The bitter territorial dispute between Japan and China over the Senkaku Islands threatened to hijack the IMF annual meetings on Wednesday after it emerged that Beijing’s top financial representatives, finance minister Xie Xuren and central bank governor Zhou Xiaochuan, had cancelled their trip to the meetings.
Japanese officials expressed dismay at what appears to be an unprecedented move by such senior Chinese figures to withdraw at the last minute from the high profile event that brings together financial and monetary chiefs from all over the world.
An official at the People’s Bank of China in Beijing confirmed to Emerging Markets that Zhou, who was due to deliver the annual Per Jacobbson Lecture in Tokyo on Sunday, would not be attending although the official gave no reason for the sudden decision.
Meanwhile, a World Bank official confirmed that the delegation from the Chinese ministry of finance would be headed by vice minister of finance Zhu Guangyao instead of finance minister Xie.
The Chinese central bank governor’s deputy, Yi Gang, is expected to deliver the prestigious Per Jacobbson lecture in place of Zhou, an IMF official said.
“If it is true that the top representatives from China are not coming, it is very regrettable and the Japanese position is that two such important economic powers [as Japan and China} must try to continue a constructive dialogue,” a senior Japanese finance ministry official told Emerging Markets.
President of the Bank of Tokyo-Mitsubishi UFJ Nobuyuki Hirano told Emerging Markets that “if this [dispute] continues for a long time it certainly could do damage not only to Japan and China but also to the global economy”.
Others were more blunt in their reaction. China has been “wanting to raise the voltage for some time [over the territorial issue] but if they raise it now I hope they know how to bring it down again,” said Nomura Research Institute chief economist Richard Koo.
“This a very serious challenge to the international order,” he told Emerging Markets. “China has been using unbelievable terms such as accusing Japan of stealing the Senkaku islands,” he said. “Now they are upping the ante. This is not a normal approach to conflict resolution.”
In a further dramatic development, one news report said Japan was considering plans to calm fast-rising tensions between the two countries over the uninhabited islands in the East China Sea by “acknowledging” China’s claims while maintaining ownership of the islands.
The report was attributed only to “sources” but was quickly picked up by China’s Xinhua news agency. The report said that the plans would allow Japan, without changing its long-held position, to “compromise a little” with China.
Up to now, Japan’s has been adamant in asserting that there is “no dispute” with China over the island since they form an “inherent part” of Japanese territory and have done so since 1875 when they were formally incorporated into Japan .
The Senkakus, known in China as “Diaoyu,” are also claimed by Taiwan and became the subject of conflicting ownership claims after what are believed to be extensive undersea gas and oil deposits were discovered in their vicinity in the 1970s.
Uproar broke out last month when Japan’s prime minister Yoshihiko Noda declared his government was “nationalizing” the islands after buying three of the five territories from their Japanese private owner. This provoked sometimes violent anti-Japanese demonstrations across China and damage to Japanese property there.