TOKYO • Money and power are combining to create a tentative thaw in the relationship between Asia's two biggest economies.
After more than two years of tensions, Chinese President Xi Jinping is making a careful rapprochement with Japanese counterpart Shinzo Abe, who has long called for improved ties. A number of factors have spurred the shift.
China's economic growth is slowing while Japan, a big investor, is sending less money in. And Mr Xi has consolidated enough power within the Communist Party and military to take a softer stance with less risk of a backlash at home.
The ramifications are potentially significant. Lowering tensions will provide room for a pick-up in trade and investment. China and Japan may work more closely to contain North Korea. It could also limit the friction between China and the United States - a key ally of Japan.
The next test will come next month when Mr Abe issues a statement to mark the 70th anniversary of the end of World War II. He has said he stands by, but won't repeat, past apologies.
Things have got considerably better. In particular, we can see a softening of the Xi administration's policy towards the Japanese government.
ASSOCIATE PROFESSOR WANG XUEPING of Toyo University's sociology department in Tokyo
Whether that is enough for China - a country Japan invaded - is open to debate, though Mr Abe also avoided a direct apology in a speech in Jakarta last April and still sat down with Mr Xi afterwards.
"Things have got considerably better," said Associate Professor Wang Xueping of Toyo University's sociology department in Tokyo.
"In particular, we can see a softening of the Xi administration's policy towards the Japanese government," she said.
While China and Japan have often been troubled neighbours, ties soured badly in 2012 over disputed islands in the East China Sea to the point that it affected trade. Mr Abe compounded tensions by visiting a Tokyo shrine that honours some World War II Class A war criminals.
For its part, China in late 2013 announced an East China Sea air defence zone and started a campaign to criticise Mr Abe's plan to expand the remit of Japan's military.
The current detente follows months of behind-the-scenes negotiations and a flurry of lower-level meetings. A frosty November handshake between the two leaders on the sidelines of an Asia-Pacific leaders meeting in Beijing marked the first public step to mending the rupture. They had a friendlier meeting in April in Jakarta, and in June their finance ministers held the first formal summit in several years.
"The Chinese government understood it was impossible to fully separate politics from the economy," said Professor Yuichi Hosoya of Keio University, who has served on security advisory panels for Mr Abe.
Trade between China and Japan slumped 6 per cent to US$343 billion (S$463 billion) in 2013 and stagnated last year. China's economy grew at its weakest pace in 24 years last year, expanding 7.4 per cent. The government is targeting about 7 per cent growth this year.
Japanese investment in China declined nearly 40 per cent last year, having fallen since 2012 when Japan's purchase of three of the East China Sea islands from a private citizen prompted riots in China targeting Japanese businesses.
However, even if Mr Abe's statement next month avoids fanning controversy, some observers remain cautious.
"Bilateral ties won't deteriorate more, but wouldn't improve too much either," said Professor Su Zhiliang of Shanghai Normal University's history department. "The adversarial nature of their positions on the core issues will exist in the long term."