General

The People's Bank of China and the Bank of Japan recently renewed the Sino-Japanese bilateral local currency swap agreement with a scale of 200 billion yuan/3400 billion yen and the agreement is valid for three years. It is worth noting that the renewal of the local currency swap agreement has two important backgrounds: one is that in October this year, Fumio Kishida became Japan's 100th prime minister; the other is that RCEP is about to take effect. This has opened up imagination for the next development of China-Japan economic and trade relations.

u3000u3000 Overall, China-Japan economic and trade relations under the epidemic have shown strong resilience and vitality. The bilateral trade between China and Japan recovered rapidly and showed a trend of continuous growth. Statistics from the General Administration of Customs of China show that from January to September 2021, the total value of China-Japan trade imports and exports was 1.78 trillion yuan, a year-on-year increase of 11.1%. Among Japan's foreign trade, trade with China was the first to recover, and it has turned to a positive growth from July 2020 and continues to expand. In 2020, Japan's exports to China accounted for more than 20% of Japan's total exports for the first time, setting a record high. At the same time, the Japan External Trade Organization (JETRO) report shows that Japan's foreign direct investment in China in 2020 has a return rate of 14.9%, which is also the highest in its overseas investment income, especially in industries such as transportation equipment, wholesale, and retail. The rate of return is more than 20%.

u3000u3000 In October this year, Kishida Yufumi became Japan’s 100th Prime Minister. On October 8, President Xi Jinping had a very timely and important conversation with Fumio Kishida. The leaders of the two countries reached an important political consensus on taking the opportunity of welcoming the 50th anniversary of the normalization of diplomatic relations next year to promote the construction of Sino-Japanese relations that meet the requirements of the new era. It has pointed out the goal and direction for the next development of the relations between the two countries.

"We look forward to the two countries meeting each other to meet this important historical node and open up new prospects for the development of bilateral relations." Ju Wenyong, chief representative of the China Council for the Promotion of International Trade in Japan, said. Prevention and control is the focus of governance, leaving room for Sino-Japanese cooperation and stable relations. Kishida clearly put forward the "Reiwa Income Double Plan", advocating to improve the distribution and the gap between the rich and the poor. "Some experts believe that China and Japan can not only'strengthen exchanges in governance and economic policy coordination', but also find mutually beneficial cooperation and promotion in the economic and trade field. There is huge room for the stabilization of relations between the two countries."

u3000u3000In terms of advancing RCEP's entry into force, 11 countries have completed the process or entered the final stage, and the possibility of entry into force in the first half of 2022 is increasing. Once RCEP takes effect, tariffs on 91% of the products in the region will be gradually eliminated, and economic, trade and investment activities in the region will be more active.

Ju Wenyong believes that in the context of the upcoming RCEP, the renewal of the bilateral currency swap agreement between the central banks of China and Japan will not only help maintain the financial stability of the two countries, support the development of bilateral economic and financial activities, but will also greatly promote trade and investment facilitation. Provide a strong guarantee for intra-regional trade activities. For financial institutions and enterprises, this will reduce the risk of USD exchange rate fluctuations and transaction costs faced in bilateral trade activities, help reduce market financing costs, and build a safety net in emergencies such as financial crises to prevent financial institutions and enterprises Deteriorating capital turnover. This agreement can not only provide liquidity in times of crisis, but also facilitate the use of domestic currency for settlement in trade between the companies of both parties.

"Under the background of the current global economic turmoil triggered by protectionism, how to ensure the stability of the regional financial market and achieve regional sustainable development is a common issue for China and Japan." Ju Wenyong said that in recent years, no matter how the international situation changes, It is still the epidemic that continues to hit, and the areas and general directions of China-Japan economic and trade cooperation are always escalating. From trade cooperation, industrial investment to third-party market cooperation, and Asian infrastructure construction, China-Japan economic and trade cooperation is in huge demand for funds, and there is a strong demand for Chinese and Japanese companies to choose RMB settlement, which also provides a pragmatic cooperation between China and Japan in financial cooperation and the expansion of cooperation models. Opportunity. In the future, China and Japan will continue to strengthen financial pragmatic cooperation, and strengthen coordination and communication in macro-prudential supervision of major financial events in the international region, capital balance supervision, gradual promotion of exchange rate cooperation, and expansion of the scale of currency swaps to help China-Japan financial cooperation Enter a broader development space.

u3000u3000 It is understood that the bilateral currency swap agreement between China and Japan began in March 2002. Affected by individual incidents, the two parties did not renew the agreement after the expiration in September 2013. Before the expiration, the upper limit of the financing of the currency swap between the two countries was about 330 billion yen. In October 2018, China and Japan restarted currency swaps after a lapse of five years, and the agreement scale was 200 billion yuan/3400 billion yen. The renewal of the bilateral domestic currency swap agreement between China and Japan maintained the original scale of 200 billion yuan/3400 billion yen.

u3000u3000 Speaking of the recent changes in the economic and trade environment between China and Japan, Ju Wenyong reminded companies to pay attention to the influence of the following two factors:

u3000u3000 First, the depreciation trend of the Japanese yen against the currencies of many countries is intensifying. The Bank of Japan's decision to maintain a large-scale monetary easing policy in response to the epidemic, coupled with the expected expansion of the trade deficit caused by higher crude oil prices, has put great pressure on the depreciation of the yen.

u3000u3000Second, Japan’s economic security policy is being strengthened. The Kishida government attaches great importance to economic security and has created a new cabinet position in charge of economic security. The government also plans to set up a 100 billion yen technology cultivation fund from the perspective of economic security. In January 2022, the "Economic Security Coverage Act" (tentative name) will also be introduced in Congress.

"Especially these policies to strengthen economic security are actually aimed at China and may have an adverse impact on Sino-Japanese economic and trade cooperation." Ju Wenyong said that the government and enterprises need to strengthen research and judgment on the situation, do a good job in risk management, and strengthen market situation analysis. .