China warns about trade with Japan

China Wednesday renewed its warning that Japan's nationalization of the disputed islands in the East China Sea would damage their trade relations. Relations between the two countries have worsened since Japan last week announced plans to bring the Senkaku Islands, called the Daioyu Islands in China, under state control. The islands, claimed by both countries as well as Taiwan, are uninhabited but reports have said they are believed to be rich in natural resources. There have been widespread protests in China against the Japanese action and officials have been raising the dispute's impact on the two countries huge bilateral trade. China's Ministry of Commerce said Japan's unlawful action would certainly affect and damage development of economic and trade relations, the official Xinhua news agency reported. "It is not what we wish to see, for which Japan should take full responsibility," ministry spokesman Shen Danyang told reporters. Last week, China's Vice-Minister of Commerce Jiang Zengwei said Japan's purchase of the islands will "inevitably have a negative impact on China-Japan economic and trade ties." Chinese media have said China is Japan's largest trading partner, with Japanese exports to China totaling $73.54 billion in the first half of the year, and imports from China totaling $91.29 billion during the same period. The protests in Chinese cities Tuesday led Japanese-owned factories, restaurants, mini-marts and clothing retailers across to close or suspend operations, the Los Angeles Times reported. The Times said while the two sides were not able to reach a compromise because of domestic political pressures, neither appeared to want to escalate the issue further. One analyst told the Times he expects a "short, sharp downturn" in business dealings between Japan and China, both major global players. The report said the latest developments included calls in China to boycott Japanese goods, which caused stock prices of some Japanese companies to drop. "This is the worst we have seen," research fellow Tetsuo Kotani at the Japan Institute of International Affairs in Tokyo told the Times. "This could be a turning point for Japanese companies, making them reconsider the risks in China and leading them to diversify toward Southeast Asia, South America and Africa."