China's anti-Japanese demonstrations damage trade flows on both sides

AS the tensions between China and Japan intensify over the sovereignty of a group of uninhabited islands in the East China Sea, a trade war between the second and the third largest economies in the world is about to break out.

The escalation of Chinese anti-Japanese protests were triggered by Tokyo's earlier decision to use public funds to buy the islands.

Many Japanese factories, restaurants and supermarkets in China have closed, including the closure of manufacturing lines of Canon and Panasonic, as well as 30 out of the 35 Japanese supermarkets owned by Aeon Group.

The bilateral trade value between the two largest Asian economies stands at nearly US$200 billion with China exports, accounting for 55 per cent, noted London's Containerisation International, adding that there has been a growing market in China for Japanese goods.

Known as Diaoyu by the Chinese and Senkaku by the Japanese, those disputed and gas-rich remote islands are not only claimed by mainland China (officially known as the People's Republic of China) and Japan, but also by Taiwan (officially known as the Republic of China), as these islands are located roughly in the east of mainland China, northeast of Taiwan, and west of Japan's Okinawa Island.

China claims it discovered the islands in 14th century and controlled them until the 1894-95 Sino-Japanese War when Japan held them until its 1945 defeat in World War II by the Allied Powers, which included China. But the islands were returned to Japan by the American occupying power unilaterally in 1972 without agreement from China or Taiwan.