With Bin Laden and Gaddafi out of the picture, the
geopolitical headline is now shifting to Asia/China. The most recent excitement came from a 3-way bitter
territorial feud over eight small and uninhabited islands in the East China Sea.
 |
| Chart Source: FT.com (h/t Mark Turok) |
Duel in the East China
Sea
Physically, Taiwan is the closest to Diaoyutai among the three;
however, China and Japan have been portrayed as seemingly the only two players by the western media in this island row. Taiwan has always
maintained a low profile in most international or diplomatic matters. But that changed about two weeks ago when Taiwan
officially asserted its claim on Diaoyutai by dispatching 12 coast guard
vessels along with some 50 civilian fishing boats to the islands. The resulted water cannon duel between the
vessels of Taiwan and Japan has officially landed Taiwan squarely on the map of
Diaoyutai, so to speak, before the eyes of world media. Japan Purchase Angers Chinese
The history of this dispute has been a regional
“undercurrent” that could be traced all the way back to Qing Dynasty. But tension erupted high above surface after Japan’s
attempt to “nationalize” these islands by purchasing them from a private owner
for 2.05 billion yen ($26.18 million).
This tactic, not that much different from the provocation by Japan to start
the previous two Sino-Japanese Wars, has brought up lots of bad memories. Needless to say, Chinese (from both sides of
the Strait) are livid and large scale anti-Japan protests have broken out in a
dozen of cities in Mainland and Taiwan.
Japan Sales Crash
China was Japan’s largest trading partner last year,
and Japan is China’s second-biggest trading partner after the United States with
two-way trade totaling $342.9bn. China
is also the largest auto market in the world and represents one significant
“life line” for Japanese automakers. The
renewed anti-Japanese backlash in China has already caused the “disastrous”
decline of Japanese auto sales of up to 50% YoY in China last month.
 |
| Chart Source: China Daily, Oct. 10, 2012 |
Japan's loss is another rival's gain as BMW, GM and Korea’s
Hyundai are reporting surging YoY sales in September. China Daily quoted
IHS Automotive that output and sales for Japanese automakers in China is
estimated to be cut by 200,000 units this year, or 20% of sales. China communist party also threatened that Japan's economy
could suffer for up to 20 years if China chose to impose sanctions over the
escalating territorial row.
The Role of U.S. in Diaoyutai
Based on historical documents, Diaoyutai Islands were
formally part of China, but Taiwan (along with the associated islands including
Diaoyutai Islands) was ceded to Japan by the Qing Dynasty in 1895 via Treaty of
Shimonoseki
(馬關條約) after losing the First
Sino-Japanese War. Taiwan was returned
to the Republic of China formed by the Nationalist Party (KMT) in 1945 after
the end of WW II in accordance of Cairo Declaration, and Potsdam Proclamation.
However, Diaoyutai was not returned to China along
with Taiwan. And in the aftermath of a
civil war in China, and two treaties between the US/Allied and Japan--without
the presence of China--the U.S. somehow ended up “administering” the Diaoyutai
Islands from 1945 before transferring the “administration” to Japan in 1972,
which is part of the basis of Japan’s claim and in essence the direct
cause-and-effect of the current 3-way row.
Further Reading: The Inconvenient Truth Behind the Diaoyu/Senkaku Islands (NYT, Sep. 19, 2012) Communist China did launch a protest at the time of the administrative transfer by the United States to Japan. So a logical question would be: Why did the U.S. return the “administration” of Diaoyutai to Japan in 1972 with China protesting knowing full well there was an unresolved territorial dispute? How “Neutral” Can The U.S. Be?
So far, the U.S. has tried hard not to
get involved by simply asserting “a neutral position on the competing claims
of Japan and China over the islands.”
However, the U.S. also affirms that it will protect Diaoyutai as part
of "the territories under the administration of Japan" according to
the US-Japan Security Treaty. With
that gold-plated safety blanket in the back pocket, it is not a surprise that
Japan resorts to anything less than the so-called “diplomatic blunder” to
force the claim over Diaoyutai via an outright purchase? It is also part of the reason China is calling
the United States to “walk the talk” regarding being neutral on the
China-Japan territorial dispute.
Global Multi-lateral
Implications
Now, this regional diplomatic row has
evolved into a global multi-lateral economic and geopolitical event when
China’s Finance and Central Bank officials, along with several Chinese major
bankers, boycott IMF and World Bank meetings in Tokyo this week.
Ratings agency Standard & Poor’s already
warned that “if the political confrontation [between China and Japan] drags
on and further worsens ties between both countries, it may hurt Japan’s macro
economy and affect the credit quality of rated Japanese companies on a large
scale.”
Alarmed by the recent development,
Christine Lagarde of IMF also warned that China and Japan should not be distracted
by territorial division as “the current status of the global economy needs
both Japan and China fully engaged."
China & Taiwan - Not Nemesis on Diaoyutai
China and Taiwan have remained hostile
to each other ever since the separation some 60 years ago. Both sides disagree on almost anything and
everything for decades. However, the
common bond of defending Chinese sovereignty from Japan seems to have pushed
them closer.
China asked Taiwan to have a joint
sovereignty claim (which was turned down by Taiwan), and said it will
continue vessel patrols and will extend protection to Taiwan civilian fishing
boats around Diaoyutai. Then
interestingly, after China Daily taking out full-page ads in New York Times
and Washington Post to broadcast and support its claim over Diaoyutai, Taiwan also took out ads in four major U.S. newspapers to assert its claim as well.
China’s First Aircraft
Carrier Worries Many
What has raised quite a few heart beats
from the Kremlin to the Pentagon was that as a show of force to Japan, China
put its first aircraft carrier--Liaoning—into commission right in the middle
the Taiwan-Japan vessel showdown.
Partly in response to the Chinese
carrier launch as well as the increasing tension over Diaoyutai, two nuclear-powered
aircraft carrier strike groups of the US Navy's 7th Fleet have been deployed
since mid-September to the Western Pacific
Backing Down Is Politically
Incorrect
Right now, the political environments in
Taiwan, China and Japan would suggest it is highly unlikely any of them would back down from their current stance.
Many are keeping a watchful eye as China
has been beefing up its military defense budget with quite a sizable naval
fleet in the Pacific region to boot. Meanwhile, the U.S. has been
preoccupied with the Middle East region, particularly since 9/11, leading to
a much diminished presence in the Asia-Pacific.
However, with so much more than just oil reserves in the East China Sea at stake, it
is now almost impossible to really have a third Sino-Japanese War. Nevertheless, when push comes to shove, China
still has the bigger gun over Japan on many other levels, and the U.S. most likely
has to at least sit in the bed it’s made so far. And also don’t discount the potential wild card role of
China’s nemesis – Taiwan either.
|
