China and Japan: Tiny islands, big dispute

“There will be no policy change on nationalizing [the islands], and it is impossible to give in on this,” Mr. Noda said on television recently.

He repeated Japan’s insistence, especially infuriating to China, that “there is no territorial dispute” over the islands.

In China, the ruling Communist Party’s official organ, the People’s Daily, responded that Beijing would not compromise even with “half steps” on its demand that Japan rescind the island purchase.

The timing of this crisis does not help resolve it; China is on the brink of a once-in-a-decade leadership change when “leaders do not want China to be seen as chicken,” says Zhu, and in Japan, Noda is expected to call elections in the next few months.

Facing a conservative opposition that has made the sovereignty issue a key campaign issue, “what does compromise get Noda?” asks Ms. Glaser, rhetorically.

In the longer term, public opinion in Japan and in China is growing both more nationalist-minded and more influential, says Thomas Berger, a visiting professor of politics at Keio University in Tokyo.

“Chinese leaders have become much more sensitive to the noisier segments of Chinese public opinion,” says Professor Berger, “and the Japanese public inserts itself more assertively and more erratically into the foreign-policy agenda than it used to.”

Notably, Berger says, “there is a growing feeling in Japan that if they do not stand up to the Chinese there will be no end to how far they will be pushed around.”

At the same time, points out Taylor Fravel, a professor of international relations at the Massachusetts Institute of Technology in Cambridge, both Japan and China are involved in other territorial tussles with other countries, and neither wants to look weak in the current crisis.

“Prevailing in this could send a signal to rivals in other disputes,” Professor Fravel suggests.

Though neither side seems to want a military conflict, China is warning that it would make Japan pay economically in a protracted crisis over the islands.

China “has always been extremely cautious about playing the economic card,” stated an editorial in the overseas edition of the People’s Daily late last month. “But if Japan continues its provocations, China will take up the battle.”

So far, Japanese businessmen are reporting nothing more serious than delays at customs and difficulties securing Chinese visas. But the potential for damage is huge; China is Japan’s largest export market (Japan is China’s third-largest market), and the two countries’ bilateral trade was worth nearly $350 billion last year.
Economic motivator?

On the other hand, China is not immune to the economic fallout of a drawn-out dispute.

Japan is the largest foreign investor in China after Hong Kong, pumping more than $5 billion into the country in the first eight months of this year. If anti-Japanese feelings continue to rise, Japanese investors are likely to think twice about putting money into China.

“That must be a factor” in China’s thinking, says Fravel. “In the current economic slowdown, the jobs that Japanese investment creates are even more important than before.”

“The economic risks should be a clear reminder to leaders on both sides to behave responsibly” in this crisis, argues Zhu. “The potential economic damage should be an alarm bell.”

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