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Japan's blink in stand-off seen as win for assertive China

Japan trading firms say China blocked rare earths exports
Tokyo (AFP) Sept 24, 2010 - China blocked rare earth exports to Japan days before Tokyo's decision Friday to free a Chinese boat captain whose detention sparked the worst diplomatic row between the sides in years, traders said. Beijing denied reports it had prevented shipments of the rare minerals that many of Japan's top exporters, such as the world's biggest automaker Toyota, rely on to make cutting-edge products ranging from car batteries to computers. But traders in Tokyo said China had blocked exports to Japan of key minerals by slowing down administrative procedures in ports in Shanghai and Guangzhou to prevent materials being loaded on ships. "We heard from our officials in China that the shipping of rare earths (to Japan) was suspended on September 21," a spokesman for Japanese trading house Sojitz in Tokyo told AFP.

Japan on Friday said it would release a Chinese fishing boat captain arrested earlier this month after a collision between his trawler and two Japanese coastguard vessels in a disputed area of the East China Sea. The move was hoped to help ease tensions that had dramatically risen in recent days, with Chinese leaders threatening "further measures" against Tokyo if the captain was not immediately released. But China reiterated Friday that Japan's detention of the captain had been "illegal and invalid". Another trader from a different trading house who wished to remain anonymous also said Beijing was blocking exports to Japan of rare minerals, underlining China's control of a market crucial to some of the world's biggest companies. "We heard from our Chinese trading partners that exports of rare earths to Japan are being stopped," the trader said, adding that Beijing had directly encouraged firms to slow or stop exports.

"On September 22, Chinese companies who have licences for exporting to Japan were gathered in Beijing by China's commerce ministry. There were discussions of stopping (rare earth) exports to Japan," he said. Japan's minister for economy, trade and industry Akihiro Ohata said Friday that the government was aware trading houses had reported a suspension of rare earth exports, adding it was still confirming the information. Separately, Japan's economy minister said Friday that tensions with China pose "serious" risks to Japan's economy. "There has been a very sudden slowdown in areas such as trade with China and tourism," said Banri Kaieda. China's commerce ministry on Thursday denied a report in the New York Times that cited industry sources as saying Beijing had blocked exports of rare earth minerals to Japan.

China supplies at least 95 percent of the world's rare earths. It had previously placed restrictions on exports of the minerals, sending market prices soaring and sparking concern among foreign governments and companies. Previous reports said the country was considering banning the export of certain elements and closing mines. Foreign companies and governments fear Chinese control will deny them access to the metals used to make everything from hybrid vehicles to energy-saving lightbulbs, missiles and wind turbines, forcing manufacturers to shift their plants to China. Market prices of some types of rare earth metals have soared more than 20 percent since China announced in July that it planned to reduce global shipments. Last month, before the row erupted, Japan had urged China to expand rare earths exports.
by Staff Writers
Tokyo (AFP) Sept 24, 2010
Japan's release of a Chinese skipper arrested in disputed waters spells a victory for China and serves as a warning to the rest of the region not to trifle with their giant neighbour, analysts say.

While the move also boosts China's communist leaders at home, where the case sparked strong nationalist sentiment, Japan's young centre-left government was accused domestically of simply caving in to Beijing's bullying.

Japan said Friday it would free the captain it arrested two weeks ago after a tense maritime incident near a disputed island chain in the East China Sea, hoping to end an ugly and damaging row with its traditional Asian rival.

The dispute had quickly blown up into their worst in years, with a furious China launching a fusillade of protests, freezing official exchanges and, industry sources say, halting crucial rare earth mineral exports.

In the latest escalation, China has detained four Japanese nationals for allegedly filming at a military site, although a conciliatory Japan was quick to stress it did not regard them as pawns in the standoff.

Japanese prosecutors moved to calm the storm by announcing the release of the captain, a decision they said was aimed at helping repair ties with China.

"This is a victory for Beijing's diplomacy," said Li Mingjiang, from the S. Rajaratnam School of International Studies in Singapore. "Many people in this region will conclude that Beijing's pressure tactics have worked in this case."

After China's concerted offensive, he added, "many people in the region will also conclude that Beijing does have all the leverage necessary to pursue its own national interests when it comes to territorial disputes".

Beijing's win in the battle of wills over Tokyo comes at a time when China's economic and military rise have triggered both envy and fear, and as Beijing has acted with increased assertiveness in its maritime territorial claims.

Washington -- openly worried about China's growing military muscle -- sided with its long-time ally Japan in the row, moving to reaffirm a relationship that has been strained in the past year by a dispute over a US base.

The United States has recently also voiced support for other nations that have long-running territorial disputes with Beijing in the South China Sea, where China has, for example, detained Vietnamese fishing boats.

Li said: "This crisis will send a signal to all the claimant states in the South China Sea that they all need to practise self-restraint, otherwise they will get into a crisis situation that will be very difficult to handle, given China's growing power. The Chinese government means business."

In Japan -- which was overtaken this year by China as the world's number two economy -- Friday's move was met with indignation from conservatives, who did not buy the government's assertion that prosecutors had acted independently.

"It was an extremely foolish decision," charged hawkish former prime minister Shinzo Abe of the main opposition Liberal Democratic Party, adding: "Japanese politics caved in to pressure from China."

"I cannot help being aghast by such a clear diplomatic defeat," agreed Yoshimi Watanabe, leader of a smaller grouping called Your Party. "We have to criticise the weak diplomacy of the (Prime Minister Naoto) Kan government."

Many observers said the row caught Japan's leaders flat-footed, having started at a time when Kan was distracted by a party leadership challenge.

"Japan was constantly behind in its actions," said Ryosei Kokubun, a professor specialising in Chinese politics at Keio University.

"Japan was baffled by how hard-line China came off, but that's how China also feels about Japan's stance over the issue. This shows how fragile the Japan-China relationship still is."

Hidenori Ijiri, professor of international politics at Tokyo University of Foreign Studies, said that "the way China pressured Japan... was pretty ugly".

"Japan must not set the precedent that it is a country that easily gives in to pressure from Beijing... But Japan thought it should not drag this out any longer. I would say this shows the weakness of Japanese diplomacy."

The affair showed that it is "difficult for Tokyo to face Beijing alone," he said. "It needs to keep good relations with Washington and Southeast Asian nations -- not necessarily to contain China, but to increase its options."

burs-hih-oh/fz/pst



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