The most recent direct investment flows to China provide an unambiguously positive answer. In the first eight months of this year, those investments came in at $138.4 billion, marking a 20% increase from the same period of 2021.

Of particular importance is the fact that, during that interval, business investments in China from South Korea, Germany and Japan increased 59%, 30% and 27% respectively.

Those are significant commitments to expectations of stable and profitable economic and political relations with China. That’s because investments are always an act of faith, a leap into unknown. And that is especially the case with direct foreign investments.

To make the story more complicated, those large increases in investment outlays are coming from countries experiencing rising political pressures to reduce their trade exposure to China in accordance with a U.S.-led “strategic and systemic competition” with Beijing.

That calls for very difficult decisions. Japan, for example, is an export-driven economy supposed to sacrifice relations with China -- its main trade partner accounting for $371 billion in last year’s bilateral business transactions.

Precarious fence sitting

Choosing between reliance on Washington for security and on Beijing for economic growth is Tokyo’s old dilemma. Only the former Prime Minister Shinzo Abe thought he could work around that formidable challenge. One of the first statements he made when he came back to power in December 2012 was that “China is an indispensable country for the Japanese economy to keep growing. We need to use some wisdom so that political problems will not develop and affect economic issues.”

Abe was counting on China’s weakness and on Washington’s usual pass on economic issues.

But times have changed. China is still ready to work with Japan, but it will not tolerate Tokyo’s trespassing its red lines: the one-China policy, Taiwan as China’s internal matter, and China’s (contested) maritime borders.

Washington, for its part, now means business. A toothless “pivot to Asia” is no more. Japan is expected to confront China – a mission at odds with Prime Minister Fumio Kishida’s last week’s message to Beijing celebrating 50 years of “normalized” relations with China. He said that “the Japanese side stands ready to join hands with the Chinese side to focus on promoting the development of constructive and stable Japan-China relations as well as peace and prosperity of the two countries, the region and the world in the next 50 years.”

Kishida’s message is fully embraced by Japan’s business community, but that is completely contrary to Washington’s blueprint of containing China, countering its global power projections and engaging only in highly selective “transactional cooperations.”

The problem is the same with South Korea. China is by far Seoul’s largest trade partner, representing $245.5 billion of merchandise business during the first eight months of this year. Particularly large bets have been placed on memory chip sales to China. Koreans have invested $70 billion in China’s chip market, and half of all their chip production in 2021 was exported to China. That is precisely what Washington wants to bloc.

China’s “golden triangle”

Koreans, like the Japanese, want to do unrestricted business with China, while maintaining their security arrangements with the U.S.

Germany is different. No more “naivety,” says the government. Berlin wants to reduce reliance on China trades. German businesses are aghast. They want to sell and produce in China to avoid bankruptcies in sinking European markets and to get away from huge competitive losses imposed by E.U.’s skyrocketing energy prices.

China has been Germany’s main trade partner for the last six years, with the volume of goods sales reaching $246 billion in 2021 – a 22.5% increase from the year before. China accounts for 34% to 49% of total sales by Audi, BMW, Daimler Benz and Volkswagen. Similar sales results in China are also reported by Bayer, BASF and Siemens.

In view of all that, stirring up business and political problems with China does not seem like a good idea. German businesses would certainly fight, and win, against such policies.

Meanwhile, China is watching its red lines and patiently observing the behavior of its close neighbors, while steadily pursuing economic development. It also seems that Beijing is not giving up on its improbable design of an “Asian golden triangle” (China-Japan-Korea) in a way reminiscent of Sun Tzu’s timeless wisdom.

Who knows? Japan could well shake off Dr. Sun Yat-sen’s curse of being a “troublemaker in Northeast Asia” and go back to the vision and courage of its leaders who established diplomatic relations with China 50 years ago.

Indeed, who knows? At this writing (October 3, 2022), Kishida made a statement that he wants to conclude “a peace treaty with Russia,” after deciding last month to be a major shareholder in Moscow’s Sakhalin 2 energy project. All that comes despite Japan’s participation in Russia’s debilitating sanction regimes.