Risks linger as China, Japan spar over islets

(Reuters) - Japan and China talk of building a strategic partnership but they can’t seem to avoid tactical scraps.

A high-profile breakdown in diplomacy over the question of whether Chinese Premier Wen Jiabao and Japanese Prime Minister Naoto Kan would meet one-on-one at a regional summit in Hanoi has raised questions about the risks from lingering brinksmanship between Asia’s two biggest economies.

After some encouraging steps to repair a rift over Japan’s detention of a Chinese fishing boat captain in disputed waters in the East China Sea, possibly rich in oil, natural gas and minerals, ties once again crumbled.

The reasons are not crystal clear. Assistant Chinese Foreign Minister Hu Zhengyue accused Japan of ruining the atmosphere by “inflaming” the East China Sea issue in collusion with others -- a veiled reference to the United States.

But below the surface, personal grudges, sensitive domestic political considerations and lack of policy coordination are likely to have played a part.

The tension was so awkward that unease spread among Southeast Asian nations at the regional talks, deflecting focus away from other topics like currency pressures, and prompting U.S. Secretary of State Hillary Clinton to offer to mediate trilateral talks with Japan and China to cool things down.

In the end, Kan and Wen did have a one-on-one chat, away from the cameras and for only 10 minutes, Japanese officials said. No mention was made of the meeting by state Chinese media.

“It is very difficult for China and Japan to step down from the summit point of the crisis in September,” said Shi Yinhong, international relations expert at Renmin University in Beijing.

The row might be Chinese recrimination for the at-times blunt diplomacy of Japan’s new 48-year-old foreign minister, Seiji Maehara, Shi said.

Maehara once called the Chinese suspension of high-level official exchanges “extremely hysterical”, comments which a Chinese foreign ministry spokesman called deeply shocking.

“In China’s eyes, the single biggest obstacle for rapprochement is the Japanese foreign minister,” said Shi. “I think he, personally, plays a very negative role.”

China and Japan talk of building a strategic relationship, but the two can get mired in distracting issues such as visits by Japanese leaders to a wartime shrine, and the Diaoyu isles, or Senkaku as they’re known in Japan.

China is Japan’s biggest trading partner with bilateral trade worth $270 billion in 2009.

All this comes as a strengthening China, which suffered a Japanese invasion and brutal occupation of parts of the country from 1931 to 1945, flexes its muscles on the world stage, moving further from a stance of non-interference in the affairs of others, partly driven by its voracious appetite for resources.

“China’s leaders have realised that maintaining economic growth and political stability on the home front will come not from keeping their heads low, but rather from actively managing events outside China’s borders,” wrote Elizabeth Economy, director of Asia Studies at the Council on Foreign Relations.

China and Japan have long-locked horns over sovereignty claims in the East China Sea, but such disputes have rarely damaged commercial ties.

The stakes are potentially huge. A disputed undersea basin could yield 20 million barrels of oil and 17.5 trillion cubic feet of natural gas, equal to a fifth of China’s gas reserves.

While previous rows over the islands have tended to fizzle out, reported curbs of rare earth minerals, crucial for the manufacture of high technology products, have complicated the diplomatic dance, with Japan in particular highly reliant on the metals and eager to not get squeezed.

China produces some 97 percent of global rare earths and has promised not to abuse its virtual monopoly, yet Japan has still scrambled to ease its reliance on China by staking deals with other nations like Vietnam.

Stability-obsessed leaders in Beijing also have domestic considerations to consider, with anti-Japan protests likely to flare-up again at any time.

Some Japanese media have blamed domestic pressures on the Chinese Communist leadership for not compromising with Japan.

“The smouldering embers of the anti-Japanese demonstrations and growing social gaps could well turn into criticism of the (Chinese) government,” the Nikkei daily said in a commentary.

“It is also possible that an intensified consciousness of being a major power is giving rise to internal conflict within the Chinese Communist Party over policy.”

Many Chinese still harbour deep resentment of Japan’s wartime occupation and have pressured Beijing to stand up to Tokyo as a matter of principle.

Territorial disputes resonate in many of China’s Southeast Asian neighbours which have overlapping claims in the South China Sea and are unnerved by China’s assertiveness and growing navy.

“China is transforming the world as it transforms itself,” wrote Economy in her article. “Never mind notions of a responsible stakeholder; China has become a revolutionary power.”