Lost In Translation: The Subtle Dealings Between China and Japan Can Lead to Powerful Profits

By Keith Fitz-Gerald
Investment Director

Money Morning/The Money Map Report

There's an incredible story taking place in Asia.

Based on my 20 years of experience in the region and formal academic study, you can believe me when I say that this may well be the most pivotal event in 20 centuries of Sino-Japanese relations.

We've reported some of this to you already. But the mainstream Western press hasn't latched on to it.

That's not to say they haven't reported what happened when Japanese Prime Minister Yauo Fukuda hosted Chinese President Hu Jintao during the historic summit the two held in Tokyo last month - the press reported everything that "happened," and did so exceptionally well.

However, like so many things in Asia, mainstream journalists completely missed the subtleties and, not surprisingly, that's where the real story usually is.

But you've got to know how to read between the lines to get at the "real" meaning of what was said.

Here's why.

When translating both Chinese and Japanese to English, there are both literal and figurative translations to consider. Frequently, inexperienced commentators (and even experienced ones) will provide one without the other.

And that's too bad, because it's the context that's "everything" in Asia - and I mean that literally.

Unlike Western romance languages - which descended from the resconstructible Proto-Indo-European language family, and which are logically oriented - Chinese languages are commonly believed to have descended from the Proto-Sino-Tibetan family while Japanese is understood to have come from a context-driven lexical borrowing process in the region.

As a result, Western languages are frequently blunt and to the point, while both the Japanese and Chinese languages historically rely heavily on context and symbolism: In other words, the "real" meaning is not the words, but is instead found in the symbolism associated with those words.

And that's not exactly something you can explain in a 10-second CNN sound bite, so most news stations don't bother.

For instance, during their historic five-day Summit last month in Japan, Prime Minister Fukuda and China President Hu agreed to make 2008 a year for boosting their nation's "mutually beneficial relationship."

I was sitting in Kyoto when I heard that, and I was stunned. I've spent two decades studying, living in and working in Asia, and in all that time I couldn't recall any of the prior leaders of the two countries ever sharing a more-direct, more-powerful statement.  And neither could the Chinese and Japanese I spoke with that day because the words represents the single most important thaw yet verbalized in the decades old animosity dating back to World War II.

While most Westerners expected them to "settle affairs" by making some reference to historical events that have badly strained bi-lateral relations in recent years, both leaders deliberately avoided doing anything like that during their five-day meeting. And, by doing so, each side was able to state his case to the other's countrymen without "losing face," which is pivotally important to both countries and cultures.

Similarly, President Hu's remarks that he's looking forward to a "warm spring" between the two countries were translated quite literally by the Western media, although the comment had an entirely different meaning to Asians. To Asians, the comment is symptomatic of far deeper, and more intimate, nationalist feelings on a variety of personal and state levels.

By stating his desire for a "warm spring," President Hu was making an allegorical reference to the importance of producing a bountiful rice harvest. And the reason why this makes sense to Asians is that rice has been pivotally important to both cultures for a millennium or more. That crop has enabled both cultures to make the transition from hunter-gathers to farmer, and it is also central to religious and social festivals in both countries, as it has been for thousands of years.

By referencing rice farming, President Hu was very deliberately reaching deep down into the core of both nations and sending an important message to millions of Japanese and Chinese citizens that China is ready to put the past to rest and look to the future.

In a more Western fashion, the two leaders also agreed that "long-term cooperation for peace and friendship" is the "only choice left" for both countries.  This, too, is full of hidden meaning: It's an unprecedented signal that both nations are preparing to (finally) put the horrific events - and the long-lingering bad feelings - of WWII behind them.

By putting this rancor to rest, each country will now be free to make major investments in the other's economy - much more so than they're doing even now.

If history is any guide, then some of the most significant Sino-Japanese trends of the future are likely to begin at the intersections of companies just now starting to flourish.

Of course, there will be course corrections along the way, but that didn't hurt relations 20 centuries ago when Japan and China were very close - and those corrections won't hurt them, now.

The important thing is to embrace change as it occurs.

For investors, one of the biggest profit opportunities will be with companies that are helping China build out its infrastructure and build up its consumer sector, which is why such companies as solar-ceramics maker Kyocera Corp. (ADR: KYO), and trading giant and independent power plant developer Mitsui & Co. Ltd. (ADR: MITSY), are logical choices.

In addition to seeing Japanese companies like these focusing their sights on the China market, we're likely to see Chinese companies doing the same with Japan. While it's not yet clear who those companies will be, it is clear to us that the initial entrée will likely be from one or more of China's sovereign wealth funds.

Our best guess is that China investors will prefer key targets like those traded on the Tokyo Stock Exchange - especially companies that have an expertise in environmental protection and energy-saving technologies.

We also think China will make a run at construction companies with experience in large-scale infrastructure and national-building projects - all of which are in exceptionally high demand in China.

News and Related Story Links:

  • All Academic Research:
    Lexical Borrowing in the Chinese Context: Examples from two English Newspapers in China.

About the Author

Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.

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