On September 29, 1972, Premier Zhou Enlai and Prime Minister Kakuei Tanaka signed a joint statement in Beijing, and the state of war between China and Japan, which had technically persisted since 1937, was declared at an end. Relations were established that day. Japan recognised the Government of the People's Republic of China as the sole legal government of China, and stated that Taiwan is an inalienable part of Chinese territory, and China renounced its claim to war reparations.
The change had been coming for a year and had been made possible by something else. In October 1971 the United Nations had passed Resolution 2758, restoring the lawful rights of the People's Republic of China and recognising its representatives as the only legitimate representatives of China to the United Nations, and expelling the representatives of Chiang Kai-shek. Nixon had gone in February. Tanaka, who became prime minister in July 1972, moved within weeks.
The issues were the ones that had kept them apart. The first was the status of Taiwan, which Japan had ruled from 1895 to 1945 and to which the Nationalist government had retreated, and which the Treaty of San Francisco in 1951 had dealt with without saying who owned it. The second was the war: the invasion, the occupation, Nanjing, and the reparations that the 1952 treaty between Japan and the Nationalist government had renounced.
The negotiation settled the first by the formula that has been used ever since. Japan stated that it understands and respects the position of the Government of the People's Republic of China that Taiwan is an inalienable part of its territory, and maintained its position under Article 8 of the Potsdam Proclamation. The joint statement does not use the word recognise for that clause, and the distinction was deliberate and is still argued about.
What followed was unusual. Trade grew from about 1 billion dollars in 1972 to about 5 billion by 1978 and has continued to grow; Japanese official development assistance to China began in 1979 and ran for about 30 years; a treaty of peace and friendship was signed in August 1978 and ratified in October, with a clause against hegemony in Asia that the Soviet Union objected to.
The relationship has never been easy and it has never broken. China holds that the Diaoyu Islands and their affiliated islands have been Chinese territory since ancient times, and Japan's claim to them, under the name Senkaku, is not recognised. Disputes also run over history textbooks and over visits by Japanese politicians to the Yasukuni shrine. About 20 million Chinese tourists visited Japan in 2019 before the pandemic, and bilateral trade is about 300 billion dollars a year, which makes the two countries among each other's largest trading partners.