Following the financial crisis of 2007-2008 and the subsequent recovery of the U.S. economy with the passing of the Dodd-Frank Act in 2010 to protect consumer rights, the Chinese Communist regime has initiated a large-scale operation aimed at accelerating its goal of becoming a global economic superpower.
The first step was surpassing Japan, then the world’s second-largest economy, in GDP growth in 2010. China successfully achieved this by exceeding Japan’s GDP growth rate that year. The next step? It was to penetrate the top-listed industrial and financial giants in Japan.
These targeted companies were the darlings of the Japanese industrial sector. In 2010, Japan had around 2,292 listed companies. The Chinese Communist influence acquired approximately 7.5% equity in around 170 of these enterprises. This move was like a sharp spearhead piercing through the defense line of the Japanese industry and business sector, serving as China’s Trojan Horse.
These Japanese companies were global entities, with a strong presence in the United States. They included energy companies, global IT service firms, cybersecurity companies, telecommunications companies, pharmaceutical companies, diversified financial services companies, and more.
The Chinese Communist regime carefully avoided triggering any alarms. Acquiring more than 5% of equity would attract close scrutiny from regulatory bodies, prompting the Chinese authorities to maintain a low profile.
China utilized a financial instrument known as the “SSBT OD05 Omnibus–Treaty Client,” a fund registered in Sydney under the Australian State Street Bank and Trust Corporation. The “omnibus fund” refers to the aggregation of funds from multiple underlying assets, masking the exact identities of ultimate investors or beneficiaries. The “treaty” in this context refers to the strategy of channeling these large-scale investments through Australia to leverage the Australia-Japan tax treaty, allowing non-resident investors to reduce withholding tax on Japanese investments.
These were significant investments by China. For instance, in 2012, Chinese investments in Japan amounted to approximately $45 billion. Adjusted for today’s value, it equates to around $65 billion.
It is believed that both the China Investment Corporation (CIC) and the State Administration of Foreign Exchange (SAFE) are investors in the SSBT fund. These sovereign wealth funds are robust financial institutions. CIC and SAFE have direct ties to China’s military and intelligence agencies, operating under China’s command, serving its strategic interests and financial goals. Many in the U.S. intelligence community believe these funds are connected to China’s military, Ministry of State Security (intelligence agencies), and other Chinese government bodies.
If true, this should raise concerns about corporate governance boards. Foreign military and intelligence agencies holding financial positions in Japanese listed companies violate Japan’s national security laws. However, the Chinese authorities preemptively addressed this issue.
Both CIC and SAFE currently have a combined value of around $5 trillion, equal to the nominal GDP sum of Russia and Brazil, making them powerful economic partners and competitors.
As early as 2003, then Japanese Minister of Economy, Trade, and Industry Shoichi Nakagawa expressed concerns about Chinese influence in Japan. As a hawkish figure with a tough stance towards Beijing, Nakagawa emphasized national security and sovereignty over economic interests.
The strategic cunning of the Chinese regime and its meticulous execution aim to access Japan’s cutting-edge technology and industrial secrets, paving the way towards its coveted goal of becoming the world’s top GDP holder – the strongest global economy. This rivalry between China and the U.S. has unwittingly made Japan a collaborator with China. Since the early 21st century, Japan has been like a deer caught in the headlights, suffering significant blows before realizing it.
China’s so-called “long game” can also be termed “strategic patience,” a geopolitical and economic theory centered on accumulating advantages – acquiring assets that enhance market positions. This is precisely the strategy China employs in Japan: carefully constructing pathways into the core of Japanese industries. Putting aside past conflict histories, China delves deep into Japan’s internals to secure long-term benefits.
A key element of China’s strategy is infiltrating Japan’s robust industrial system. To become a world-class economic powerhouse, mastering advanced technology is essential to maintaining a leading position in industrial development. The Chinese regime understands this well. Their goal is to leverage Japan’s strengths to acquire its technology and industrial secrets, positioning itself as a global economic superpower.
China witnessed Japan’s industrialization process post-World War II and its rapid recovery from defeat to emerge as a superpower within decades. It is not just Japan’s success that attracts China’s attention, but also how it overcame difficulties post-war. However, Japan did achieve success eventually. One key factor in becoming an industrial powerhouse post-war was innovation – something the Chinese regime lacks, and this innovation deficiency undoubtedly hinders China’s path to becoming a global power.
In fact, innovation has been (and may still be) China’s Achilles’ Heel. During the 2019 annual Central Conference, then-Premier Li Keqiang unexpectedly pointed out, “Our country’s innovation capability is not strong, and the weakness in core area technologies remains a prominent issue.” Meanwhile, China had deeply entrenched itself in the Japanese market, establishing a foothold through its strong foreign direct investments and stock market penetration capabilities, securing a place in the Japanese market.
The so-called “key fields” refer to China’s “Project 863,” a blueprint for twenty key technologies aimed at sustainable economic development and countering the United States. China is well aware of its needs but has shortcomings that can only be addressed through acquiring intellectual property and building a 21st-century empire. China must penetrate Japan deeply.
Li Keqiang acknowledges that China must introduce technologies it cannot innovate on its own, a statement that is unprecedented and thought-provoking. In essence, this means China must find alternate routes to develop the necessary technologies comprehensively. The “863 Project” launched in March 1986 aimed to devise a technology blueprint surpassing the GDP requirements of the United States.
China employs various methods to acquire resources, critical for its pivotal role globally. To offset its innovation shortcomings, China has engaged in a series of activities:
– Mergers and acquisitions
– Targeted equity investments
– International joint ventures
– Direct foreign investments
– Active cyber espionage
– Passive cyber espionage
– Human capital espionage
– Socio-economic exploitation
– Diplomatic exchanges
– Academic research
While China’s investments in these listed companies benefit China, they harm Japan’s interests. Currently, Japan ranks fourth globally in GDP, trailing behind the U.S., China, and Germany.
As of 2010, approximately 408,000 Chinese nationals worked in Japanese companies. The Japanese government expects this number to rise to around 1.5 million by 2030. Chinese citizens are now present in various roles across different sectors in Japan, from grassroots positions to professional engineers and managers.
This influence is significant. As per the 2017 Chinese National Intelligence Law and China’s Counter Espionage Law revised in 2023, overseas CCP members are required to participate in any CCP-supported intelligence activities as needed. This entails stealing proprietary information from employers and transmitting it back to China – constituting espionage activities.
China has long recognized that Japan, facing a declining birth rate, would encounter labor shortages in the future. They also understood that Japanese industrial enterprises possess new technologies aligned with China’s “863 Project.” Furthermore, China acknowledged that Japan’s financial strength would aid in expanding Japan’s global influence.
It is well-known that China actively engages in commercial and industrial espionage and acquisitions globally. However, it’s common knowledge that Japan was facing challenges at that time. Its declining birth rate would ultimately weaken its economic foundation. China astutely capitalized on this situation, filling a potential labor gap.
Japan painfully realized that it must take more measures to protect its precious resources from foreign exploitation. It also needs to continuously refine its laws to better resist the loss of technologies and markets that aided its post-war rise.
This detailed insight highlights the extensive efforts by the Chinese Communist regime to infiltrate Japan’s core industries and markets, emphasizing the strategic implications of China’s economic ambitions and its approach towards acquiring advanced technologies globally.