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About this book

Diplomatic issues, i.e. the textbook discussion, the Yasukuni debate, and the Senkaku/Diaoyu Islands dispute cause political shocks to Japan-China relations, but economic exchange is maintained. Franziska Schultz discusses political shocks within bilateral relations, analyzing shocks in 2005, 2010 and 2012 causing economic spillovers, such as boycotts, property damage and decreasing numbers of Chinese tourists to Japan. The correlation of monthly trade data with political conflict values (2005-2014) created by the author is analyzed with a vector autoregression (VAR) model. A qualitative content analysis of reports by the Japan-China Economic Association (1981-2015) according to Früh (2011) evaluates whether spillovers play a role for Japanese economic actors involved in China business.

Table of Contents

Frontmatter

Chapter 1. Introduction

Abstract
Although Japan and the People’s Republic of China have normalized diplomatic relations in 1972, considerable potential of conflict in Sino-Japanese relations continues to exist. Three diplomatic issues within bilateral relations, that is, the textbook discussion, the Yasukuni debate, and the territorial dispute over the Senkaku/Diaoyu Islands cause recurring political shocks, i. e. sudden political (or politicized) domestic events that temporarily cause relations to deteriorate. Despite these shocks that lead to mass demonstrations and are extensively covered by the media in both countries, Japan and China have continuously maintained strong economic relations since the diplomatic normalization.
Franziska Schultz

Chapter 2. Theoretical Background

Abstract
The first part of this chapter discusses the concept of political shocks prevalent in International Relations literature and analyzes the specific characteristics of shocks to the Japan-China relationship, finding that a modified version of the concept can be applied to shocks to Sino-Japanese relations.
Franziska Schultz

Chapter 3. State of Research

Abstract
If one considers the conditions for spillovers of political shocks onto Sino-Japanese economic relations, such as the changes in Sino-Japanese trade shares and trade structure, the question arises why those effects could not be observed more often. In the first part of this chapter, the state of research regarding theoretical approaches to possible impacts of political conflicts on trade will be discussed and evaluated in the context of Sino-Japanese relations. The second part of the chapter presents past research on the effects of politically conflicting Sino-Japanese relations on economic exchange and discusses the implications for political shocks to Japan-China relations between 2005 and 2012.
Franziska Schultz

Chapter 4. Examples for Spillovers of Political Shocks

Abstract
Although spillovers of political shocks onto Sino-Japanese economic relations have mostly been prevented by constraining economic or political factors, there were three shocks which have caused spillovers onto the economic relationship between the end of the New Thinking in 2005 and Xi Jinping coming to power at the end of 2012. Changes of the Sino-Japanese political and economic environment, such as the shift of economic interdepedence to Japan’s disadvantage from the 1980s to 2005 because of its declining importance as Chinese trading partner and a change in bilateral trade pattern, allowed for three shocks to spill over onto economic relations. The first one of them resulted from the textbook discussion in 2005; the other two were caused by the territorial dispute over the Senkaku Islands in 2010 and 2012.
Franziska Schultz

Chapter 5. Analyzing the Correlation between Sino-Japanese Monthly Trade and Conflict Values (2006-2014) with Vector Autoregression (VAR)

Abstract
In addition to the theoretical perspective, the following chapter analyzes the correlation of Sino-Japanese monthly trade with according political conflict values from January 2005 to December 2014 by employing vector autoregression (VAR) modeling.
Franziska Schultz

Chapter 6. Spillovers of Political Shocks to Sino-Japanese Relations in Annual Reports of the Japan-China Economic Association (1981-2015)

Abstract
Political shocks to Sino-Japanese relations resulting from the textbook discussion in 2005 and the Senkaku Islands dispute in 2010 and 2012 have caused direct and indirect spillovers onto economic relations, such as property damage, boycotts or canceled business events. In most cases, both direct and indirect effects were detrimental to Japanese companies in China. This experience raises the question whether direct or indirect spillovers caused by shocks, or conflicting political relations in general, play a role for Japanese actors doing business with China.
Franziska Schultz

Chapter 7. Conclusion

Abstract
This dissertation has explored the question why repeated political shocks resulting from three diplomatic conflicts, the textbook discussion, the Yasukuni debate and the Senkaku dispute, have spilled over onto the Sino-Japanese economic relationship three times from 2005 to 2012. After discussing the concept of political shocks in context of Sino-Japanese relations, this thesis has explained the bilateral economic and political framework ignored by past research in this context that has made spillovers of three shocks possible and either constrained or prevented others.
Franziska Schultz

Backmatter

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