The Sino Stranglehold

How badly could the Chinese protests hurt Japan's economy?

Anti-Japanese riots aren't a new phenomenon in China, but the ongoing demonstrations across the country have surpassed previous outbreaks in both their extensiveness -- over a hundred cities -- and their perfervid declarations. One banner, hung over an Audi dealership, declared that the Japanese should be exterminated; another called for a nuclear strike on Tokyo; a woman's hospital featured a neon sign announcing that Japanese females would absolutely not be treated. The issue of sovereignty over the uninhabited islands, known as Diaoyu to the Chinese and Senkaku to the Japanese, sparked China's fevered response. Protestors threw eggs and water bottles at the Japanese embassy in Beijing; at least one city reportedly banned Japanese cars from its streets to protect their occupants; a television station in Guizhou province reportedly stopped airing commercials for Japanese businesses. Most worryingly, one of China's highest ranking military officials, vice-chair of the Central Military Commission Gen. Xu Caihou, told the People's Liberation Army to be prepared for combat.

Despite their intensity, these demonstrations, like the half-dozen that preceded them over the past 25 years, are abating. In the past, China has long been able to hold Japan's economy hostage after political disputes, and it is likely to get its way economically this time as well. The two economies are deeply interlinked; trade between them in 2011 was worth almost $350 billion. China is Japan's largest trading partner and absorbs just under a fifth of Japan's total exports; Japan is China's third-largest trading partner, after the European Union (EU) and the United States. China's economy, which overtook Japan's as the world's second largest in 2011, is expected to grow at the reduced but still healthy rate of more than 7.5 percent in 2012; Japan's economy by contrast could contract in the third quarter of this year.

Though it never recovered from the bursting of its economic bubble in 1990, Japan remained the world's second-largest economy until China edged it out of that spot in 2011. The triple earthquake-tsunami-nuclear meltdown of March 2011 curtailed domestic auto production; disastrous floods in Thailand in October of that year closed Toyota, Nissan, and Honda factories. Shortages of power resulting from the shutdown of reactors and strong public sentiment for ending reliance on nuclear energy meant fuel shortages and higher electric bills. To make matters worse, the global economic downturn depressed demand for the country's exports, and a strong yen made Japanese products less competitive in world markets. In that same annus horribilus, Japan recorded its first trade deficit since 1981. Japan's exports to China had dropped 7.3 percent in 2011, not as bad as the 21.3 percent decline in those to the EU that same year, but worrisome nonetheless. Indeed, despite periodic frictions between Tokyo and Beijing, trade with China in 2011, and in the past decade, had been the brightest spot in the Japanese economy.

A boycott of Japanese goods has the potential to hurt Japan badly; the effects are difficult to calculate but likely in the billions of dollars. In 2002, Japan banned imports of Chinese onions, mushrooms, and rushes -- the latter used in the production of tatami mats for the floors of traditional Japanese homes. Beijing responded by suspending imports of Japanese cars, air conditioners, and cell phones. Japanese car manufacturers complained that the lost sales in autos would amount to roughly $3 billion in losses (according to the 2002 exchange rate), Japan capitulated eight months later.  

In September 2010, when the Japanese government refused to release the captain of a Chinese fishing boat after he rammed two of their ships, Beijing imposed a ban on exporting rare earths -- elements crucial to many high-tech products like smartphones, flat-screen TVs, and the Toyota Prius -- to Japan, subjected its imports to an excruciatingly slow inspection procedure, and advised its tourist agencies not to book groups to visit Japan.

Suspension of trade would hurt China as well. Many Japanese products are made in China; among the numerous factories shut down out of safety fears include Toyota, Nissan, Honda, Panasonic, and Mitsumi Electric ( a major supplier of optical equipment to Nintendo). Should these be unable to resume production, hundreds of thousands of Chinese would lose their jobs. The newly unemployed are unlikely to put patriotism before their paychecks and, concentrated in company dormitories or other accommodations nearby, can easily mobilize to protest. This time, their target will not be Japan.

Admittedly, boycotts are devilishly difficult to enforce, especially on a long-term basis. The Chinese economy is no longer sealed as it was in Mao's era: Motivated consumers can, and do, find ways around it. After Beijing banned Norwegian salmon out of anger over the Nobel Peace Prize Committee's decision to award imprisoned dissident Liu Xiaobo, businesspeople imported salmon into Hong Kong, repackaged it, and sold it in major retail outlets throughout the country. A government ban on Japanese imports could be effective only if public anger were so intense that the overwhelming majority of Chinese consumers were willing to forgo purchases of Japanese products, which Chinese skeptics doubt. An anonymous cartoonist whose sketch was quickly removed from the web, drew a crowd holding angry anti-Japanese signs in one hand while snapping pictures with their Japanese cameras and texting on Japanese cellphones in the other.

One of the biggest benefits to Japan of manufacturing in China is the ability to sell finished products to Chinese consumers domestically. If Japanese manufacturers cannot sell to the Chinese, there is little reason to keep their factories in China. Vietnam as well as several other ASEAN members are already courting Japanese manufacturers, offering attractive leases, well-educated employees, and modest wage scales. Things are bad, but economically, both China and Japan have other options.

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What Is Iran Doing in Syria?

The reason the Quds Force is talking about supporting Bashar al-Assad.

Until recently, the Islamic Republic's military involvement in Syria was shrouded in mystery. When The Free Syrian Army paraded alleged members of Iran's Islamic Revolutionary Guards Corps (IRGC) on al-Arabiya this summer, Iranian officials insisted that the abducted men were "pilgrims" and that Iran's support to Syria was limited to moral backing and economic assistance.

In recent months, however, there has been a shift in Iranian statements. Regime officials have been increasingly categorical in their admissions of Iran's military presence in Syria, while simultaneously maintaining some ambiguity about the nature of its intervention. Most recently, on September 16, IRGC Commander Mohammad-Ali Aziz Jafari admitted that the IRGC's Quds Force, which is the extraterritorial operations arm of the IRGC, "are present" in Syria. However, he added that "this does not mean that Iran has a military presence" there and that Iran's aid was limited to "consultancy and economic assistance."

Ambiguity may reflect differences over strategy among the Islamic Republic's ruling elites -- and represent a veiled threat that Iran can flex its military muscles even more in Syria. Speaking a day after Jafari's candid interview, for instance, Foreign Ministry spokesman Ramin Mehmanparast further complicated interpretation of Iran's messaging by condemning what he called some media outlets' "selective, incorrect, and politically motivated use" of Jafari's statements. "Iran has not in any way a military presence in the region, particularly in Syria," he stressed.

The latest controversy over Jafari's statement is not the first time that Iran has sent mixed signals about the nature of its involvement in Syria. On May 26, Quds Force deputy commander Brigadier General Esmail Qaani admitted Iranian forces were present in Syria in an attempt to "prevent great massacres" there. Then, on Aug.22, Defense Minister Ahmad Vahidi declared Iran's readiness to "live up to its defense and security obligations upon Syria's request," but he did not concede that Iran maintained any military presence there at the moment.

When it comes to potential differences among Iran's ruling elites, it is hardly surprising that IRGC officials would openly boast of Iran's military presence in Syria. The organization has an interest in making its presence known in order to increase its leverage over other branches of the Iranian government. This isn't the first time we've witnessed this phenomenon: In spring 2008, Quds Force commander Major General Qassem Suleimani sent a message to Gen. David Petraeus, then the commander of international forces in Iraq, claiming that he controlled Iranian policy in Iraq, Lebanon, Gaza, and Afghanistan. Suleimani's message was clear: The United States should negotiate with the Quds Force rather than other branches of the Islamic Republic in order to solve the problems it was facing in the Middle East and Southeast Asia.

Suleimani's message to Petraeus, of course, was self-serving. If the United States proved willing to engage in negotiations with him, it would further enhance his prestige and the Quds Forces's control over strategic decision-making in Iran. Similarly, Qaani and Jafari's admissions of the IRGC's military presence in Syria is a way of communicating that those who desire a negotiated solution to the crisis in Syria must involve the Quds Force.

The Foreign Ministry, on the other hand, probably opposes Iran's military involvement in Syria lest it result in the Quds Force taking the lead on Iran's Syria policy. This may not only explain Mehmanparast stressing that Iran has "no military presence in the region," but also the Foreign Ministry's systematic attempts at mediating between the opposition and President Bashar al-Assad's regime.

The statements of Iranian military involvement can also be interpreted as the IRGC's way of threatening to increase its intervention, which would transform civil war in Syria into a regional war. The threat obviously aims to force Westerners, Turks, and Saudis to think twice before getting further embroiled in a proxy war. The ploy, however, could be too little, too late: Assad's regime may be beyond salvation, and increased IRGC presence in Syria is no guarantee for success. 

According to the Wall Street Journal, a certain Brigadier General Hossein Hamadani has been sent to Syria to oversee the Quds Force's operations. It's not hard to understand why Hamadani would be chosen: According to his official biography Taklif Ast Baradar ("Brother, It's Duty"), he has extensive experience in suppressing the Kurdish separatist movements in Iranian Kurdistan in the immediate aftermath of the 1979 revolution and during the Iran-Iraq war. In 2005, Jafari, the founding commander of the IRGC Strategic Studies Center, appointed Hamadani his deputy, and together they devised doctrines to counter "velvet revolutions." In 2009 and 2010, Hamadani managed to effectively suppress anti-regime rallies in Tehran.

Hamadani's background may be of some help to him today. However, with the protests in Syria having developed into an armed rebellion, and with the rebels gaining access to more sophisticated weaponry, he may find himself fighting a very different war than the one he won against peaceful protesters in the streets of Tehran.

-/AFP/Getty Images