The relationship between China and Japan exercises a profound influence on the present and future of Asia and has worldwide impact as well, apart from being vitally important to the two countries themselves.

Geographically, the two nations are close neighbours.

Thanks to this geographic closeness, the Shanghai-Osaka marine transportation cost, for example, is merely one-fifth that of a Shanghai-Hamburg run and one-10th that of a Shanghai-New York shipment. A flight from Tokyo to Beijing takes only three and a half hours, almost the same as air travel from Beijing to Guangzhou.

Both countries are big players in Asia, with a combined population making up nearly 40 per cent of the Asian total and combined GDP accounting for 80 per cent of Asia's total. In addition, the two countries' trade volume has a 60 per cent share in Asia.

The figures provided by the International Monetary Fund show that the two countries contributed enormously to the economic growth in East Asia in, for instance, 2003 and 2004.

Conversely, the stability and prosperity of Asia, which provides China and Japan with a vast stage, is vital to the two countries. The geographic closeness places China and Japan in an "intergrowth of interests" in the Asian arena.

Economically, the two countries complement each other, due to different patterns of resources and the different stages of development in which China and Japan find themselves. This demands we advance co-operation. As a matter of fact, this economic complementariness has translated into strong momentum for co-operation over the last three decades.

The market best epitomizes the complementary nature of the two economies.

Economic development of both countries relies on vast markets. At the same time, however, China and Japan are big markets in themselves. For example, China has imported US$2,200 billion worth of commodities over the past five years. In 2005 alone, goods with a total value of US$660 billion were imported. This vast market, still growing at fast pace, is vitally important to Japan.

On the other hand, Japan is a big market, too. While turning out huge quantities of manufactured goods and high-tech products, Japan absorbs daily utensils and farm produce in large amounts, a significant portion of which comes from China.

The two complementary markets are bringing beneficial results to both peoples.

The two countries are also complementary to each other in science and technology and in human resources.

China has an abundant supply of labour, which is of high quality, while enjoying a complete set of basic-science disciplines and large ranks of scientists. Japan boasts contingents of top-notch researchers and managerial personnel and an advanced scientific set-up, which combine to churn out scientific and technological outcomes that lead the world.

In addition, the prospects of economic growth in the two countries compensate for each other. This is because both Chinese and Japanese economies are in a period of ascendancy, which offers much room for co-operation.

According to China's 11th Five-Year Plan (2006-10), for example, the Chinese economy is set to grow by 7.5 per cent annually over the coming five years. At the same time, Japan's economy, having stepped out from the shadows of stagnation over the last decade, has registered growth for the last four years in a row.

With economic growth picking up speed, bilateral trade is expected to grow by large margins.

In addition, industrial structure realignment, resource exploration, environmental protection and energy saving are all important fields for co-operation.

Historically, the two countries experienced centuries of friendly exchanges and also suffered woes brought by wars in the more recent past. In view of this, we must develop friendship and avoid woes.

The late Chairman Mao Zedong and Premier Zhou Enlai often said that Sino-Japanese ties were marked by 2,000 years of friendship and 50 years of misfortunes.

As early as in the Tang Dynasty (AD 618-907), Monk Jianzhen (Ganjin) made six voyages to Japan to spread Buddhism there and 19 batches of Japanese students were sent to China for studies during the period, who later brought back to Japan knowledge of Chinese culture, medicine and so on.

In addition, China and Japan were important trade partners in ancient times. The two sides, for instance, signed a trade pact during China's Ming Dynasty (1368-1644), the first ever between the two sides.

Since the founding of the People's Republic of China in 1949, especially since the Sino-Japanese rapprochement in 1972, the bilateral trade has made advances by leaps and bounds. For example, China has become Japan's No 1 trade partner since 2004 and Japan China's third largest. Twenty per cent of Japan's overseas companies in terms of numbers are resident in China; 11 per cent of Japan's total output and 10 per cent of total profits are attributed to China.

Since 1979, Japanese investment and technology have helped considerably speed up the course of industrialization in China. 

Good state-to-state relations help create a favourable climate for bilateral economic co-operation.

Both parties, therefore, should strive to bring about this favourable climate.

First, the two countries ought to bring into play their own advantages, which are complementary to each other, and make progress side by side in a win-win context.

At present, three things need to be taken care of in this respect.

To begin with, environmental and energy-saving co-operation needs to be strengthened. China's 11th Five-Year Plan mandates that energy consumed in turning out a given amount of GDP be brought down by 20 per cent by 2010. This offers a good opportunity for Japan, which has first-class technologies for environmental protection and energy conservation.

Then comes the issue of Japan's getting involved in some of China's local development programmes, such as developing the western regions, reviving the old industrial base in Northeast China and promoting economic progress in the central areas.

Finally, mechanisms for mutual investment promotion ought to be improved. On this platform, investment in small and medium-sized enterprises on both sides will be facilitated and a new framework of mutual investment introduced.

Second, both parties should work together to help deepen regional economic co-operation in Asia.

Upon entering the new century, the pace of regional co-operation has quickened and the level of economic integration has been steadily enhanced. The integration rate in Asia has reached 60 per cent, according to the estimate by Japan's Ministry of Economy, Trade and Industry. Conditions are maturing for forging an Asian regional economic community. China and Japan can help accelerate the progress of the bilateral, China-Japan-South Korea and 10-plus-three (10 countries grouped in the Association of Southeast Asian Nations on the one hand and China, Japan and South Korea on the other) co-operation.

Third, the two countries can work together to push for the introduction of a new international economic order based on fairness and justice.

With the acceleration of economic globalization, problems keep cropping up: runaway petrol price hikes, murky prospects for the Doha Round of world trade negotiations and challenges and predicaments confronting many nations.

As big trade players and important members of the World Trade Organisation, China and Japan have unshirkable obligations to help reopen the Doha Round negotiations, improve the multilateral trade regime, tear down tariff barriers and safeguard the international economic order based on fair competition.

The author Shi Guangsheng is the vice-chairman of the Financial and Economic Committee of the National People's Congress.