SHANGHAI — A year after about 20,000 anti-Japan protesters jammed the streets here, Japanese and Chinese officials are still wrangling over how to repair a damaged Japanese Consulate building -- a reflection of the icy political relations that persist between the two nations.
But it is a different story on the economic front. Not only are Japanese restaurants that were attacked during the April 16 demonstrations back in business, but more than 525 additional companies from Japan set up shop in Shanghai in 2005. That's about the same number as in the previous year, indicating that fears of a Japanese corporate pullback from China were unfounded.
The rallies in Shanghai and other Chinese cities last spring were triggered by anger over Japanese history textbooks that glossed over wartime atrocities and Tokyo's bid for a permanent seat on the United Nations Security Council.
After the protests, many Japanese companies said they would reconsider their strategy in China. But Japanese investment there hit a record $6.6 billion last year, climbing 12% from 2004, according to the Japanese Ministry of Foreign Affairs.
By Chinese government figures, Japan's direct investment in China rose 20% last year.
Trade between China and Japan is balanced, in contrast to the U.S.-China flow of goods. Indeed, while economic relations between the United States and China are troubled, commercial links between Japan and China are as good as they have ever been.
That could limit U.S. officials' ability to get their Japanese allies to lend a hand on economic issues related to China.
When Chinese President Hu Jintao arrives in the United States this week, President Bush is expected to press him to take a number of steps, including further opening China's market and strengthening the Chinese currency.
American politicians have complained that an undervalued yuan has contributed to the $200-billion trade deficit with China, the fastest-growing major economy in the world.
On Sunday, Hu announced that China's economy expanded 10.2% in the first quarter, well ahead of expectations.
That may offer little comfort to U.S. politicians complaining that China should buy more American goods. But in Japan, it will probably be viewed as another confirmation that businesses made the right move by bulking up investments in China, despite an initial slowdown after last year's protests.
