09/18/2012, 00.00
CHINA - JAPAN

Economy first casualty of Diaoyu/Senkaku dispute

Beijing and Tokyo continue to fuel tensions over disputed islands. Dozens of demonstrations take place in China, including terrorist-like acts against Japanese diplomatic missions. Both governments want to divert domestic attention from their main problems: political succession in China and economic crisis in Japan. Meanwhile, trade is getting worse.

Beijing (AsiaNews) - On the 81st anniversary of the incident that led to Japan's invasion of China, relations between the two countries are worsening. The dispute over the Diaoyu/Senkaku Islands does not seem to be abating. In fact, the two governments appear to have their own reasons to up the ante. China wants to distract people from the upcoming Communist Party congress, which should put a new set of leaders in power. Japan needs greater national cohesion at a time when it is undergoing a major economic and energy policy shift.

On 18 September 1931, Japan blew up a railway in Manchuria, blaming it on Chinese dissidents. Remembered as the 'Mukden Incident,' it became the pretext to invade northeast China and divide China's republican government. Japanese troops remained until 1945 when the forces of Mao and the Republican government drove them out.

Today, in the name of national sovereignty, both nations are letting demonstrations and violent acts to take place.

When two Japanese activists landed on the disputed islands, Beijing asked Tokyo for immediate explanations, warning it would not tolerate such actions. Meanwhile, in the islands' waters, six Chinese patrol boats are protecting a thousand fishing boats.

It is not clear what the islands are worth, but some experts believe they are strategically located astride some major maritime routes. Others consider them important because of their fishing grounds or their vast seabed gas reserves.

In 2008, Beijing and Tokyo had agreed to develop the area jointly, but they never saw the accord through.

Anti-Japanese demonstrations have multiplied in many of China's cities. Police have tended to be restrained, allowing thousands of protesters to throw rocks at shops and Japanese diplomatic offices.

For some, this self-restraint reflects the government's desire to distract ordinary Chinese from the upcoming party congress, which should crown the rise of the Communist regime's 'fifth generation.'

Japan is also facing protests. A man was arrested in the southern city of Fukuoka for throwing two smoke bombs at the local Chinese consulate.

Yuya Fujita, a 21-year-old construction worker, reportedly told police that he lobbed the smoke bombs "in a protest against China". No one was hurt.

Japanese authorities are also not in a hurry to stop the anti-Chinese wave. After announcing it was going to phase nuclear energy over the next 30 years, the government can expect a major negative impact on economic growth forecast at a time when new elections are on the horizon.

However, Japanese companies have paid a price. Nissan Motors lost 2.5 per cent, Honda dropped 1.4 per cent and Fast Retailing 4.9 per cent.

Panasonic shut down its plant in Qingdao as Canon did the same to three of its plants. Honda and Nissan stopped production for two days, Mazda for four. Seven & Holdings closed 13 supermarkets and 198 outlets. Sony told its employees to avoid non-essential travel to China.

Japan also faces a structural problem. Over the years, its companies have heavily invested in China, despite the historic rivalry between the two countries. Government-guaranteed cheap labour and the yen's high value made it more convenient to manufacture on the mainland.

Now Chinese protests and nationalism could force Japanese business to change their strategy.

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