Relations between China and Japan are relatively good. The two neighbors are at peace, Japan is China's top trading partner and China's relentless growth is reviving Japanese construction and manufacturing.
But two potential deals appear to have gone sour because the past will just not go away, and the basic problem is official visits to a Tokyo shrine by Japanese officials to honor Japan's war dead.
In one deal, Japan has been ruled out of the bidding for construction of the new proposed high-speed rail line between Beijing and Shanghai due to the shrine visits. In the other, the Japanese media have reported that Japan has lost out to the French in a major experimental nuclear fusion project due to China's impatience over the same issue.
On New Year's day this year, Japanese Prime Minister Junichiro Koizumi once again visited the Yasukuni war shrine, the fourth time he has done so since he took office in April 2001.
The shrine also honors a handful of war criminals, and much of East Asia views the official visits as a sign of Japan's refusal to fully come clean on its responsibilities for the damage caused by its occupation of much of East Asia up to the end of World War Two. Asked by reporters whether there are any differences between the 14 convicted Class-A World War II criminals and the other war dead, Koizumi replied: "I do not dwell on them."
The Chinese are not happy about all this, and as China's economy and self-confidence grow, new economically significant means of expressing displeasure appear.
During a visit to Beijing in early February, Takenori Kanzaki, leader of Japan's New Komeito party, was told by Chinese officials that the Japanese bid to build the high speed rail link between Beijing and Shanghai would be rejected because of Koizumi's repeated visits to the Yasukuni shrine.
The contract for the Beijing-Shanghai rail project has had consortia from Japan, France and Germany bidding for the high-profile opportunity to showcase new rail technology.
The German consortium, led by Siemens and ThyssenKrupp, built a small stretch of its magnetic levitation (maglev) rail system between central Shanghai and the city's international airport in Pudong to prove the system's effectiveness.
But the maglev rail is very expensive, leading some to predict that the Japanese consortium could win the Beijing-Shanghai project, which is planned to reduce the surface travel time between Mainland China's two most important cities from 12 hours to a mere five. That was before Koizumi's latest Yasukuni visit.
The economic ramifications are significant. Japanese officials had estimated that the project would be worth US$14 billion if Japan's Shinkansen bullet train were selected. Furthermore, the line is a prime opportunity for the world to observe the bid winner's product in action, making it easier to parlay into new contracts elsewhere.
"Japan's inability to resolve this question of history with regard to China is going to become more and more of a drag on business prospects, because China now has the power to choose," said one European analyst working in China. "If Japanese businessmen were smart, they'd put pressure on the government to end this once and for all."
The political fallout of the shrine visits is also significant. Nearly three years into his term, Koizumi has yet to receive an invitation to visit Beijing. He looks likely to remain persona non grata in the Chinese capital for some time to come.
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