Summer 2014 | 326 China and Japan: ‘Hot Economics, Cold Politics’ May 21, 2014 By June Teufel Dreyer June Teufel Dreyer is a professor of political science at the University of Miami and a Senior Fellow at the Foreign Policy Research Institute. She has served as Chief Far East Specialist for the Library of Congress and as Asia Advisor to the Chief of Naval Operations; has published numerous books and articles on such topics as ethnic minorities in China, the Chinese military, Asia-Pacific security issues; is the author of a general book on China, China’s Political System: Modernization and Tradition, now in its ninth edition. She is now preparing a book on Sino-Japanese relations. This article is a revised version of a paper she delivered at a conference on "The Great Divergence? Economic Integration and Political Conflict in Asia,” cosponsored by FPRI and the Reserve Officers Association, held in Washington, D.C. in October 2013. Abstract: According to integration theory, growing economic interdependence between China and Japan should have spilled over into more cordial political relations. The opposite occurred, as summarized in the phrase “hot economics, cold politics.” Even as both sides acknowledge the value of cooperation for shared benefit, commercial and strategic rivalries have intensified, calling into question the validity of integration theory. iven the progress of economic integration with its intricately engineered global supply chains, social scientists have sought to find ways to extend this inter-dependence to political institutions as well. The idea is that shared economic fortunes will lead to common political visions and ultimately to peace and harmony among the participating states. According to integration theory, the process should start with shared resources managed by politically disinterested technocrats. This will build trust, with greater trust enabling the development of an organizational capacity to resolve disputes and the formulations of legal codes to aid in dispute resolution. In a theory known as “neofunctionalism,” this structural functionalism will create the basis for political integration through a process referred to as spillover. Originally conceived as a model for European integration, it was expected to be applicable to other regions of the world, as well. G This convergence has not happened in the case of China and Japan, and the short to medium-term prognosis is not promising. The case for Sino-Japanese doi: 10.1016/j.orbis.2014.05.002 © 2014 Published for the Foreign Policy Research Institute by Elsevier Ltd.