CDT previously reported on the possible economic strain from the Diaoyu Island dispute between China and Japan. As Chinese surveillance ships arrive in the region, the tensions between the two nations continue to escalate. The dispute seems to be further straining the two nations’ economic ties. The Wall Street Journal reports several Chinese banks have canceled their participation in meetings with the World Bank and the IMF in Tokyo:
Most of the banks haven’t given a reason for their last-minute no-shows. But the withdrawals come amid an escalating tit-for-tat between China and Japan, whose government recently purchased a set of islands in the East China Sea that are also claimed by China and Taiwan. China has shown its displeasure by canceling some diplomatic events and sending patrol boats into what Japan considers its territorial waters—with one group going through Tuesday. Some Japanese companies have reported falling demand for their goods in China and unusually strict inspections as well as processing delays at Chinese ports.
“Quite frankly, it’s Japan-China relations,” said an official at the Tokyo branch of the Agricultural Bank of China Ltd., 601288.SH +0.41% explaining why the bank was pulling out of both IMF-related events and the Osaka conference, which is sponsored by the Belgium-based Society for Worldwide International Financial Telecommunication, or Swift, a group set up by financial institutions to handle transactions. The bank is still sponsoring and participating in a meeting of the Institute of International Finance—a global association of financial institutions—that is taking place in Tokyo at the same time as the IMF meeting, another official said.
“The point is really about China being a global player,” said Fraser Howie, a Singapore-based co-author of “Red Capitalism,” a book on China’s financial system. “China may rightly demand a seat at the head table, but what signal does it send when they go off in a huff over these types of issues. Such boycotts are pointless.”
A few Chinese speakers appear to have dropped off the IMF and World Bank schedules as well. The latest schedule for a British Broadcasting Corporation-sponsored debate on rescuing the global economy, for instance, leaves out China Investment Corp. President Gao Xiqing, who was originally scheduled to be a panelist. A BBC spokesperson said that Gao Xiqing had “accepted an invitation to join the panel, but has subsequently made the decision not to travel to Japan for the meeting and so will be unable to take part in the debate. We are still in the process of looking for a suitable replacement for Mr. Gao.”
Despite reports of Chinese banks canceling their attendance in Tokyo, Japan says it expects to see Chinese delegates at the meeting, from The Voice of America:
A senior Japanese finance ministry official said Thursday that China’s finance minister and central banker are both slated to attend the annual meetings.
Some major Chinese banks have already pulled out of the forum, prompting speculation that the entire Chinese delegation would do the same.
Speaking to Japanese media ahead of the annual IMF meeting in Tokyo next week, Christine Lagarde said two of the world’s biggest economies needed to show a bit of neighbourly tolerance for the good of everybody.
“Both China and Japan are key economic drivers that do not want to be distracted by territorial division,” Kyodo News agency quoted Lagarde as telling reporters in Washington, in an interview published Wednesday.
“The current status of the economy and the global economy needs both Japan and China fully engaged,” she said.
China and Japan, the world’s second and third largest economies, have been at loggerheads for months over a group of uninhabited islands in the East China Sea.
Amid concerns about the effect on the economy, Al Jazeera reports that the disputed region is under closer surveillance and stricter regulations:
With any move, even by citizens, possibly bringing tensions to that fine edge, Japan’s Coast Guard has introduced stricter regulations for each trip out there.
Wagging a finger at us, a stern faced officer from the Coast Guard, who I could only guess was in charge – judging by his age and the respect shown by others to him – said, “You are not going to land on the islands, correct?”
While the government refuses to say how many Coast Guard ships it has operating in these waters, sources tell us, there are in fact some 42 – all equipped with water cannon and heavier weapons. They also carry faster, smaller boats that can be deployed at any moment.
We soon learned eight Chinese surveillance ships had entered nearby waters from different directions – readying for another dangerous round of cat and mouse.
Read more about anti-Japan rhetoric in China, via CDT.