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China and Japan agree to start talks on free trade pact
Shanghai Daily, Dece,ber 26. 2011CHINA and Japan have agreed to start formal talks early next year on a free trade pact that would also include South Korea, Japanese Prime Minister Yoshihiko Noda said yesterday after talks with Chinese Premier Wen Jiabao that showed the deepening bonds between Asia's two biggest economies.
Japan also said it was looking to buy Chinese treasury debt, and the two governments agreed to enhance financial cooperation.
"On a free trade agreement among Japan, China and South Korea, we've made a substantial progress for an early start of negotiations," Noda said after his meeting with Wen.
China's central bank, the People's Bank of China, said on its website that the two leaders agreed to strengthen bilateral financial market cooperation and "encourage the use of the yuan and Japanese yen in international trade transactions between the two countries."
The trade talks announcement builds on an agreement between the three countries last month to also seek a trilateral investment treaty and finish studies on the proposed free trade agreement by the end of December so they could start formal negotiations on the trade pact.
"China is willing to closely coordinate with Japan to promote our two countries' monetary and financial development, and to accelerate progress of the China-Japan-Republic of Korea free-trade zone and East Asian financial cooperation," Wen told Noda, according to the Chinese Foreign Ministry's official website.
But the regional trade negotiations could compete for attention with Washington's push for a trans-Pacific partnership, after Japan said last month it wants to join in the talks over the United States proposal.
Despite sometimes rancorous political ties between the two neighbors, Japan's economic fortunes are increasingly tied to China's economic growth and consumer demand.
China and Japan are also the world's first and second-biggest holders of foreign reserves. Wen told Noda that closer economic ties were in both countries' interests.
"The deep-seated consequences of the current international financial crisis continue to spread, and the complexity and severity of global and world developments have exceeded our expectations," Wen said.
"China and Japan both have the need and conditions to join hands more closely to respond to challenges and deepen mutually beneficial strategic relations," he said.
In 2010, trade between the two nations grew by 22.3 percent compared to the levels the previous year, reaching 26.5 trillion yen (US$339.3 billion), according to the Japan External Trade Organization.
In a statement issued after the two leaders' meeting, the Japanese government said it would seek to buy Chinese government bonds - a tentative step toward diversification of Tokyo's large foreign exchange reserves that are believed to be mostly held in dollars.
China's central bank said the two governments agreed to support Japanese businesses issuing yuan bonds in Tokyo and other markets outside of China, and the Japan Bank for International Cooperation would begin a pilot scheme for issuing yuan-denominated bonds in China's mainland.
The People's Bank of China also said it would support Japan in using the yuan for direct investment in China.
But Japanese officials have stressed that Japan's trust in dollar assets remains unshaken, and the scale of the planned purchase of Chinese government bonds will be small.
Wen and Noda also agreed to set up a framework to discuss maritime issues after diplomatic ties deteriorated last year following Japan's arrest of a Chinese fishing boat captain in the East China Sea.
Bilateral meetings attended by vice ministers and senior officials from relevant ministries will be held periodically to exchange views, in an effort to prevent a similar row.
"On maritime matters, we have successfully set up a channel to solve problems through multi-layered dialogue," Noda told reporters
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Diplomacia e Relações Internacionais