While the media keeps it eye on the Diaoyu/Senkaku islands dispute, a parallel, possibly game-changing development in China-Japan relations has gone largely unreported: the recent increase in collaboration between the world’s second and third largest economies in a host of science, technology, and business fields.  Nationalist rhetoric aside, at the level of pragmatic action the logic for partnership has never been stronger.

This is not to downplay the seriousness of simmering tensions. Although it’s true that Chinese anti-Japanese protests are nothing new and that carefully managed nationalism has been a staple of China’s Japan policy for decades, 2013 presents a more dangerous picture. The stakes are higher. As a newly strong China projects its power outward into the East China and South China seas, the tiny, uninhabited islands at the end of the Okinawa archipelago—Diaoyu in Chinese, Senkaku in Japanese—have assumed outsized importance due to their strategic location and proximity to undersea oil and gas reserves.  Disputing Japan’s sovereignty over the islands as China has done recently raises to a new order of magnitude longstanding friction between the two sides over issues of history and war responsibility. With air and sea provocations now increasingly part of the equation, observers quite rightly warn of a local incident spiraling out of control even as cooler heads examine the justice of conflicting territorial claims through the lens of international law. Taking the long view, Cui Tiankai, China’s new ambassador to the U.S., says that “the fundamental problem is whether Japan can accept China’s expanding new strength.”  The U.S. answer to the same question lies in the ‘yes, with reservations’ tone of its pivot to Asia policy. Meeting in Hawaii in late March, U.S. and Japanese officials outlined a joint defense plan aimed to push back against China’s new assertiveness in the East China Sea.

Measuring the economic impact of the ongoing territorial crisis has drawn a lot of attention and produced a mixed balance sheet. When Diaoyu/Senkaku-related anti-Japanese protests broke out in China last August and September, commentators were quick to tag Japanese business the clear loser. True, Japanese car sales in China plummeted some 40% by year end with significant declines also in sales of Sony, Panasonic, Toshiba and Sanyo home appliance products. Although recovery has started in these sectors—auto sales show modest gains and air purifiers, not surprisingly, are selling exceptionally well—other areas appear stagnant. Japan’s tourism industry has yet to reverse the downward trend in Chinese visitors to Japan triggered by the dispute.

But there have been negative consequences for China as well. Anti-Japanese protests and boycotts have convinced many Japanese companies to accelerate plans to shift production operations from China to Southeast Asia, a shift already under way in response to increasing wage demands from Chinese workers. Potential loss of jobs is significant. Toyota alone employs around 30,000 Chinese workers in its factories in China. Analysts appear generally unconcerned about the impact on China of the decline in Japanese FDI that occurred in 2012. Still, any pullback of Japanese investment over the long term could work to China’s detriment, denying Chinese businesses the technological and managerial expertise of Japanese companies with global reach and experience—and this just at a critical time in China’s own push to develop innovative technologies that are globally scalable.

The Diaoyu/Senkaku dispute merits close media attention. A military clash would be enormously dangerous and damaging. Unfortunately, however, the near exclusive coverage of the conflict side of the story has all but obscured the cooperative efforts, ongoing and potential, that are an equally significant part of the current China-Japan relationship.

China and Japan have maintained decades-long contacts to talk about energy sector concerns, including what seems unthinkable in 2013: cooperative efforts to develop new resources in the East China Sea. Yet an agreement reached as recently as 2008 called for joint exploration of the Chunxiao/Shirakaba offshore oil field (north of the Diaoyu/Senkakus), a promising start that quickly foundered on the details of implementation. Today, achieving energy security remains at the top of the economic agenda for both countries—for Japan as it rethinks its nuclear policy in the aftermath of the 2011 disaster, for China as it seeks to maintain the fast-paced growth Chinese have come to expect as the norm. Already the world’s largest energy consumer, China will continue to dominate the world’s energy consumption picture over the next two decades. China’s dependence on foreign oil is projected to reach 80% by 2030, with natural gas import dependency rising to 40%. China is now on a restless search for energy globally. Regionally, the seaward thrust to secure supplies—the Diaoyu/Senkakus is but one target area—is matched by new and planned pipelines stretching overland from the west and north into China from Myanmar, Turkmenistan, and Russia. Japan’s recent success in its 12 year project to extract deep sea methane hydrate has met with skepticism from some experts on cost grounds. But it could prove to be a boon when it comes to exploiting oil and gas deposits in the Arctic Circle, currently the site of fevered interest on the part of China and Japan and a host of other powers.

China and Japan have common interests not only in developing new energy sources, but in enhancing energy efficiency, conserving energy, and protecting the environment. And in the latter areas Japan has the edge over China—and most of the rest of the world—in experience and new technologies. Collaboration makes sense, for Japan to expand business opportunities in China, for China to learn from Japan, to boost its own energy and environmentally-related businesses, and to help China’s cities manage the downsides of rapid urbanization.  It was this kind of thinking that led to creation of the first Japan-China Energy Conservation Forum in 2006. At the most recent meeting, held in Tokyo on August 6, 2012 just a week before Chinese youth launched anti-Japanese protests in Shanghai, ministerial level officials on both sides signed off on 47 joint projects in a range of technical fields, including photovoltaic power generation, energy distribution, installing smart grids, wastewater treatment, and home appliance recycling. Hitachi, leader in energy-saving and environmental technologies, is among a number of Japanese companies now involved in jointly managed and designed model projects under way in such cities as Kunming, Ningbo, Dalian, and Chongqing.

Collaboration among Chinese and Japanese research institutes and universities is also an important part of the bilateral relationship little remarked on in the media. The Japan Science and Technology Agency working with China’s Ministry of Science and Technology and National Natural Science Foundation have funded joint university projects since 2004. “Comprehensive conversion of biomass and waste to biofuels by novel catalytic processes,” an ongoing project headed by professors at Toyama University and the Chinese Academy of Sciences (CAS) won’t grab headlines the way “Japanese jets scramble over the Senkakus” will, but this is solid stuff, both the topic and the establishment of research links.

Many of the university-based projects address China’s worsening problems of air and water pollution, much in the news this spring. Killer smog in Beijing does make the headlines, as does the image of toxic clouds blowing across the sea to Japan. Air pollution is beginning to affect cities in Southwestern Japan. In China, the immediate health hazard posed by high concentrations of deadly PM2.5 particles is compounded by political risk should the leadership be unable to show an angry public that something is being done about it. Environmental concerns have a momentum of their own. In February, even amid talk of armed conflict over the Diaoyu/Senkakus, officials from Japan’s environmental and health agencies visited their Chinese counterparts in Beijing to discuss another urgent threat, air pollution. A similar meeting, again, with little publicity and adding climate change to the agenda, was held in Japan in May. Strengthening linkages to deal with environmental problems of regional concern, which is the purpose of these meetings, clearly makes sense. China would reap tremendous advantage from access to Japan’s green technology, the most advanced in the world, and, not least, from Japan’s decades-long experience in instituting pollution control regulations. Japan would benefit from expanded business in China, its major trading partner.

University and research institute exchange projects are not confined to environmental fields. Tokyo University’s Institute of Medical Science and CAS have teamed up on cancer research as have the two countries’ health ministries, which also have collaborative research in preventive epidemiology on the agenda.  In January of this year, CAS’s Institute of Chemistry signed an agreement with Japan’s Institute of Physical and Chemical Research to expand the joint research program in chemistry begun in 2007. Some of the China-Japan projects are important but unlikely to attract much notice from the general public: viz, a six-year project to develop 1.3GHz superconducting radiofrequency technology, the subject of a meeting of Chinese and Japanese physicists in Beijing also in January. These are just scattered examples indicative of hundreds of projects involving Chinese and Japanese researchers, some of them international in scope, many of them sponsored by CAS.

‘Hot economics, cold politics,’ has been used to characterize the bumpy path of China-Japan relations for most of the postwar period. Judging from the number of major new joint ventures being announced at this time of frayed political ties, the phrase seems to hold true now.  Nippon Steel is set to build an auto steel facility in China, Lenovo and NEC are in the final stages of establishing a partnership in the smartphone business, audio device manufacturer Guoguang Electronic has just joined ONKYO Acoustic to produce car radios for the China market, and so on. One of the most promising areas for joint venture activity is robotics. Japan is a global leader in production of industrial robots.  Chinese demand for robots to replace humans is growing exponentially, first, because rising labor costs are eroding the competitive advantage in manufacturing China has enjoyed until now, and second, because a more environmentally aware public has become less tolerant of using human labor in highly polluting or dangerous industries.  Within a year, according to the International Federation of Robotics, China will become the largest market for industrial robots in the world. Recent joint ventures like Shanghai-Fanuc and Yasakawa Shougang Robot are poised to reap the benefit.