The economic consequences of China's military threats
On top of this, the sheer size and integration of the economies — China and Japan are the world’s second- and third-largest economies, respectively — makes the relationship hard to ignore.
Japan has 23,000 companies operating in China, with 10 million Chinese workers on their payrolls. But Japanese companies are actively diversifying away from China now, with foreign direct investment waning and Japan shifting to Southeast Asia in particular.
China-South Korea trade is fast approaching the levels of China-Japan trade as a result of fallout from tensions between Tokyo and Beijing. If the Chinese and Japanese start thinking their economic relationship is deteriorating, the potential for confrontation grows. . . .