China and Japan used to have good energy cooperation before China switched into a net oil importer in the mid-1990s, but the recent years have witnessed an increasingly intensive competition between the two countries over petroleum supplies. While many saw such competition as inevitable with China's growing energy demands, the paper argues that the energy relationship between the two countries was never separated from political and strategic concerns, and heavily affected by the concern of 'relative gains', as suggested by the neorealists. Like the case prior to the mid-1990s when the non-energy factors underpinned the Sino-Japanese energy cooperation, the key factors that prevented the two from continuing energy cooperation today also lay in political and strategic aspects. Being two regional powers in East Asia, China, and Japan need to recognize the fact that their lack of energy cooperation due to mutual political distrust will not only impair their own energy security, but may also have negative implications on regionalstability.
China has conducted six government reforms over the past three decades to separate government functions from the major industries. These reforms enabled a number of national oil companies (NOCs) to be established in the 1980s, and the NOCs were further listed in the international stock markets in the new century. However, due to the incomplete government and enterprise reforms, the government has not been very successful in playing a role as the 'principal' to make the NOCs as an 'agent' to manage China's petroleum industry on its behalf. A sensible government-NOCs relationship may be created by either further removing the NOCs' political functions, and strengthening China's energy market mechanism, or by establishing a Super-Energy Ministry that can assert fundamental authority over the NOCs, and manage the energy sector.
The Sino-Japanese dispute over the East China Sea maritime resources was triggered by the unsettled maritime boundary and the territorial dispute over the Diaoyu/Senkaku Islands. The dispute has been ascribed by many to intensified competition between China and Japan over energy supply. However this article attributes the fundamental cause of the conflict to power politics and political distrust, which are deemed to have the key role in preventing the two governments from finding a solution. The article analyses the origin and the causes responsible for the Sino-Japanese dispute over the East China Sea gas exploration, and then proceeds to investigate the diplomatic dialogues to reveal the key obstacles in the process.
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