24 November 2024

The History And Impact Of Japan’s Loans To China – Analysis

Xia Ri

1979 was a critical year for the economic, political, and diplomatic development between China and Japan. During his visit to China, then-Japanese Prime Minister Masayoshi Ōhira explicitly stated that Japan would support China’s reform and opening-up efforts. Subsequently, Japan formally began providing government development loans to China, primarily in yen. In December 2007, China and Japan signed the yen loan agreement, and 28 years later, the Japanese government officially announced that it would cease the loans to China starting in 2008. Researchers at ANBOUND believe that yen loans played a significant role in China’s reform and opening-up, and in advancing China’s socialist modernization. However, the importance of yen loans is clearly underestimated in China, hence the need for it to be re-examined and recognized.

In its entire process, Japan provided loans to China in batches, with the initial scale rapidly increasing, peaking in 2000, then sharply decreasing. Overall, yen loans show the five characteristics of high amounts, large increases, low interest rates, long repayment periods, and high cooperation.

The first three batches of yen loans saw a significant increase in scale. The first batch (1979-1983) amounted to JPY 330.9 billion, with an interest rate of 3% and a 30-year repayment period, including a 10-year grace period. The second batch (1984-1989) was announced during Prime Minister Yasuhiro Nakasone’s visit to China in 1984, with a loan of JPY 470 billion, an interest rate ranging from 3% to 5%, and the same 30-year repayment period, including a 10-year grace period. The third batch (1990-1995), announced during Prime Minister Takeshita Noboru’s visit in 1988, involved JPY 810 billion, a 2.5% interest rate, and a 30-year repayment period, also with a 10-year grace period.

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