The People's Republic of China, guided by its 'four modernization' program, has eagerly solicited and accepted Japan's increasing participation in a range of economic atiities, including direct capital investment, joint ventures, and resource development. On the basis of a judicious use of indigenous materials and field research conducted in China and Japan, the author examines Sino-Japanese economic diplomacy by asking some central questions: How have China and Japan conducted economic negotiations? What have they accomplished? Why have problems and difficulties arisen, and how have both countries attempted to resolve them? This original in-depth analysis concentrates on a few salient cases of Sino-Japanese economic interaction: a multibillion-dollar steel complex at Baoshan, the joint offshore oil development in the Bohai Sea, and Japanese government loans provided to fund China's important construction projects. Although these cases have not always produced mutually satisfactory results, the range and magnitude of the new diplomacy attests to an increasing degree of economic interdependence that will be an important factor in the formation of their respective economic and political policies in Asia and elsewhere.