Uriel Araujo, researcher with a focus on international and ethnic conflicts

There have been tensions over disputed waters between China and Japan for while. For example, recently, on August 19, the Japanese Defense Minister Taro Kono told the Chinese ambassador to Japan, Kong Xuanyou, that China should refrain from pursuing any further military activities around the East China sea, particularly around the Senkaku islands, a disputed area, (these islands are called Diaoyu by the Chinese). Such sea is shared by China, Japan, and South Korea, those being three major East Asian countries, whose economic and diplomatic relations can be counted among the most important ones in the world.

The dispute also involves an undersea natural gas field (the Chunxiao gas field) within the Chinese exclusive economic zone (EEZ) – Japan objects to Chinese drilling projects for that area where both Japanese and Chinese EEZ overlap.

Now, on Friday (4), Japan has announced it is offering incentives to those companies that are shifting base from China to India. This is part of a larger context. On Tuesday (1), Japan, India and Australia agreed to launch an initiative which was clearly aimed at reducing trade dependence on China - which is of course a major trading partner for all 3 countries. It was an initiative to achieve supply chain resilience in the region – in a joint statement, the ministers from these 3 countries called on other nations from the Indo-Pacific region to take part also.

Over the last years, India and Japan have signed a number of free trade agreements and lowered tariffs with partner countries (excluding China). Nevertheless, the goods from China keep flowing and some Asian nations (dependent on China for trade) do have been suffering occasionally from supply disruptions. Thus, it is quite natural they would seek diversification. However, one should notice that both Japan and India have boundary disputes with China. And Australian relations with China, in their turn, are also certainly not at their best. Two Australian journalists who were working in China have just left the country and, as a result of that, currently the Australian media has no journalists working in the country (for the first time in nearly 5 decades). It has indeed become a diplomatic standoff - the whole thing started when the journalists became "persons of interest" in a Chinese investigation related to a national security case and were detained by local police. Questions of press freedom were raised. Furthermore, a US-China trade war is unfolding.

After the recent Chinese-Indian border clash, India has banned over 50 Chinese mobile applications (including TikTok and WeChat). Japan, in its turn, has been paying at least 87 companies to “exit China”, shifting production back home or to other nations in Asia. And now India and Bangladesh have been added to Japan's relocation subsidiary. The program aims to providing Japan with a more or less stable supply of electronic components and materials - should an emergency arise (during the COVID-19 pandemic, supplies from China were cut off).

The truth is that India-Japan ties have been on the rise throughout Japanese Prime Minister Shinzo Abe years – the fact that neither India nor Japan have participated in the Chinese-led Belt and Road Initiative is a good indication of that. Mr. Abe was, after all, the main architect of the Asian-Africa Growth Corridor, for instance, aiming at joint Japanese-India efforts in Africa. He also pushed the Japan-India (civilian) nuclear deal. Finally, in 2015, Japan became a (permanent) member of the Malabar Indian exercises. So, India-Japan ties remain on the raise. And it would appear such trend will go on and on – even after Mr. Abe health-related resignation. However, the new Japanese Prime Minister still could change this picture somehow.

An Indian-Japanese alliance has always troubled China who sees the advancement of the concept of the Indo-Pacific Region (IPR) as way to further strengthen the QUAD (the informal strategic forum between India, Japan, Australia, and the US). To make things worse (from a Chinese perspective), India has reportedly invited Australia to join the Malabar-2020 exercises involving its navy and the US and Japanese ones.

The fact remains, however, that China is still one of Japan's main economic partners. Completely decoupling from China is not so feasible and not so simple. The Japanese economy needs to sell  products to China in order to keep growing. Furthermore, Japan has a highly skilled but shrinking population – not to mention its limited availability of land. Could Japan successfully relocate production entirely?

It is only natural that India and Japan pursue further cooperation in several fields. But if the relations of these two countries and China completely deteriorate, this will only destabilize the region. Basically, Asia needs China's economic dynamism. There is another issue: Japan currently has debt levels of $12 trillion (around two and a half times its economy) and therefore can not afford an escalating economic war with China.

Furthermore, if such Indian-Japanese cooperation is dictated by Washington (in terms of the QUAD as a new NATO), then not only China, but all the Indo-Pacific regions should be worried.