The trade volume between China and Japan reached 207.36 billion U.S. dollars in 2006, up 12.5 percent on the previous year. Trade between the two countries broke the 200 billion U.S. dollars mark for the first time.

Japan continues to be China's third-largest trade partner. By the end of November 2006, Japan had invested 57.45 billion U.S. dollars in China. It is now the second-largest source of foreign investment in China, after the United States.

From January to October 2006, Chinese enterprises invested 12.18 million U.S. dollars in Japan, with total investment from China reaching 189 million U.S. dollars.

Strained Sino-Japanese relations last year had a negative impact on Japan's investment in China. The amount of investment projects and total investment decreased.

This year marks the 35th anniversary of the normalization of Sino-Japanese ties. Premier Wen Jiabao recently accepted Japanese Prime Minister Shinzo Abe's invitation to visit Japan in spring, a move widely viewed as a sign of thawing relations.

Improved relations will bring new opportunities for bilateral trade. China and Japan could potentially cooperate in many areas, including energy saving and environmental protection, small- and medium-sized enterprise, software and service outsourcing, developing the middle and western areas of China, and developing regional economic cooperation in Asia.

The two countries, both influential in Asia, need to work together to establish a complete multilateral trade system in the region and create a peaceful and stable trade environment.

The author is director of the Department of Asian Affairs under the Ministry of Commerce.