Assessing the effectiveness of Japan's ODA policy towards China: whether Japan has realized its national interests

1. Introduction

Even though the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD) adopted official development assistance (ODA) as the “gold standard” of foreign aid in the 1960s, foreign aid is not a new word to the international politics. For instance, the foreign aid provided by France supported the United States of America in the Revolutionary War against the Great Britain in the 18th century, and the Ming Dynasty's provided direct military assistance to Korea in the 16th century. In other words, the history of foreign aid is even longer than the history of the Westphalian state system, established in 1648.

Although there are different definitions of foreign aid, it is, in general, a voluntary transfer of resources, including but not limited to food, goods, money and expertise, from the donor country(s) to the recipient country(s) (Morgenthau, 1962; Riddell, 2008).

According to OECD, ODA is concessional financial assistance provided by official agencies to promote economic development and welfare in developing countries (OECD, 2020). Though voluntary, neither donor nor recipient governments are uninterested in how and why their money, even if in the name of “aid”, is spent (Arase, 1995). There are scholarly debates on the motivation of donor countries. For scholars from the realism school, foreign aid is simply “an instrument of political power and policy” (Liska, 1960, p. 14). The core motivators for realists are political and strategic considerations (Morgenthau, 1962; Alesina and Dollar, 2000; Korb, 2008). Liberalism provides different perspectives on foreign aid, including globalisation, interdependency and international institution, where foreign aid is considered as a set of measures designed to enhance the socioeconomic and political development of recipient countries (Chenery and Strout, 1966; Hattori, 2001). For constructivism, ideological or moral considerations matter in foreign aid, and countries might mimic the aid behaviour of the traditional donors to be a “good” actor in the international society (Lumsdaine, 1993; Opeskin, 1996; Meernik et al., 1998; Brown and Grävingholt, 2016). However, as a general proposition, foreign aid is highly politicised, and even humanitarian aid performs a political function (Arase, 1995).

National interests play a crucial role in shaping foreign aid policies, with the role theory offering insights into how nations perceive their roles in international relations and understand their national interests. Japan's aid policy, distinct from other major donors, is more economically focused and aids trade partners over countries with humanitarian needs. Japan's ODA is a key diplomatic strategy, with China being a significant recipient.

The objective of the paper is to demonstrate the history of Japan's ODA to China, and more importantly, examine whether Japan's ODA to China is a successful policy or in other words, realizes the national interests of Japan.

2. Beginning of Japan's ODA to China

With the rapid recovery of Japan's economy, Japan became the most developed countries in Asia. In the 1960s, Japan achieved an average real gross domestic product (GDP) growth rate of 8% a year. In 1970, Japan's GDP reached the level of 200 bn US dollars. Three years later, Japan's GDP doubled, reaching 432 bn US dollars.

The initial form of Japan's foreign aid was the war reparations to several Asian countries, and then official development assistance in the 1960s. In the 1970s, Japan became one of the largest donor countries, and foreign aid also became one of the most important foreign policies of Japan.

Since the beginning of the 1970s, the alteration in the relative strength of the United of America and the Soviet Union has undoubtedly affected the international situation, accelerating the multi-polarization of the world. China had also become a more important player in the global politics. In addition, Japan, as an emerging power, was trying to promote its political influence through economic diplomacy.

Beginning in 1977, the Chinese Government explored the potential of using foreign capital and technology to develop the national economy. This led to market reforms initiated in 1978, officially known as China's Reform and Opening Up. In August 1978, the Treaty of Peace and Friendship between China and Japan was signed. On 3 September 1978, Deng Xiaoping, the then leader of China, met with the delegation of the Japan–China Friendship Parliamentarians' Union (Nitchū Yūkō Giin Renmei), led by Hamano Seigo, the President of the Union. Deng emphasized that Sino–Japanese relations were prior to any other bilateral relations, and China was willing to cooperate with Japan on issues such as production techniques and market management (Kondō, 1978). In October of the same year, Deng visited Japan, where he was invited to visit several modernized factories and the high-speed railway. The experience in Japan is believed to inspire Deng regarding the economic reform in China, leading to the decision introducing Japanese investment and advanced technique (MoFA of China, 2022).

On the other hand, the Government of Japan started to investigate the further cooperating potential with China. There were proposals in the Liberal Democratic Party even in the early 1970s that Japan might take the use of the OECF's funds for exports to China, bypassing the limitation due to the Yoshida Letter (yosida syokan) (Jin, 2000). Since the normalization of the Sino–Japanese relations in 1972, the trade between two countries had been continuously increased. In general, MoFA, MITI and MoF are the three important governmental bodies that wield significant influence in various aspects of Japan's economy and international relations. These agencies often find themselves in competition with each other as they pursue different priorities and goals. The bureaucratic complexities also result in competing definitions of the national interest in the context of Japan (Rix, 2010). The MITI, as the main agency responsible for promoting Japan's international trade, represented the interests of the commercial and industrial community; the MoFA focused on promoting Japan's diplomatic relations with other countries and ensuring its national security, which often involves negotiations and agreements on trade and economic cooperation, potentially clashing with the objectives of MOF and MITI; and the MoF is responsible for managing the country's fiscal and monetary policies, seeking to maintain a balanced budget and stable currency.

The private sector, especially the large-scale companies, were very interested in promoting the trade with China, and therefore became the most active actors trying to influence the government's decisions on ODA to China. Amongst a number of associations and economic groups, the Japan–China Economic Association and the Japan Business Federation (Keidanren) are the most important and influential organizations. Their then presidents, Inayama Yosihiro and Dokō Tosio, visited China and met with Premier Zhou Enlai, Vice Premier Li Xianian, Gu Mu and other high-level officials several times, becoming a bridge between the leadership of two countries (Japan-China Economic Association, 2020).

In the September of 1978, Ōhira Masayosi successfully completed his cabinet. He had to make the political decision on Japan's ODA to China with a variety of opinions from his partners and opponents. Compared to his predecessor, he held a more positive attitude to China. On 1 March 1979, even during the period of Sino–Vietnamese War, Ōhira confirmed with Kōmoto Tosio as the Chairman of Policy Research Council of the LDP that Japan might provide yen loan through OECF if China requests (Takahara and Hattori, 2012). By the efforts on negotiation and cooperation made by Ōhira, the cabinet achieved consensus on the principles of ODA to China.

It is believed that the loan-related issues was discussed in different governmental and diplomatic meetings before the end of 1978, when Li Qiang, the Minister of Foreign Trade of China, confirmed at a press conference in Hong Kong that China may consider accepting loan between government (Wang, 1978, pp. 864–865). On 5 December 1979, Ōhira visited China, officially informing China the final decision made by the Government of Japan, marking the official start of the Japan's ODA to China.

3. From development to recession

Japan's ODA to China mainly includes the three types of assistance: (i) loan aid (yen loan or ensyakkan); (ii) grant aid and (iii) technical cooperation. Amongst these three types of assistance, loan aid is the largest and most influential one. The last loan aid was provided in 2007, but Japan decided to continue providing grant aid and technical cooperation. Anyhow, because the maturity of the yen loan to China was usually set between 20 and 40 years, a large amount of the loan has not been repaid yet. The author divides the ODA to China history into four periods: (1) Starting period (1979–1983); (2) Development period (1984–1988); (3) Conversion period (1989–2000) and (4) Recession period (2001–present).

4. Japan's role and national interests

The diplomacy of any country is always aimed to realise the national interests, though in various ways. Even though foreign aid is somehow considered as the money given by rich countries out of charity, the governments thereof always have to inform their taxpayers how and why their money is used. It is therefore not surprising that the name of the ODA Review Final Report of Japan, published in June 2010, is “Enhancing Enlightened National Interest”.

However, national interests refer to too many conceptions. According to Morgenthau (1952), national interest has two factors: rationally demanded and changeable, and to pursue the national interest is a necessity. The author agrees with the statement that “national interest has proven to be a very elastic concept with multiple meanings across time and space” (Hook, 1995, p. 5). The territory is obviously highly connected to the national interests; the economic benefit is also apparent. However, the reputation of one country, or the so-called soft power, smart power or sharp power, is more difficult to analyse, especially when some interests might be controversial.

Since Holsti (1970) systematically extending the concept of role in sociology to foreign policy analysis, many scholars have contributed to the development of the role theory. Walker (1987) suggests that the role theory has a descriptive, analytical and organizational value, and Wish (1980) comes up with the national attribute-role conception model, and conducts content analyses of speeches by 29 decision-makers from 17 nations. She concludes that the policymakers, who believe that their nations have larger influence domains are more active in the international system. Recently, Wehner (2020) introduces how interpretive narrative analysis allows the researcher to understand the change of role within a ruling narrative domestically and internationally, providing practical research methods for understanding the national roles.

Through narrative analysis, we may realise how the Government of Japan and the leaders thereof understands their role and the interests of their country. Based on the role conception of Japan, the author examines the national interests and the realisation thereof.

Japan is undoubtedly an economic power, and is sometimes described as “Civilian Power”. Maull (1990) suggested that a civilian power, for example Japan, would prefer to cooperate with other countries to promote the collective international goals; and realise the national goals and interests with economical method rather than the military method. Besides, some scholars also pointed out that group-orientation was a typical characteristic of the cultural norms as well as the national role of Japan.

Narrative analysis is widely used in the field of foreign policy analysis. Narrative, as a terminology, refers to spoken or written text that describes and interprets an event or a series of actions that are connected within some sort of sequence (Czarniawska, 2004). The narration of the Japanese government regarding the ODA to China was not always consistent, but related to the change of domestic politics and international situation.

In the 1970 and 1980s, trade, energy and friendship were the three priorities of Japan's China policy. Firstly, as we discussed, the large-scale companies were very interested in promoting trade with China, which relied on a stable bilateral relationship. Most of the visits and meeting between two countries in the 1970s were also related to the trade. Secondly, energy security was a significant part of Japan's comprehensive security policy, and Japan's attention on mining and infrastructure during the negotiation for ODA projects proved the significance on Japan's position. Thirdly, friendship with China, and importantly, Chinese people, was also important for the regional security. If China, as the biggest and high potential country in East Asia, could become a friend of Japan rather than an enemy, it would be a great success of Japan's diplomacy. For better friendship, both parties tried to avoid discussing the disputed issues, e.g. the territory dispute regarding the Diaoyu Islands (or Senkaku Islands in Japanese), for not undermining the “friendship”, which is different with the situation in the later period that the territory dispute became a “weapon” of diplomats.

In addition, considering that Japan's aid to Southeast Asian countries started from war reparation, many Japanese in the 1970s might also feel guilty for the sorrow Japanese army brought to Chinese people, and Asian people, during the World War II. As Loutfi (1973) suggested, the Japanese Government might also hold the opinions that the problem of development in these countries is not merely an economic or social question, but a problem of building peace in Asia. Providing aid is not only a way to reduce the moral burden of Japanese citizens but also a way to heal the pain of the citizens of other countries, making a better national image in the recipient countries.

Therefore, the role conception of Japan, during the starting and development period of the ODA to China, could be summarised as: (1) a trade promoter; (2) a regional power and security maintainer and (3) a normalising nation with the responsibility to support its neighbours in Asia.

The role conception gradually adjusted in the 1980s, when Japan had become an economic giant and tried to extend its influence on international politics. In 1992, Nakasone was elected as the Prime Minister of Japan. His political slogan, “the final settlement of the post-war politics” Nakasone proposed political slogan of “the final settlement of the post-war politics” (sengo seizi no sōkessan) could be considered as the signal of the change of Japan's role conception. He tried to strengthen the military force of Japan, and even revise the constitution. Even though not a few Japanese politicians and citizens, especially the left-wing, disliked his ideas [9], becoming a great political power was obviously attractive for the people of Japan, the world's second-largest economy with impressive naval strength. The role identification of Japan was changed from a facilitator into a regional ruler and major international actor. Disappointed about Japan's unfavourable position in the Japan–USA trade friction, Ishihara sintarō, a famous right-wing politician, published a best-selling book with Morita Akio, the founder of Sony Corporation in 1989. The title of the book is: The Japan That Can Say No (Nō to Ieru Nihon) (Ishihara, 1992). The Japan That Can Say No (to the United States of America), means Japan is not a follower of the superpower, but an equal partner of the United States of America, a protector of the regional order of Asia, and a contributor to the new global system. The role conception of a regional power and security maintainer was continuously enhanced.

As a result of the formation of the role conception, in 1992, Japan published its first ODA Charter (MoFA of Japan, 1992). The charter clearly stated that “the world is now striving to build a society where freedom, human rights, democracy and other values are ensured in peace and prosperity”, marking that Japan's ODA policy started to focus more on human rights, environment and other political topics. However, it does not mean that development or economic was not important to Japan. As shown in Table 3, development and economy are still the top used words in the ODA Charter.

In 2001, the MoFA of Japan published a report regarding the economic cooperation programme for China. The report emphasized that “the stability and prosperity in the East Asian region in which Japan is located is indispensable”, and the economic cooperation is therefore significant (MoFA of China, 2001). However, the report stated that China had been able to make more “self-help” efforts, and the “enormous demands for aid” was “impossible and inappropriate”. Besides, the report required the government to encourage China to make efforts to enhance publicity on Japan's ODA.

However, as a country on a fast line of development, change of the role conception of China might conflict with Japanese changing role conception, leading to the role conflict. China would not be happy when Japan tried to teach it how to reform its political and economic system, especially considering Japan was a “student” of China during its long history. The role conception of China is always the “centre of the world”, as its name, Zhong Guo, shows, which would sooner or later conflict with Japanese role as a regional protector. It can therefore explain the reason why there were more bilateral frictions in the 1990s and the 2000s. As a researcher wrote, “Japan and China have never experienced coexistence as great powers,” (Syōzi, 2012) and they are doomed to suffer from mutual rivalry.

In 2003, Japan revised its ODA charter. Proud as “the first nation in Asia to become a developed country”, Japan was enthusiastic about sharing its experience with other developing countries, and participate in international politics more actively (MoFA of Japan, 2003b). On the other hand, China was speeding up its own foreign aid projects. According to the Information Office of the State Council of China, China's financial resource for foreign aid has increased rapidly, averaging 29.4% from 2004 to 2009 (Information Office of China, 2011). As discussed, both parties understood that Japan's ODA to China was reaching the end. In 2015, Japan published the Development Cooperation Charter, but we would not further discuss the narrative since it had little relevance with the national interests regarding Japan’ ODA to China.

To conclude, the role conception of Japan at the starting point of Japan's ODA to China was: (1) a trade promoter; (2) a regional power and security maintainer and (3) a normalising nation with the responsibility to support its neighbours in Asia. The role of “a normalising nation” was minimized due to the successful normalisation and increasing strength of Japan, while the role of a regional power was enhanced and the role of a contributor to the peace of world emerged.

5. Discussion: whether Japan has realised its national interests

Behind the role conception, the national interests behind are summarised accordingly: (1) promoting trade; (2) ensuring the energy security; (3) maintaining regional security through improving bilateral relations and reducing the anti-Japanese sentiment; (4) promoting reputation of Japan for reducing the negative image during the World War II and (5) making the diplomatic method more pluralistic to maintain the national status. The author will then analyse and examine the realisation of the national interests dividedly.

6. Conclusions

Since 1979, Japan has provided thousands of billions of yen loan, grant aid and technical cooperation. It is difficult to analyse a foreign policy lasted for more than 40 years, but we might have a clearer vision with appropriate research methods.

The objectives of the paper are to examine whether Japan realise its national interests through foreign aid, especially in the case of Sino–Japanese relations. To understand the question, it is essential to firstly understand what the national interests of Japan are, which is, from the author's perspective, connected to the role conception of Japan and the leadership thereof.

The author summarises the role conception of Japan as (1) a trade promoter; (2) a regional power and security maintainer and (3) a normalising nation with the responsibility to support its neighbours in Asia; and the change of the conception when Japan became more powerful, both economically and politically.

Based on the role conceptions, the author classifies the national interests into five categories, as shown in Table 6: (1) promoting trade; (2) ensuring energy security; (3) improving bilateral relations, (4) winning kudos and international status; (5) diversifying diplomatic methods. As a conclusion, Japan has successfully promoted the trade and business between two countries, and somehow ensured the energy security as part of the comprehensive security agenda. Japan has also partly achieved the objectives of improving bilateral relations and diversifying diplomatic methods, though the frictions between two countries happened from time to time. However, Japan has failed to win kudos and international status through its ODA projects in China.

In addition, the Government of Japan might hold the concept that aid produces economic growth, which in turn encourages political stability and the benefits to donor interests. However, as some scholars suggested, the premise itself is doubtful (Rix, 2010, pp. 17–19). The research has also proved that some of the cognition of the Japanese Government on the diplomacy of China as well as the understanding of Chinese leaders on Japan's ODA might be incorrect, leading to some negative effects on the realization of Japan's national interests.

However, the cost of the Japan's ODA was not that high as imaged. Japanese people were used to saving their money in their postal and banking system. The high savings rate therefore led to plenty of loan funds, which means the actual cost of the yen loan, though discounted, is not that high. The Government of Japan considered loans to be rational the system by which loans are repaid as economic benefits accrue to the borrower over a relatively long time (Akiyama and Nakao, 2005). In fact, due to the rapidly increasing of the exchange rate of Japanese yen, China might have to repay even more in the 1990s.

The discussion in this paper also indicates something important. Firstly, the diplomatic objectives are constructed by the national role conception, sometime unconsciously. Secondly, foreign aid, whose initial objectives are usually connected with some specific national interests of one country, does not necessarily realise those national interests. Thirdly, the misunderstanding of the national role conception of the recipient country and the potential role conflict might negative affects the national interests of the donor country.

The paper has not discussed, with a quantitative method, to exactly what extent has Japan realised its national interests. There are mainly two reasons for this situation: the percentage of the national interests realised by Japan through its ODA policy is impossible to quantify; and the percentage is not the main topic of the paper. The author believes that the paper has already discussed the main topics and made the conclusion based on both quantitative and qualitative methods.

The author, therefore, made the final conclusion regarding the realisation of Japan's national interests on Japan's ODA policy to China that the policy in general has achieved some of the diplomatic objectives successfully, but failed to achieve all.

The study's results are meaningful not only for analysing Japan's foreign policy but also for broader International Political Economy studies. The research links the field of international development with foreign policy analysis. The research method employed in this study could potentially be applied to other contexts, such as examining China's foreign aid to Africa and South Korea's foreign aid to Southeast Asia, thereby providing a framework for evaluating the effectiveness and impacts of foreign aid policies in various international contexts. The study provides a valuable foundation and tool for enhancing foreign aid policies and diplomatic strategies.