Why Japan-China Spat Hurts Both

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Why Japan-China Spat Hurts Both

Failure to manage the row over a detained ship captain could mean both countries lose out over the Senkaku/Diaoyu Islands.

Tensions in the current spat between China and Japan keep rising. On Sunday, China’s senior diplomat, Dai Bingguo, escalated his country’s dispute with Japan over the arrest of Zhan Qixiong, the captain of a fishing boat that collided with two Japanese Coast Guard ships on Tuesday.

The Japanese authorities have charged the boat’s captain with deliberately ramming the two Japanese ships after refusing either to leave the area or allow them to inspect his vessel. After a Japanese court on Friday authorized a ten-day extension of Zhan’s detention, Dai summed the Japanese ambassador to China, Uichiro Niwa, and urged the Japanese government to avoid ‘misjudgements’ and find a ‘wise political resolution’ to the crisis by releasing Zhan.

The collision, which didn’t result in any casualties, wouldn’t have attracted so much attention if it hadn’t occurred near disputed islands (referred to as the Senkaku Islands in Japan and the Diaoyu Islands in China) in the East China Sea. China. Japan and Taiwan all claim sovereignty over the uninhabited islands, which are located west of Japan's Okinawa island, east of China's south-eastern Fujian coast and northeast of Taiwan.

Yet the ongoing dispute is less about the actual islands than the East China Sea itself. In addition to rich fishing areas, the ocean seabed is thought to hold large deposits of oil and natural gas (estimated at over 100 billion barrels of oil and 7 trillion cubic feet of natural gas), which make it a tempting prize for both energy-poor Japan and energy-hungry China.

According to the United Nations Convention on the Law of the Sea (UNCLOS), which entered into force in 1994, a country’s Exclusive Economic Zone (EEZ) extends 200 nautical miles from its shoreline. In addition, a country’s EEZ can extend to the outer limit of the continental shelf that the country sits on if that outer edge is less than or equal to 350 nautical miles from the country’s shoreline. Unfortunately, the treaty’s language is unclear when discussing which countries have access to certain islands, such as those in the East China Sea.

The sovereignty dispute over the East China Sea concerns a body of water that separates eastern China from the southern islands of Japan. At its broadest point, the East China Sea is only 360 nautical miles wide; at its narrowest point, it is only 180 miles wide. The potential problems with such a scenario are clear.

However, despite the obvious overlap between the EEZ of China and of Japan, the Chinese government claims an extremely large area of the East China Sea through its Law of Natural Prolongation. China asserts that its EEZ extends all the way to the Okinawa Trough, which is located just off the Japanese coast, with Chinese representatives arguing that the Trough doesn’t follow the Japanese coastline very closely. In the eyes of the Chinese, this proves that China and Japan are not located on the same continental shelf, and that China’s Law of Natural Prolongation therefore applies. In addition, Chinese representatives cite the use of the islands by Chinese fishermen since the fifteenth century to bolster their ownership claims.

And Japan? Japanese officials argue that, since the UNCLOS doesn’t directly address what should happen in a situation like the one in the East China Sea, the two countries should divide their claims along a median line between them. In this case, a median line gives each country a roughly equal amount of territory, but it places the Senkaku Islands, which are thought to contain vast energy resources, on the Japanese side. China has therefore rejected this division. Nonetheless, Japan currently possesses the islands, having incorporated them into its territory in 1895.

The issue has been complicated by the fact that in 1992, China adopted legislation that authorized the use of force to enforce Chinese claims to the islands. Tokyo quickly protested the law which, if enforced, could lead to a Sino-Japanese military confrontation. In 1996, Japanese nationalists later travelled to one of the islands and erected an aluminium lighthouse. This prompted condemnation from both China and Taiwan (which also claims what it calls the Diaoyutai islands based on the fact that, before China’s establishment, Beijing had charged Taiwan’s provincial government with administering the island).

In August 2003, the Chinese Offshore Oil Corporation and Chinese Petroleum Corporation partnered with the Union Oil Company of California and the Royal Dutch/Shell Group to explore the extent of the energy resources in the vicinity of the disputed island of Chunxiao. In April 2005, the Japanese government lifted a ban prohibiting Japanese energy companies from exploring areas of the East China Sea and on July 14 of that year, Teikoku, a Japanese energy company, was granted the right to explore an area located 43 nautical miles into the Chinese EEZ.

The tit-for-tat continued in 2006, when revised Japanese textbooks reaffirmed the country’s claims. Later that year, a group of Hong Kong residents sailed to the islands to affirm China’s claims. After the Japanese turned them away, China protested that the Japanese response infringed on Chinese sovereignty. China, for its part, sent some ships to the island group to conduct research in 2007.

Tensions continued in 2008, when the Chinese Navy cruised through the area to affirm ownership, while last year, then Japanese Prime Minister Taro Aso asserted that the islands were covered under the US-Japan Security Pact, prompting a complaint from the Chinese Foreign Ministry.

The problem for both countries is that as long as they remain unable to resolve this dispute—either through a negotiated division or through joint development projects—both miss out on the rich natural resources, as private energy firms are reluctant to attempt to exploit them.

For a while, it looked like the countries might be able to suspend their sovereignty dispute in order to mutually benefit from exploiting the undersea riches. But the bilateral negotiations that began in 2004 have neither reconciled their conflicting sovereignty and territorial claims nor established an agreed mechanism for joint exploitation of the energy reserves. So far, at least, Chinese-Japanese energy collaboration remains primarily confined to uncontroversial areas such as cooperative conservation and environmental programmes.

It’s not as if the issue hasn’t been on the political agenda. From April 11 to 13, 2007, Chinese Premier Wen Jiabao made the first visit by a senior Chinese leader to Japan in seven years, with Chinese representatives at the time characterizing his visit as an effort to help thaw Sino-Japanese relations. The Chinese government had frozen high-level summits with Japanese leaders outside the context of multilateral gatherings in order to protest Prime Minister Junichiro Koizumi’s annual visits to the  controversial Yasukuni Shrine, where 14 Class A war criminals are enshrined (Koizumi’s successors have refrained from publicly visiting the shrine).

Among other things, Wen pledged to make the East China Sea a ‘sea of peace, cooperation and friendship.’ Soon after that statement, in July 2007, leaders of the Japanese Coast Guard and the Chinese State Oceanic Administration established a hotline between the two organizations. In June 2008, China and Japan finally agreed on a joint development project, in a 2,700 kilometre area south of the Longjing Field, pending a solution to their dispute. Yet for all the fanfare over this project, neither this, nor the talks that started this July over an international treaty on jointly developing gas fields, have made much progress.

So who’s to blame? Japanese officials have accused the Chinese of violating the agreed moratorium by unilaterally drilling for natural gas. The Chinese have for their part denied this and have postponed the next round of bilateral talks on their maritime dispute.

The risk of further escalation was underscored Saturday, when the Japanese government protested after a Chinese State Oceanic Administration ship tried to prevent a Japanese Coast Guard vessel from surveying the ocean 280 kilometres northwest of Japan's southern Okinawa island.

The problem with finding a resolution lays in large part with the fact that neither government wants to look weak to domestic and foreign audiences by appearing especially conciliatory. At home, nationalists in both China and Japan have taken up the cause of the islands, while Chinese policymakers will almost certainly must be worried about how concessions related to the East China Sea would affect its position in other disputes.

The potential for nationalist agitation was particularly evident in April 2005, when anti-Japanese protests in China morphed from a boycott of Japanese goods into large-scale demonstrations, sometimes violent, against Japan (Koizumi’s visits to Yasukuni Shrine and controversial textbook revisions only added fuel to the fire).

At the time, the Chinese government claimed that the protests were organized spontaneously at the grassroots level, and allowed them to continue. However, some observers believe that Chinese authorities may actually have orchestrated them. Regardless, even though the protesters were eventually dispersed in the interests of social stability, the Chinese government, perhaps concerned not to antagonize aroused Chinese nationalists by looking weak, refused Japanese demands for an apology.

Will there be a repeat this time? So far, it seems unlikely, with the Chinese government apparently wanting to keep any mass demonstrations better contained (authorities have reportedly already increased the number of Chinese guards around the Japanese embassy in Beijing).

Ironically, although the Chinese were happy to see Koizumi leave office, the weak popular support for his successors has impeded negotiations over the islands, with the political weakness of the five prime ministers that have followed him making it difficult to sell any compromise to the public. Since Chinese officials doubt that the Japanese government has sufficient domestic support to negotiate and implement major concessions regarding the issue, they are disinclined to make any of their own.

But it’s not just about the disputed islands—the tensions come against the backdrop of increasing Japanese concerns about China’s growing military capabilities (and intentions). Even under the new Democratic Party of Japan, which took office last year and expressed a commitment to improving relations with China, Japanese security leaders have identified China’s military modernization as potentially threatening and called on Beijing to make its defence programmes more transparent.

And, in the midst of the current dispute over the islands, the Japanese Defence Ministry published its annual defence white paper, which took a more critical approach to China than has been the case previously. For example, the text noted that while Japan’s defence budget has declined over the past decade, China's military spending has nearly quadrupled during the same period, and it observed that China’s armed forces have about ten times as many personnel as Japan, despite the roughly equal size of their economies.

In addition to this disparity in spending and capabilities, the report warned that, ‘China has been intensifying its maritime activities including those in waters near Japan.’ The report further claimed that China’s ‘lack of transparency of its national defence policies, and its military activities are a matter of concern for the region and the international community including Japan.’

In many cases, it might be expected that there’d be economic pressures on both countries to resolve their differences expeditiously. Yet the Sino-Japanese economic relationship has been developing robustly despite these differences. Bilateral trade between China and Japan reached $149.2 billion in the first half of 2010, maintaining China’s status as Japan’s largest trading partner. And, while the Chinese purchase almost 20 percent of Japan’s exports, the Japanese for their part provide the biggest national source of foreign direct investment in China.

The fear, though, is how long these robust ties can continue to develop should, for example, some of the recent labour protests in China at Japanese firms be exploited for political purposes. Should this happen, the disputes will become harder to resolve and could threaten their deeper economic relationship. With relations across the East China Sea already turning frosty, it’s the last thing either economy would want to see.