On August 15 in Beijing

Visiting the Chinese capital is always fun and it can be a somewhat edgy experience, especially if you are a Japanese visitor on the sensitive day of August 15 (the anniversary of the end of World War 2).

This week the weather here has been relatively mild by Beijing standards, meaning the outside temperature is only around 30 degrees Celsius with an air pollution index of 164, only an "unhealthy" level.

Likewise, here in Beijing, at least on the surface the political temperature vis-a-vis Japan is not particularly hot either. Despite the tense political environment and concerns about the future Japan-China relations, the bilateral economic indicators seem to be gradually coming back to reasonably business-as-usual levels.

For example, since the September 2012 anti-Japanese demonstrations when every indicator sharply deteriroated, Japan's direct investment in China has steadily increased in the first half of this year. Japanese automobile sales in China have been also on the rise. The number of private Chinese visitors to Japan is also going up again, although the number of tourist groups is still low.

Officials, scholars or journalists involved in bilateral relations here were cautiously optimistic earlier this week, since reports from Tokyo suggested major ministers of the Japanese government, including Shinzo Abe himself, would probably not visit the Yasukuni Shrine on August 15. However, this does not mean that the overall bilateral relationship is also steadily improving.

The reasons for this are three-fold: At the political level, top Chinese Communist Party (CCP) leaders don't seem to be ready to address the souring of diplomatic relations with Japan, simply because they have been busy with domestic political infighting over the future course of the newly appointed Xi Jinping-Li Keqiang government.

Premature compromise or concessions in favor of Japan are considered treason or proof of weakness in this highly politicized city. No leaders in the new Chinese government can run such a high risk at this initial stage. It may take at least a year or so before Mr. Xi Jinping feels comfortable in making such politically sensitive decisions.

Secondly, at the business level, the recent Chinese economic setback doesn't seem to be serious enough for Chinese leaders to review economic and investment relations with Japan. Although many local governments wish to have better business ties with major Japanese investors or corporations, under the CCP central government politics always overrides business.

Finally, at the people's level, as a result of the CCP's continuous anti-Japanese education and propaganda, many ordinary Chinese naturally harbor hatred towards Japan. Anti-Japan demonstrations are also now the safest and most risk-free political pastime or entertainment for the frustrated poor or jobless Chinese migrant workers in major cities.

Simply put, China is not ready to make a deal with Japan on the Senkaku Islands, at least in the near future. This is the political reality in the capital of the People's Republic and there should be no illusion about it. Yet, this does not mean that the Japan-China bilateral relations can never improve. The following are some of the possible prescriptions for the future.

All the indications so far suggest that in the near term Prime Minister Abe will focus on economic policy. Yet, in the area of foreign policy, he must start trying to rebuild Japan's relationship with China as well as the Republic of Korea without compromising on territorial or other issues that are critical national interests for Japan.

Since there was no serious political surprise at the Yasukuni shrine on August 15, Japan and China now should seriously pursue opportunities to resume ministerial- or higher-level bilateral contacts, if not meetings, in the second half of 2013. In order to have a new round of such contacts, the two governments must come up with intellectually creative political maneuvers.

Such maneuvers must include mutual "face saving" operations which enable either side to claim that the other side took the initiative to make concessions first. Such face saving is only possible if and when the two governments start working on a Japan-China version of the U.S. and China's "new type of power relationship" in 21st century East Asia.

This kind of new bilateral relationship may not be the same as the Japan-China friendship of the 1970s, but should still be based upon its spirit: skillfully cohabiting despite unending territorial or historical arguments, and finally focusing on making rules to prevent miscalculations leading to maritime frictions or confrontations.

Although it may take time, now is a critical moment for both Japan and China to start seriously contemplating a new framework for their bilateral relationship. Success in this would take us back to an equilibrium and stability in the Western Pacific. But any failure would lead to semi-permanent instability for all of East Asia.