Introduction

On the Christmas Eve of 2019, Premier Li Keqiang of China, Prime Minister Shinzo Abe of Japan and President Moon Jae-in of South Korea met in the eighth Trilateral Summit in Chengdu, China. The summit released two key documents. The first document, “Trilateral Cooperation Vision for the Next Decade”, outlines the blueprint of trilateral cooperation in the next 10 years. Another document, “Trilateral+X Early Harvest Projects”, compiles a list of potential projects involving cooperation among the trio plus other states in the region [1]. The summit coincided with the 20th anniversary of Trilateral Cooperation, which originated in 1999.

Among the various concerned areas, economic cooperation is a focal point in Trilateral Cooperation. This is not surprising given the close economic ties among China, Japan and South Korea. Besides, trilateral economic cooperation can facilitate regional economic cooperation in the broader East Asia region as the trio are major economies in the world. According to the World Bank, China, Japan and South Korea are ranked second, third and twelve in terms of their economic size in 2019 [2]. In “Trilateral Cooperation Vision for the Next Decade”, the leaders of the three states pledged to accelerate negotiations for the China-Japan-South Korea FTA (CJK FTA) and to promote cooperation on digital economy and the telecommunication sector [3].

Overall, China has been supportive towards the institutionalization of trilateral economic cooperation. As a major regional actor, China’s approach towards the institutionalization of trilateral economic cooperation will have important implications for the regional institution. This paper is based on a study which endeavours to examine and explain China’s approach towards the institutionalization of trilateral economic cooperation between 1999 and 2019. The findings indicate that while China has supported the institutionalization of trilateral economic cooperation, it has been less proactive in promoting the institutionalization of trilateral economic cooperation in recent years. This is explained by the decreasing economic interdependence between China and the other member states and the shift in China’s regional strategy since 2013.

The paper is organized into four sections. The first section introduces the development of trilateral economic cooperation. The second section critically reviews two explanations on China’s involvement in Trilateral Cooperation, which underline the importance of critical junctures and Sino-US relations in shaping China’s involvement. The third section introduces the proposed explanation and analyses China’s approach to institutionalizing trilateral economic cooperation in three periods from 1999 to 2019. The last section summarizes the major arguments of the study. Drawing on the definition of Huntington [4: 4, 12-24],Footnote 1 this study will focus on China’s approach to further trilateral economic cooperation (e.g. to conclude the CJK FTA) and create trilateral mechanisms on related areas to assess its approach to institutionalize trilateral economic cooperation.

Development of Trilateral Economic Cooperation

Trilateral Cooperation emerged from the participation of China, Japan and South Korea in Association of Southeast Asian Nations Plus Three (ASEAN+3). In November 1999, Premier Zhu Rongji of China, Prime Minister Keizo Obuchi of Japan and President Kim Dae-jung of South Korea held a breakfast meeting on the sidelines of the ASEAN+3 summit, marking the beginning of the regional institution. Such meetings were later formalized. In 2007, the state leaders decided to convene separate meetings in Northeast Asia, while the meetings on the sidelines of the ASEAN+3 summits would continue. Accordingly, the first Trilateral Summit was held in Fukuoka, Japan, in December 2008 [5: 10, 6]. These summits formed the core of Trilateral Cooperation. Over the years, more than 70 dialogue mechanisms were developed covering a wide range of issues such as trade, finance, managing disasters and environmental issues. In 2011, the Trilateral Cooperation Secretariat was established in Seoul to support the mechanisms of the regional institution [7].

Given the close economic ties among the trio, it is not surprising that economic cooperation has received much attention in Trilateral Cooperation. For instance, 10 out of 21 ministerial-level meetings in Trilateral Cooperation were related to the economic area [8]. There were two major initiatives developed by the regional institution, namely, the Trilateral Agreement for the Promotion, Facilitation and Protection of Investment (also named as the Trilateral Investment Agreement) and CJK FTA. The Trilateral Investment Agreement was the first legal document to promote trilateral economic cooperation. In 2003, leaders of the member states reached consensus to launch a feasibility study on the agreement, which was completed in the following year. Negotiations commenced in 2007. Finally, the Trilateral Investment Agreement was signed by the economic ministers of the member states during the fifth Trilateral Summit in 2012. It was expected to improve the investment environment of member states and facilitate intra-regional trade and investment [9:129 & 132-133, 10].

The CJK FTA is currently under construction. In 2002, the leaders of the three states decided to conduct a study on a CJK FTA. A joint study on the economic effects of the CJK FTA was conducted by the research institutions of the three states from 2003 to 2009, followed by a feasibility study with official involvement from 2010 to 2011. The research team submitted the report to the fifth Trilateral Summit, whereby leaders decided to begin negotiations on the CJK FTA. Altogether, sixteen rounds of negotiations were held by December 2019 [11, 12].

Literature Review

This section will provide a critical review of two explanations on China’s involvement in trilateral economic cooperation, which stresses the importance of critical junctures and China’s interests to balance against the US.

Critical Juncture

One explanation argues that the development of regionalism in Asia is driven by crises. It directs our attention to the role played by the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis to China’s participation in Trilateral Cooperation. Some analysts asserted that the Asian Financial Crisis was a turning point in the development of regionalism in Northeast Asia as political elites in the region realized the need to coordinate their efforts to combat the crisis and to avert similar events in future [13, 14]. Nonetheless, the empirical evidence seems to suggest a more nuanced relationship between the Asian Financial Crisis and China’s participation in Trilateral Cooperation. For instance, when South Korea sought assistance from neighbouring states in the midst of the crisis, “neither Japan nor China directly made direct and immediate response to the appeal [15: 188-189]”. China turned down the proposal to convene a trilateral meeting when it was first raised in 1998. It took another year before China changed its mind [16:60, 17:321]. Following China’s preference, the first meeting of the regional institution took the form of a breakfast meeting involving the leaders of the three states during the sidelines of the ASEAN+3 summit [18: 139]. The informal meeting had no agenda, and the leaders simply took the opportunity to discuss domestic and regional economic developments [19:239, 20].

Contrary to the Asian Financial Crisis, the Global Financial Crisis contributed to China’s support towards further institutionalizing trilateral economic cooperation. During the first Trilateral Summit in 2008, bilateral currency swap agreements were reached between China and South Korea and between Japan and South Korea, respectively. China and Japan agreed to provide assistance to South Korea in accordance with the Chiang Mai Initiative [21:201-202]. At the same time, China also supported to accelerate the development of the Trilateral Investment Agreement and CJK FTA, including the timely completion of negotiations for the Trilateral Investment Agreement and the feasibility study of the CJK FTA [22: 110]. Taken together, the existence of critical junctures can explain China’s approach to trilateral economic cooperation in the late 2000s but not in the late 1990s.

Balancing Against the US?

Another explanation draws on realism in the international relations literature. Some scholars explained China’s approach to regional institutions in Asia by its interest to balance against the US [23,24,25]. Assuming the centrality of Sino-US relations in shaping China’s approach to institutionalizing regional institutions, this explanation argues that China seeks to increase its relative power vis-à-vis the US by participating in regional institutions in Asia. Specifically, China will exploit situations when the US is pre-occupied or when the image of the US in the region is severely damaged to promote or support initiatives to increase its relative power at the expense of the US. To explore the plausibility of this explanation, it is vital to examine why China chose to join specific regional institutions in the first place and what were the considerations that shaped its subsequent behaviour.

In the case of Trilateral Cooperation, Rozman noted that China’s decision to join the regional institution coincided with deteriorating Sino-US relations. In May 1999, the Chinese embassy in Belgrade was bombed by the US during a campaign launched by the North Atlantic Treaty Organization (NATO) against Yugoslavia:

When relations with the US deteriorated in 1999, China acted as it had a decade earlier after sanctions were imposed over Tiananmen. It turned to its Asian neighbours… In 1999 at Manila an informal breakfast began among the three non-ASEAN states. In Singapore in 2000 the gathering grew more formal, and the agenda was broadened. This showed increased trust in Japan as well as in Kim Dae-jung as a balancing figure [26: 247-248].

The informal meeting which marked the beginning of Trilateral Cooperation was held against the backdrop of a strained Sino-US relationship, which might lend support to the explanation. Nonetheless, it was noteworthy that the NATO campaign lasted less than 3 months and the capability and image of the US in Asia was left largely untarnished.

Some scholars asserted that China’s subsequent participation in Trilateral Cooperation was motivated by its interests to balance against the US. As argued by Yeo, “The Trilateral framework enables China to participate in a regional forum without US involvement and strengthen relationships with Japan and South Korea on its own terms.” This would enable China to increase its regional influence vis-à-vis the US in the long run [27:4]. For instance, China’s promotion of the CJK FTA may be perceived by critics as an example of balancing. After the 911 Incident in 2001, the US was preoccupied with its War on Terrorism. China’s promotion of the CJK FTA could enhance its economic ties with the two key US allies in Northeast Asia, disrupt the economic pillar of the US alliance system in the regionFootnote 2 and complicate any possible attempts by the US to contain China in future. Nonetheless, a major cause that complicates the economic pillar of the US alliance system in Northeast Asia is the growing importance of China as a trade partner to both Japan and South Korea, which develops in the absence of the CJK FTA. As discussed in the following, China’s initiative regarding the CJK FTA was shaped by economic considerations as well as its prevailing regional strategy. All in all, China’s involvement in Trilateral Cooperation does not seem to demonstrate a strong tendency to balance against the US.

Explaining China’s Approach to the Institutionalization of Trilateral Economic Cooperation

This paper seeks to explain China’s approach to the institutionalization of trilateral economic cooperation via two factors, namely, the level of economic interdependence between China and the other member states as well as the relationship between Trilateral Cooperation and China’s regional strategy.

Economic Interdependence

The level of economic interdependence among regional states will shape their approach towards institutionalizing regional economic cooperation. For example, Madhur noted that “Neighboring countries that already trade heavily among them tend to form PTAs (preferential trade agreements) as they have much to gain by their low natural trade (including transport) costs [29: 378]”. In Northeast Asia, China, Japan and South Korea are important trade partners of each other and are deeply involved in regional production networks. Chiang observed that their “growing economic interdependence” generated support for further institutionalizing trilateral economic cooperation via the CJK FTA despite problems in bilateral ties [30: 200].

The emphasis on economic interdependence draws our attention to the volume and proportion of China’s trade ties with Japan and South Korea. The latter is especially important, as an increase in the volume of intra-regional trade does not necessarily translate to an increase in the proportion of intra-regional trade [31: 207-208]. If China has a high level of economic interdependence with Japan and South Korea, it will be supportive to institutionalizing trilateral economic cooperation. Likewise, an increase in the level of economic interdependence between China and its Northeast Asian counterparts will lead to the adoption of a more proactive stance towards institutionalizing trilateral economic cooperation, and vice versa.

China’s Regional Strategy

The decision to institutionalize regional economic cooperation by states is not driven by economic considerations alone. For example, Yoshimatsu pointed out that FTAs may be used by states to accomplish a variety of diplomatic objectives, ranging from safeguarding national security to facilitating bilateral ties. Hence, the FTA strategies of states (e.g. choice of partners) may be shaped by diplomatic considerations [32: 102-103]. This paper argues that China’s approach to institutionalizing trilateral economic cooperation is shaped by the relationship between Trilateral Cooperation and China’s regional strategy which seeks to accomplish multiple objectives such as reassuring others about China’s rise and securing a peaceful periphery conductive to economic development.

Since the 1990s, China has adopted a more regionally focused foreign policy based on “good neighbourliness” (mulin youhao) [33: 56 & 60]. As part of the policy, China joined various regional institutions in Asia and its participation has been increasingly active over time [34]. Nonetheless, the existence of multiple regional institutions and initiatives in Asia compete for the time and resources of regional states. In their regional strategies, different states may prioritize different regional institutions and/or initiatives to institutionalize regional cooperation. By so doing, regional powers may compete for regional influence. This factor draws out attention to whether Trilateral Cooperation serves China’s regional strategy in a specific period. If it can facilitate China’s regional strategy, China will be supportive to institutionalizing trilateral economic cooperation. Otherwise, China will assign less priority to the institutionalization of trilateral economic cooperation and promote regional economic cooperation via other platforms or initiatives instead.

The First Period (1999–2004)

During the early years of Trilateral Cooperation, China enjoyed a high level of economic interdependence with Japan and South Korea. Both were China’s top trade partners in the 1990s, and the proportion of intra-regional trade and investment rose significantly [35:323, 36:20]. According to the official statistics of China, Japan was the largest trade partner of China in 1999, while South Korea was its fourth largest trade partner. China’s foreign trade with Japan and South Korea amounted to US$ 91 billion (US$ 66 billion for Japan and US$ 25 billion for South Korea) or roughly one-quarter of its foreign trade. By 2004, China’s trade with Japan and South Korea rose to nearly US$ 258 billion, which constituted about 22.34% of its foreign trade (see Table 1).

Table 1 China’s trade with Japan and South Korea, 1999–2019 (in US$ million)
Full size table

A similar trend can be found when we examine China’s foreign direct investment (FDI) from Japan and South Korea. Japan was the third largest investor in China in 1999, whereas South Korea was its eighth largest investor. The total amount of FDI invested by Japan and South Korea in China was US$ 4 billion (nearly US$ 3 billion for Japan and US$ 1 billion for South Korea), which constituted about 10.54% of the FDI received by China. By 2004, the FDI of Japan and South Korea in China surpassed US$ 11 billion, and the proportion of China’s FDI from Japan and South Korea reached 19.3% (see Table 2) [37]. Majority of the FDI was concentrated in the manufacturing sector. The three Northeast Asian states were deeply involved in regional production networks in sectors such as electrical machinery. Within the regional division of labour, China imported intermediary goods and capital goods from Japan and South Korea and exported final goods to the international market [38].

Table 2 FDI to China from Japan and South Korea, 1999-2019 (in US$ million)
Full size table

With such a high level of economic interdependence, it would be beneficial for China to strengthen its economic ties with Japan and South Korea by institutionalizing trilateral economic cooperation. In fact, China had once considered the Northeast Asian states as the potential candidates for China to conclude its first FTA [39: 180]. As suggested by the findings of the joint study mentioned above, the CJK FTA would contribute to both GDP growth and welfare benefits to the three states.Footnote 3 Besides, the economic ties with Japan and South Korea were more important to China than those with the ASEAN states.Footnote 4 Ultimately, the proposal failed to materialize due to the challenges posed by troubled Sino-Japanese relations and the lack of enthusiasm from Japan and South Korea to the CJK FTA [39: 180-182].Footnote 5

China’s participation in Trilateral Cooperation could further its regional strategy to promote regional cooperation via ASEAN+3. During the 1990s, China joined several nascent regional institutions in Asia such as the Asia-Pacific Economic Cooperation, the ASEAN Regional Forum and ASEAN+3. Among them, China viewed ASEAN+3 as an important vehicle for promoting regional cooperation. In 2000, China advocated positioning ASEAN+3 as the “main channel” (zhuqudao) of promoting East Asian regionalism [34: 111]. Later, in 2003, the Director-General of the Department of Asian Affairs of the Ministry of Foreign Affairs Fu Ying identified ASEAN+3 as one of the “two key points” for China to promote regional cooperation in Asia [46: 311].Footnote 6

By participating in Trilateral Cooperation, China could foster coordination with Japan and South Korea in ASEAN+3. The three Northeast Asian states played an important role in ASEAN+3, which involves the trio and the ten member states of ASEAN. As the material capability of China, Japan and South Korea far outweighed their ASEAN counterparts, their financial support was crucial to promote cooperation in ASEAN+3. Hence, China hoped to promote dialogue and build consensus with its Northeast Asian counterparts, thereby contributing to the development of ASEAN+3. In 2002, Premier Zhu Rongji declared China’s intention explicitly in the trilateral meeting, “While China, Japan and South Korea supported ASEAN to function as the core (hexin), it is necessary for them to coordinate their policies under the rubric of ASEAN+3 to facilitate the development of East Asia cooperation jointly [47]”.

During the first period, China enjoyed a high level of economic interdependence with Japan and South Korea. China’s trade with Japan and South Korea constituted over one-fifth of China’s total trade throughout this period, while the proportion of China’s FDI from Japan and South Korea was in a rising trend. This provided impetus for China to promote the institutionalization of trilateral economic cooperation to further its economic ties with Japan and South Korea. Participation in Trilateral Cooperation also facilitated China’s regional strategy to promote East Asian regionalism via ASEAN+3. Accordingly, China was proactive in institutionalizing trilateral economic cooperation. In 2002, Premier Zhu Rongji suggested that economy and trade together with the information and communications technology industry should be among the priority areas of Trilateral Cooperation. He proposed to conduct a joint research on the possibility of developing a CJK FTA in the trilateral meeting [47] and to accelerate the study in the following meeting. China also proposed the establishment of trilateral mechanisms covering economic and trade; quality supervision, inspection and quarantine; and transport and logistics [48: 5, 49].

The Second Period (2005–2012)

During the second period, China’s economic interdependence with Japan and South Korea displayed mixed tendencies. In this period, China’s foreign trade with Japan and South Korea was generally on the rise, except in 2009 when the world economy was recovering from the 2008 Global Financial Crisis. By 2012, it reached nearly US$ 586 billion. At the same time, the proportion of China’s intra-regional trade with Japan and South Korea was in a decreasing trend. By 2012, it dropped to 15.15% (see Table 1). Further scrutiny shows that it was mainly attributed to the drop in the proportion of China’s bilateral trade with Japan from 18.35% in 1999, 12.97% in 2005 to 8.52% in 2012. In 2008, Japan lost its place as the top trade partner of China to the US. The proportion of China’s trade with South Korea remained relatively constant [37].Footnote 7 Kimura attributed the drop in the proportion of China’s intra-regional trade to the rapid, sustained economic growth of China and its expanding economic ties with the rest of the world [51: 43].

China’s FDI from Japan and South Korea fluctuated during the same period (see Table 2). In 2005, China’s FDI from Japan and South Korea surpassed US$ 11 billion and peaked at around 19.39% of the FDI received by China. It was in a declining trend from 2006 to 2010 and resumed growth in 2011. By 2012, China’s FDI from Japan and South Korea surpassed US$ 10 billion, constituting around 9.3% of the FDI received by China. Both figures were lower than those in 2005 [37]. Noteworthy is the trend of Japan’s FDI in China, which seems to reflect the ups and downs of Sino-Japanese relations. In 2005, Sino-Japanese relations were severely hampered by the repeated visits of Japan’s Prime Minister Junichiro Koizumi to the Yasukuni Shrine, history textbook revisions in Japan and the territorial dispute over the East China Sea. Anti-Japanese demonstrations broke out in various Chinese cities. Accordingly, Japan’s FDI in China was sluggish from 2006 to 2010 [52:279].

China managed to promote financial cooperation in ASEAN+3 through trilateral financial cooperation. When the finance ministers of member states met in May 2008, they reached a consensus to establish a regional reserve pool involving US$ 80 billion to help Asian states encountering financial problems. Later, the reserve pool was expanded to US$ 120 billion, in which four-fifths of the total amount was contributed by the three states [13: 97-98]. On the whole, however, China’s plan to facilitate the development of ASEAN+3 via participating in Trilateral Cooperation faced grave challenges. The convening of top-level meetings in Trilateral Cooperation was disrupted by problems in Sino-Japanese relations. In 2005, the seventh leaders’ meeting was postponed when bilateral ties hit its lowest point [53: 12]. Later, in late 2012, Sino-Japanese ties dropped to a freezing point again following the decision of Japan to nationalize three of the Diaoyu (or Senkaku) Islands. Accordingly, the leaders of China, Japan and South Korea did not meet during the ASEAN+3 summit in November 2012. The sixth Trilateral Summit, which was supposed to be convened in 2013, was postponed to 2015 [54: 103, 55]. The absence of top-level meetings hampered the momentum of Trilateral Cooperation.

More importantly, the competition between China and Japan for regional influence derailed the development of ASEAN+3. In the late 1990s, the East Asia Vision Group (EAVG) was established to chart a vision for East Asian cooperation. One of its recommendations was to develop ASEAN+3 into the East Asia Summit (EAS). As Japan was gravely concerned about China’s growing regional influence in ASEAN+3, it worked in tandem with some ASEAN members like Singapore and Indonesia to include Australia, New Zealand and India in the EAS. The expansion aimed to dilute China’s regional influence in ASEAN+3 [56: 525-526]. After the EAS emerged as a separate regional institution in 2005, Japan strived to promote regional cooperation via EAS rather than ASEAN+3. One example was the EAVG’s recommendation to establish the East Asian Free Trade Area (EAFTA) among the member states of ASEAN+3. China took the lead in conducting the feasibility study of the EAFTA. After the report was published, Japan advocated the development of the Comprehensive Economic Partnership of East Asia (CEPEA) among the member states of EAS and took the lead to conduct a feasibility study on CEPEA. The competing proposals supported by China and Japan led to a stalemate in regional economic integration. Finally, China and Japan reached a consensus to accelerate the development of EAFTA and CEPEA jointly in 2011 [57, 58: 7 & 10]. ASEAN then advocated the development of the Regional Comprehensive Economic Partnership (RCEP) which was based on the membership of EAS. Due to Sino-Japanese competition, the development of ASEAN+3 was stifled. Except in selected issue areas such as financial cooperation, it became another regional institution driven by ASEAN with overlapping membership and agenda rather than the main engine for promoting regionalism in East Asia.

To recap, China’s mutual interdependence with Japan and South Korea displayed mixed tendencies during the second period. While the volume of China’s intra-regional trade with Japan and South Korea continued to rise, the proportion of China’s intra-regional trade with the pair moved in the opposite direction. China’s FDI from Japan and South Korea decreased in both absolute and relative terms. Although China’s regional strategy remained intact, its plan to promote the development of ASEAN+3 by participating in Trilateral Cooperation was overshadowed by the intermittent top-level meetings of Trilateral Cooperation and the competition between China and Japan for regional influence. So far, China has remained positive regarding the institutionalization of trilateral economic cooperation. After the completion of the feasibility study on the CJK FTA in 2011, China suggested to commence negotiations for a CJK FTA as early as 2012 [59: 52, 60]: 10]. At the same time, China pushed for the timely completion of negotiations for the Trilateral Investment Agreement [61: 10]. Although the position of China on various issues (e.g. performance requirements, pre-establishment national treatment) differed from Japan and South Korea [9:132-133], it possessed the political will to bridge the gaps with both parties and complete the negotiations for the Trilateral Investment Agreement in 2011 [62].

The Third Period (2013–2019)

During the third period, China’s level of economic interdependence with Japan and South Korea followed a declining trend. The volume of China’s intra-regional trade with Japan and South Korea fluctuated in this period, as bilateral trade with Japan and South Korea was negatively affected by problems in bilateral ties. China’s bilateral trade with Japan was affected by the latter’s decision to nationalize the Diaoyu (Senkaku) Islands in late 2012. It dropped from 2013 to 2016 and only resumed growth in 2017. Meanwhile, China’s bilateral trade with South Korea was gravely affected by the latter’s decision to install the Terminal High-Altitude Area Defense (THAAD) system in July 2016. This led to a drop in bilateral trade in 2015 and 2016 [37]. Until a settlement was reached in October 2017, the bilateral trade was affected by regulatory challenges, delays in Chinese customs, the alleged ban on cultural products from South Korea as well as boycott of Korean products in China [63]. At the same time, the proportion of China’s intra-regional trade with Japan and South Korea continued to decrease from 15.15% in 2012 to 13.1% in 2019. This was mainly attributed to the further drop in the proportion of China’s trade with Japan (see Table 1) [37]. In comparison, the proportion of intra-regional trade among the trio was far lower than that of the members of the European Union, North American Free Trade Agreement and even ASEAN [64].

The declining economic interdependence was evident when we further analyse China’s FDI from Japan and South Korea. It declined from 2013 to 2017 and resumed growth from 2018 onwards. This was largely attributed to a drop in China’s FDI from Japan from 2013 to 2016. Although China’s FDI from Japan increased from 2017 onwards, it did not restore to the level in 2012. In the same vein, the proportion of China’s FDI from Japan and South Korea showed a downward trend. At its peak, the proportion of China’s FDI from Japan and South Korea exceeded 19% in 2004 and 2005. By 2019, it dropped to 6.7% (see Table 2) [37]. Admittedly, the decreased economic interdependence reduced the incentives of China to institutionalize trilateral economic cooperation.

A major shift in China’s regional strategy took place in this period when China adopted “multiple and parallel tracks” to promote regional cooperation. In addition to existing regional institutions (including those driven by ASEAN), China began to advocate new regional initiatives including the Asian Infrastructure Investment Bank (AIIB) and the Belt and Road Initiative (BRI) [65: 277-278]. The BRI, in particular, merited special attention. The BRI was a shorthand for the Silk Road Economic Belt and 21st Century Maritime Silk Road. Introduced by President Xi Jinping in 2013, it aimed to promote cooperation with the states located along the belt and road via conducting policy dialogue, enhancing connectivity of infrastructure, promoting trade and investment liberalization, fostering financial cooperation and promoting people-to-people exchanges. The development of infrastructure and economic corridors connecting China and belt and road states was emphasized. Since its inception, the plan covered over 60 states in Southeast Asia, South Asia, Central Asia, the Middle East and Africa [66, 67].

As Japan and South Korea were not participants of the BRI, the relationship between China’s participation in Trilateral Cooperation and its regional strategy was dubious at best. One factor shaping Japan and South Korea’s reaction towards the BRI was the timing of the BRI. When China advocated the BRI in 2013, Sino-Japanese relations were deeply troubled by the territorial dispute surrounding the Diaoyu (Senkaku) Islands. Looking through a sceptical lens, Japan perceived the BRI as an attempt by China to expand its geopolitical influence [68: 23]. In response to the BRI, Japan launched the Expanded Partnership for Quality Infrastructure in 2016 which committed US$ 110 billion to promote infrastructure development in Asia. It also worked with like-minded states such as advocating the development of the Asia Africa Growth Corridor with India in 2017, concluding the EU-Japan infrastructure agreement and launching the Blue Dot Network with the US and Australia in 2019 [69]. The final initiative was widely viewed as an “alternative” [70] or “US-led scheme to counter China’s BRI” with two key allies [71]. South Korea’s reaction to the BRI was adversely affected by troubled bilateral ties with China following the THAAD dispute. This resulted in internal opposition to joining the BRI in South Korea [68: 26].

From 2013 to 2019, the level of economic interdependence between China and its Northeast Asian counterparts dropped. The volume of China’s intra-regional trade and FDI from Japan and South Korea fluctuated due to political disputes between China and Japan and between China and South Korea. Concurrently, the proportion of China’s intra-regional trade and FDI for Japan and South Korea displayed a downward trend. This weakened a key incentive for China to further institutionalize trilateral economic cooperation. With a shift in China’s regional strategy, the relationship between China’s participation in Trilateral Cooperation and the realization of the BRI was questionable at best. Both Japan and South Korea were not part of the BRI, and Japan adopted various unilateral, bilateral and minilateral initiatives to counter BRI. To make matters worse, the intermittent meetings of Trilateral Cooperation at the highest level took away a useful venue for the trio to dialogue on the issue. Following the resumption of the Trilateral Summit in 2015, the next summit was postponed to 2018 because of various impediments. China seemed to assign a lower priority to promoting the institutionalization of trilateral economic cooperation. Although Premier Li Keqiang proposed accelerating negotiations for the CJK FTA during the eighth Trilateral Summit in 2019 [72], the trio differed on a variety of issues regarding the CJK FTA such as the issues covered and the degree of liberalization. Thus far, China did not seem to have a strong motivation to settle the differences with Japan and South Korea [73: 6, 31: 220]. In contrast, China pushed for the early conclusion of the RCEP due to its feasibility and its linkage to the BRI. As Southeast Asia was a key region in the BRI, developing the RCEP could further the economic ties between China and the region and further support its regional strategy [31: 220-221].

Conclusion

This paper has attempted to analyse and explain China’s approach to institutionalizing trilateral economic cooperation from 1999 to 2019. It was found that China was generally supportive to the institutionalization of trilateral economic cooperation, with some adjustments over the years. This was attributed to the level of economic interdependence between China and other member states as well as whether Trilateral Cooperation can further China’s regional strategy.

During the first period (1999–2004), the level of economic interdependence between China and its Northeast Asian counterparts was high. China’s participation in Trilateral Cooperation could facilitate its regional strategy to promote regional cooperation via ASEAN+3. Accordingly, China was proactive in institutionalizing trilateral economic cooperation. By the second period (2005–2012), China’s economic interdependence with Japan and South Korea displayed mixed signs. While its regional strategy remained unchanged, China’s plan to facilitate the development of ASEAN+3 via participating in Trilateral Cooperation was frustrated by the postponement of top-level meetings in Trilateral Cooperation and Sino-Japanese competition for regional influence. Overall, China remained positive to the institutionalization of trilateral economic cooperation. In the third period (2013–2019), China’s economic interdependence with Japan and South Korea was apparently declining. As China’s regional strategy shifted with the launch of the BRI, it emphasized other initiatives to promote regional economic cooperation such as the RCEP. In other words, trilateral economic cooperation was assigned a lower priority.

What is the prospect of trilateral economic cooperation? Currently, negotiations for the CJK FTA are ongoing, and the three states have indicated support for accelerating negotiations. Based on the findings of this study, we should be realistic over the development of the CJK FTA in the foreseeable future. As China lacks strong incentives to compromise with Japan and South Korea over their differences, it is unlikely for the trio to reach an ambitious CJK FTA in the near future. To enhance the momentum of trilateral economic cooperation, China, Japan and South Korea should cooperate to enhance their level of economic interdependence. They should find a way to manage their political disputes to avoid disruptions on economic ties. At the same time, Japan and South Korea can explore the possibility to participate in BRI. For example, they can review and reposition their regional strategies to the BRI to explore cooperation opportunities. In 2017, President Moon Jae-in of South Korea suggested linking his New North, New South policies with the BRI during his visit to China [74]. So far, concrete results remain to be seen. The trio may also utilize Trilateral+X cooperation to promote sustainable development and expand its cooperation areas to enhance connectivity in Asia. This can ease the competition between China and Japan for regional influence and promote trilateral economic cooperation further.