On the agenda but off guest list, China eyes G-7 in Japan

[TOKYO] World leaders meet in Japan this week for talks that will encompass the slowing Chinese economy and China's reclamation of land in the disputed South China Sea - without any representatives from Asia's largest economy at the table.

Prime Minister Shinzo Abe will host US President Barack Obama and other Group of Seven leaders from Thursday at a secluded resort on Kashiko Island, 300 kilometers (190 miles) southwest of Tokyo. That puts the summit not far from China itself, and brings to focus several points of tension with the Communist regime.

The meeting is being held against a backdrop of slowing growth as China's engine cools, with a debate among major developed nations on how much - or whether - governments should take fiscal action to boost their economies.

It also comes before an international court ruling on a case brought by the Philippines over territory in the South China Sea, which could affect China's behavior in waters through which more than US$5 trillion of trade passes each year.

China reacted with anger to an April statement by G-7 foreign ministers expressing opposition to any "intimidating, coercive or provocative" actions in the East China Sea and South China Sea, and calling on all parties to act in accordance with international law. That's even as the statement did not mention the country by name.

A similar declaration by the leaders this week would further irritate China, a key trading partner for all the G-7 members.

'Veiled Statement'

"Basically Japan and the US are trying to get the Europeans on board to express concern about China's actions," said Robert Dujarric, director of the Institute of Contemporary Asian Studies at Temple University in Japan.

"Even a veiled statement would be a victory for Tokyo and Washington. It puts Beijing on notice that even countries which first and foremost care about making money in China are worried."

China is embroiled in a territorial dispute with Japan in the East China Sea, and in separate spats with several Southeast Asian nations in the South China Sea. An international tribunal in The Hague is expected to rule in the case brought by the Philippines in the coming months. While the US is not a party to the disputes, it has set out to champion freedom of navigation in the region, backed by its close ally, Japan.

Summoned Diplomats

China summoned diplomats from the Beijing embassies of the G-7 nations several days ahead of the foreign ministers' meeting in Hiroshima to try and convince them not to play up the South China Sea disputes or other China-related issues during the summit, according to a Chinese official familiar with the situation who asked not to be identified, citing policy.

In what appeared to be a fresh sign of displeasure, the US said last week that two Chinese military jets carried out an "unsafe" intercept of a US maritime patrol aircraft over the South China Sea, approaching within 50 feet. China said its planes had kept a safe distance from the US reconnaissance aircraft.

Chinese foreign minister Wang Yi warned this week against the "exploitation" of territorial matters after meeting with the foreign ministers of Russia and central Asian nations in Uzbekistan, according to the ministry's website.

"Any country that ignores the basic facts, draws territorial lines for allies, or deliberately exploits the South China Sea issue for political purposes will gain no benefit or support but only destroy its own reputation," Mr Wang said.

Other Participants

As host to countries that share the values of "freedom, democracy, the rule of law and human rights," Japan plans to lead the world on the path of peace and prosperity, according to documents distributed to reporters by the foreign ministry ahead of the G-7 summit. The documents specify that the "Asia-Pacific situation" and China's economic slowdown will be on the agenda.

Japan has invited the heads of several non G-7 nations to come to the country during the summit, for sideline chats. That includes the leaders of Vietnam and Indonesia, plus Laos, which this year holds the rotating chair of the Association of Southeast Asian Nations and thus has some sway over the wording of any Asean statements on the South China Sea. Bangladesh and Sri Lanka are also on the list.

Steel Glut

On the economic front, China could come in for fresh criticism amid a global steel glut. Several European governments, including the UK, have repeatedly called on China to reduce the amount of steel it produces in a bid to help the industry. The weakening of the Chinese currency could also be a topic of discussion.

Any perception that Japan is spearheading a rebuke of China would be risky for ties, according to Noriyuki Kawamura, a professor at Nagoya University of Foreign Studies. After inheriting a relationship in its worst state in decades, Abe has met President Xi Jinping twice since he took office in 2012. But attempts to re-start what were once regular high-level talks have been stymied by bickering over the territorial matters.

"China will find it extremely unpleasant if Japan takes the lead and begins a debate critical of China," said Mr Kawamura.

"Relations between Japan and China had just begun to improve from last year, and this would have a negative effect."

'Doesn't Help'

China and Japan had two-way trade of US$344 billion in 2014, and China is Japan's biggest trading partner.

Song Guoyou, deputy director of the Center for American Studies at Fudan University in Shanghai, said any G-7 efforts to tackle problems relating to China in its absence would be counterproductive.

"It doesn't help the situation, as all these issues can only be solved after more consultations with China," said Mr Song.

"China today won't bow to this kind of political and diplomatic pressure by other nations, and such actions can only generate suspicion and make relations even more antagonistic."

Any criticism could prompt China to dismiss the G-7 as an anachronism for excluding the world's second largest economy. While the grouping was originally founded to deal with economic issues, its remit has spread. China is set to host the broader G-20 summit in September.

"China sees the G-7 as a relic of the 20th century," said Mr Kawamura.

"It's the G-20 that actually makes a difference in international issues now. That's how they see it."

BLOOMBERG