September 13, 2010 / 5:10 AM / 9 years ago

Q+A: Where is the China-Japan sea dispute headed?

BEIJING/TOKYO (Reuters) - Japan on Monday freed the crew of a Chinese fishing boat seized last week in disputed waters, leaving unclear what will become of the arrested captain at the center of a territorial rift.

Such territorial disputes may recur, but economic imperatives are likely to contain any broader damage. Here is an explanation of the dispute and how it could unfold:

WHAT IS THE QUARREL ABOUT?

The dispute is about a Chinese fishing boat that on Tuesday last week collided with two Japanese coast guard ships near islets in the East China Sea claimed by both countries.

The fishing boat was intercepted by Japanese authorities, who have accused the captain, Zhan Qixiong, of deliberately striking a patrol ship and obstructing public officers. A Japanese court on Friday authorized a 10-day extension in Zhan’s detention.

Because both countries claim the seas around the islets — called Senkaku in Japan and Diaoyu in China — as part of their territory, the case has become embroiled in their broader dispute over the area, which has plentiful fish and may hold valuable oil and gas reserves.

WHAT ARE CHINA AND JAPAN LIKELY TO DO?

Both governments have pressed their case without dramatically escalating tension. They are likely to continue along that path.

Expect more diplomatic pushing from China, at least while the Chinese boat captain stays in detention.

But both governments are likely to try to calibrate their steps to avoid turning this quarrel into an wider rift.

An escalation could occur if, for example, either side sends navy ships near the disputed area or if China, usually wary of big protests, allows them against Japan, as it did in 2005.

Policy-makers in Beijing and Tokyo are both likely to have in mind such times, when Chinese protests against Japan sometimes turned violent and leaders from the two countries were barely on speaking terms.

Both countries now have even more at stake in containing tension. Japan and China together account for about 17 percent of the world’s total gross domestic product and China has been Japan’s biggest trading partner since 2009.

A serious falling-out could unnerve some investors, especially Japanese companies’ seeking access to Chinese markets and infrastructure spending.

WHAT COULD GO WRONG?

There is nonetheless room for this dispute to expand, and for miscalculation that unsettles broader relations.

Public opinion weighs especially heavy on the relationship, and that constrains the ability of both governments to back down without claiming vindication.

Japan invaded and occupied much of China from 1931 to 1945. Bitterness over Japan’s wartime atrocities still underlies widespread Chinese public distrust of Japan.

The ruling Chinese Communist Party also draws on wartime memories to bolster its claims to power. While China can contain nationalist anger against Japan, as it did after 2006, it treads gingerly in doing so.

There is also widespread wariness of China in Japan, where many see China’s growing military strength and regional power as a latent threat to Japanese security and influence.

WHAT WILL BE THE CONSEQUENCES OF THIS ROW?

This case has laid bare tension over territory and influence that will persist after the dispute is settled. Negotiations over disputed undersea gas beds, slow to begin with, are likely to be even more halting. Shifting perceptions of influence may even magnify tension, creating more room for such incidents.

Preliminary statistics show China has edged past Japan to become the world’s second biggest economy. China’s rise in the economic rankings has been accompanied by military modernization, especially growing naval reach that worries Japan.

Both governments face a tricky task in navigating these longer-term shifts. But tension is likely to be held in check by deeper economic inter-dependence.

Japan’s exports to China topped those to the United States last year, accounting for nearly 20 percent of its exports. That figure will probably rise to 35 percent by 2026, according to Chi Hung Kwan at Nomura Institute of Capital Markets Research.

Reporting by Chris Buckley; Editing by Ron Popeski

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