Recently, Japanese business delegations visiting Beijing often ask about the ``China threat.'' Chinese leaders and scholars immediately deny it, saying, ``We are behind our neighbors in terms of military capabilities and it is out of the question that we are a threat.''

Most of the time, the discussion gets nowhere.

While China feels the need to explain the increase in its defense budget, it thinks of itself as a developing country. As such, it has never crossed its mind that Japan would regard the Chinese economy as a threat.

Looking from the outside, the Chinese economy has made remarkable growth. It has continued an average growth of 10 percent for the last two decades and Shanghai, a typical business center, has transformed into a modern city almost beyond recognition. It is true that products bearing the tag ``Made in China'' are inundating the Japanese market. Perhaps that is why the Japanese feel threatened.

Actually, however, the size of the Chinese economy is still less than one-quarter of Japan's. China's accumulation of technology is limited. Furthermore, its entry into the World Trade Organization could prompt a sharp rise in imports, which could cause Chinese companies to go out of business and force workers to lose jobs. China appears more worried than confident about its future.

According to C.H. Kwan, a senior fellow of the Tokyo-based Research Institute of Economy, Trade and Industry, even now, there is a difference of some 40 years between the Japanese and Chinese economies. Even if China continues a high economic growth for another two decades, its per capita gross domestic product may or may not reach one-tenth of Japan's. Thus, it has a long way to go before it can be called a truly industrialized economy, Kwan said.

It is true that imports from China are rising steeply. However, most of them are labor-intensive products. In addition, more than half the total value is made up of development imports by Japanese companies that advanced to China in search of cheap labor and products exported by Japanese companies operating locally. Uniqlo is a typical example.

The increase in trade between the two countries is mutually beneficial. Development imports benefit Japanese consumers and the low price of imports is effective in reducing Japanese companies' production costs, strengthens their competitiveness and promotes structural reform of industries. At the same time, it leads to increased exports to China.

Computer-related products, electronics and machinery exported from China are largely dependent on parts imported from Japan. Although most of them are labeled ``Made in China,'' actually, in many cases, the core components with added value are made in Japan.

Japanese exports to China, including Hong Kong, exceed imports. According to Kwan, competitive products that both countries export to each other make up less than 20 percent of all exports between them. Since China has an abundance of cheap labor and Japan has an edge over China in terms of funds and technological advancement, the two countries are not rivals but share a complementary relationship, Kwan said.

Just a short while ago, most analysts predicted the devaluation of the renminbi and warned of an imminent Chinese financial crisis. But such views were suddenly replaced by a possible revaluation of the currency and the argument of China as a threat. The sudden shift owes more to the loss of confidence on the part of Japan as a result of its slumping economy rather than a change in the Chinese economy itself. Failed policy such as a delay in structural reform that would make Japanese businesses more competitive may also have to do with the trend.

Rather than grieving over the situation, Japan urgently needs to strengthen its safety net for its workers with flexible application of unemployment insurance and provision of technical support to job applicants. It should also advance structural reform, including the trimming of uncompetitive industries, and promote deregulation.

Although such measures could cause friction, they also provide an opportunity to build cooperative relations. I don't think the recent advancement of China presents a threat to Japan, but it has put strong pressure on Southeast Asian countries, whose economic standards are close to China's.

China, which is becoming a regional major economic power, has a responsibility to dispel the anxiety of its neighbors and make a contribution to the shared prosperity of regional economy. Meanwhile, Japan, a global economic power, is expected positively build a system of division of labor with China and the rest of Asia.

Japan-China cooperation is indispensable for balanced sustainable growth in East Asia. The two countries should strengthen their complementary roles. They have an increasingly important responsibility to take the lead in building a regional economic bloc while paying consideration to surrounding countries. In the process of cooperation, they must overcome their differences such as the problem of historical recognition. What both countries need to share is such a broad perspective.

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The author, born in China, is an assistant manager of Norinchukin Research Institute Co.