because of its early leadership potential and its ongoing efforts to frustrate China's plans through competing economic agreements with its counterparts in the area.

During the 1990s, the formative years of Asian regionalism, Japan was ahead of its neighbors in the quest for leadership in economic integration. Japan was a member of APEC before the three Chinese economies--China, Hong Kong, and Taiwan--were admitted to the regional association. Furthermore, Japan had been, and still is, the primary source of multinational investment capital in Asia. [FN42] Additionally, the Japanese economy was impressive enough that this factor alone was thought to be sufficient for Japanese leadership in economic regionalism. According to one observer, "The Japanese market has the size and wealth to induce the nations of East and Southeast Asia to agree to bind themselves in a supranational legal framework with a membership based on the [East Asian Economic Grouping]." [FN43] Japan was therefore a logical choice to lead economic integration in the Asian-Pacific region.

For a time, Japan looked to the West, regarding the EU and the US as its primary trading partners. [FN44] However, China's economic ascendancy and apparent leadership aspirations have spurred Japan in its more recent rapprochements with other Asian countries. A year after the 2001 ASEAN-China Summit in Brunei Darussalam, Japan and ASEAN issued their Joint Declaration of the Leaders of ASEAN and Japan on the Comprehensive Economic Partnership. It stated in part:

We recognized that, for the creation of economic partnerships and linkages of a leading nature between ASEAN and Japan, ASEAN and Japan should seek broad-based economic partnership covering not only liberalization of trade and investment but also trade and investment promotion and facilitation measures, including, but not limited to customs procedures, standards and conformance, non-tariff measures, and co-operation in other areas, such as financial services, information and communications technology, science and technology, human resource development, small and medium enterprises, tourism, transport, energy and food security. [FN45]

Moreover, in the wake of China's 2002 negotiations with ASEAN regarding a free trade area, Japan quickly agreed to a free trade area with ASEAN member Singapore, resulting in the Japan-Singapore Economic Partnership Agreement. [FN46] In addition, Japan has put aside its rivalry with its Northeast Asian neighbor, eagerly touting the Japan-Korea Free Trade Agreement. [FN47] More recently, in September 2005, Japan initiated periodic economic ministerial meetings with four of the least-developed ASEAN members, Cambodia, Laos, Myanmar, and Vietnam (collectively "CLMV"). [FN48] Japan and CLMV agreed on a new set of Japanese aid programs to modernize the Mekong River area, including help in building a production and distribution system and assisting intra-regional trade through the use of tags that utilize radio frequency identification. [FN49]

Japan's private sector has also improved the country's ties to Southeast Asia. For instance, several companies in Japan's automotive, electrical and electronic, and food processing industries--including Toyota, Honda, and Sony-- have participated actively in the ASEAN Industrial Cooperation ("AICO") program, which gives the output of cooperative arrangements (the so-called "approved AICO products") preferential tariff rates and unfettered access to participating countries' markets. [FN50] Furthermore, Japan has contributed to the AICO scheme by providing foreign direct investment to the automotive and electronic sectors. [FN51] Through these vehicles, Japan has signaled its desire for greater cooperation in Asia and renewed efforts to lead economic integration in the region, which has perpetuated the rivalry between China and Japan. [FN52]

China has responded in kind to Japan's overtures to ASEAN countries. Like Japan, it too has offered a financial assistance program for the development of the Mekong River sub-region. [FN53] Perhaps in a bid to outdo its archrival, China also forgave Cambodia's estimated $1 billion debt, and in July 2005 announced that it would broaden the array of products from Cambodia, Laos, and Myanmar eligible for preferential tariffs. [FN54] Additionally, China has signed many agreements with CLMV and Thailand to foster cooperation on issues such as transportation, building an information superhighway, and power trade. [FN55] Consistent with a policy of playing the part of a gentle giant in its courtship of ASEAN members, Chinese Prime Minister Wen Jiabao summarized China's wishes by stating somewhat poetically, "[m]ay our friendship and cooperation run as long and deep as the Lancang-Mekong River," and "[a] close neighbor is more helpful than a distant relative." [FN56]

In contrast to their militaristic and violent relationship in the past, China and Japan are currently engaged in a war of statecraft. Whether China can surpass Japan as the head of Asian economic integration is not yet evident, as Japan refuses to relinquish its competitive position in the region. What is certain, however, is that diplomacy is of prime importance. Both countries have demonstrated that they are adept at using it to forge strategic cooperation, to facilitate their respective bids for leadership, and, on some occasions, to raise their opponent's ire.

B. Taiwan

At a parliamentary committee meeting in March 2006, Japanese Foreign Minister Taro Aso remarked, "[Taiwan's] democracy is considerably matured and liberal economics is deeply ingrained, so it is a law-abiding country. In various ways it is a country that shares a sense of values with Japan." [FN57] It was a comment that generated such headlines in China's state-run media as "China 'shocked' by remarks of Japanese FM" [FN58] and scathing, though unsubstantiated, statements such as "[i]nternational news media say Aso lacks the required basic political qualifications as a foreign minister because he frequently goes back onhis own words." [FN59] Aso's comment also captured the essence of what makes Taiwan an obstacle to Chinese leadership of Asian economic regionalism: that Taiwan is economically vital to China and to the region yet unofficially regards itself, and is regarded by others, as a de facto independent country, functionally separate and distinct from China.