Behind the China-Japan feud


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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

It was ostensibly about a captured fishing-boat captain. But the conflict between the Asian economic giants went far beyond that

When Japan detained a Chinese fishing-boat captain on Sept. 8, accusing him of deliberately ramming two coast guard vessels near a set of disputed islands in the East China Sea, long-simmering tensions between the two economic powers quickly boiled to the surface. Harsh words between the two countries followed, and diplomatic relations hit their lowest point in five years. (Watch a report about the conflict.) Japan released the captain on Saturday morning, and China has since dialed down its rhetoric. But with land, gas deposits, and a historically fraught relationship in the mix, the situation remains tense. Here’s a guide to the dispute so far:

What kicked off this latest flaring of tension?
The boat-ramming incident got it started. It happened near islands that both Japan and China claim sovereignty over — Japan calls them Senkaku, China, Diaoyu — and that are near important oil and natural gas fields. In a diplomatic breakthrough between the historic enemies, Japan and China in 2008 agreed to jointly develop the oil and gas deposits. China suspended those talks during the standoff.

So it is really about natural resources?
That is a big part of it, since fuel-hungry China and resource-poor Japan both covet an energy source so close to home. But some analysts think China is testing Japan’s new government, led by the Democratic Party, which is viewed as more conciliatory than the hardline Liberal Democrats who have dominated Japan since World War II. China wants “to be a global naval power, and being able to do what they want in the East China Sea is an important part of that,” says James Manicom at Canada’s Balsillie School of International Affairs. “From the Japanese standpoint that is unacceptable.”

What was the diplomatic fallout?
China launched a series of retaliatory measures, lodging a formal protest on Sept. 12 and cutting off most contact with the Japanese government. Beijing also stopped shipping vital rare-earth metals — key in manufacturing hybrid cars — to Japan, although it blamed a holiday for the interruption. Then, a week ago, Wen Jiabao, the usually reticent Chinese premier, weighed in with strong words, stating definitively that Japan “bears full responsibility for the situation, and it will bear all consequences.”

What were some of the other consequences?
Anti-Japanese protests have sprung up around China; Japanese pop group SMAP called off a concert in Shanghai; China rescinded invitations to 1,000 Japanese youths to attend the Shanghai expo; and on Thursday, Chinese security officials detained four Japanese citizens they accused of illegally filming Chinese military installations. (Japan says it thinks the detention of the four Fujita employees is unrelated to the other standoff.) Things even got downright bizarre: A panda died in a Japanese zoo after being anesthetized so the zoo “could collect his sperm for use in artificial insemination.” China cried foul and sent “a panel of experts to investigate.”

Why did Japan decide to release the captain?
“In the end,” says The Economist, “it came down to economic ties versus national pride,” with the former winning out. China recently surpassed Japan as the world’s second-biggest economy and is exerting its newfound leverage all over the world. Japan simply couldn’t keep alienating such an important trading partner, and eventually it succumbed to “an avalanche of pressure” to let its prisoner go.

Who “won” the dispute?
While Japan “came off looking weak” by caving in, China’s brash response ultimately hurt the country “by undermining confidence in China as a responsible stakeholder in the region.” Ultimately, this was a message from China to other countries that “it is willing to go to extraordinary lengths to exert its maritime claims” — an unsettling message to receive from an emerging superpower that has advertised its own “peaceful rise.”

Is this officially over?
For now, the worst appears to be in the past. But Japan still says it owns the islands in question and wants China to pay for repairing its coast guard vessels, while China still hasn’t released the four men it accused of spying. So things may just be on hold until the next incident sends Sino-Japanese relations into another crisis.

Sources: BBC News, Guardian, AP, Bloomberg, Daily Yomiuri, Reuters, The New York Times

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