World View: China Declares Economic War on Japan

This morning’s key headlines from GenerationalDynamics.com:

• Japan bolsters defenses as 1,000 Chinese fishing boats approach
• China declares economic war on Japan
• Chinese Communist Party urges punitive sanctions against Japan
• Quote: ‘There won’t be a war because it’s bad for business!’
• Should we defend Japan against China?
• Japan bolsters defenses as 1,000 Chinese fishing boats approach

The Japanese embassy in Beijing has suspended passport services and is bolstering its defenses around the Senkaku/Diayou islands, after media reports indicate that a flotilla of around 1,000 Chinese fishing boats was sailing towards them. Hundreds of Japanese businesses and the country’s embassy suspended services in China on Tuesday, expecting further escalation in violent protests over a territorial dispute between Asia’s two biggest economies. Reuters

China declares economic war on Japan

China is trying to hurt Japan economically, to gain leverage in its campaign to take control of the Senkaku/Diayou islands. In the 2010 confrontations, China took revenge on Japan by terminating shipments of rare earth minerals, needed for manufacturing of many of Japan’s electronic products. In the current confrontation, the Beijing government is encouraging the Chinese people to demonstrate and protest against Japanese businesses in China. The government urged protesters not to use violence, but that part of the message is clearly not getting through. Protesters torched a Panasonic factory and Toyota dealership, looted and ransacked Japanese department stores and supermarkets in several cities. China’s National Tourism Administration ordered travel companies last week to cancel tours to Japan over the weeklong National Day holiday in early October. AP and Bloomberg

Chinese Communist Party urges punitive sanctions against Japan

The Chinese Communist Party (CCP) is urging strong punitive sanctions against Japan, for its “well-orchestrated plan” to take control of the Senkaku/Diayou islands, according to the CCP’s official newspaper:

The “nationalization” of the Diaoyu Islands by Japan after “purchasing” them from a “private owner” is ridiculous and cannot change the fact that they are Chinese territory. … China should take strong countermeasures, especially economic sanctions, to respond to Japan’s provocations. Military consideration, however, should be the last choice.

The United States has frequently used Article XXI Security Exceptions of the WTO (taken from the earlier General Agreement on Tariffs and Trade) to impose economic sanctions on other countries. The security exception clause says a country cannot be stopped from taking any action it considers necessary to protect its security interests. That means a country can impose sanctions on enterprises, financial institutions, organizations and even other countries’ central and local governments. Taking a cue from the US’ practice, China can use the security exception clause to reduce the export of some important materials to Japan.

China didn’t announce any sanctions against the Philippines in April, but it froze banana imports from that country in response to Manila’s aggressive attitude in the Huangyan Island dispute. Though the economic countermeasure forced the Philippines on the back foot, it also harmed the interests of some Chinese enterprises.

So it is important for China to devise a sanction plan against Japan that would cause minimum loss to Chinese enterprises.

China Daily

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