Are China and Japan heading for war?

Japan’s prime minister, Shinzo Abe, “sent a shiver through the global diplomatic community” at Davos, a talking shop for world leaders and businessmen, last week by comparing current tensions between Tokyo and Beijing to animosity between Britain and Germany in the run up to the First World War, says The Independent.

Abe said it was a “similar situation”. Relations between the two countries have been strained for over a year due to disputed sovereignty of an uninhabited string of islands in the East China Sea.

Last November, China established an air defence zone over the islands, which Japan controls. Abe also argued that a key source of instability in the region was the steady 10% annual rise in Chinese military spending, says Lifen Zhang in the FT.

Meanwhile, his recent visit to the Yasukuni Shrine, where some Japanese war criminals from the Second World War are commemorated, has “enraged” the Chinese.

Abe’s speech was “a red flag for a bull”, says Ambrose Evans-Pritchard in The Daily Telegraph. He is a “hard-core nationalist” and his government is “re-arming fast”: Japan increased spending on military equipment by 23% last year.

Until now, this “remarkable economic and political risk” appears to have been overlooked, says Andrew Sorkin in The New York Times, but the implications for the global economy “are profound”. China and Japan are the largest economies in the world, after America, and are trade partners.

We need not get too worried yet, says Gideon Rachman in the FT. Abe’s remarks were not “as bellicose as they sound. His tone was discursive.” Nonetheless, coming from a world leader, the comparison with pre-war Europe was “startling” and it brought a “firm rebuke” from China’s foreign minister, Wang Yi.

He said that the parallel was misleading as military conflict was “unthinkable” and compared Abe’s visit to the shrine to a European leader “going to celebrate by the graves of Nazis”.

It is clear that political relations are really “quite bad”, says Martin Wolf, also in the FT. What this means for the future was “one of the biggest questions” raised at Davos this year.

66% off newsstand price

12 issues (and much more) for just £12

That’s right. We’ll give you 12 issues of MoneyWeek magazine, complete access to our exclusive web articles, our latest wealth building reports and videos as well as our subscriber-only email… for just £12.

That’s just £1 per week for Britain’s best-selling financial magazine.

Click here to take advantage of our offer

Britain is leaving the European Union. Donald Trump is reducing America’s role in global markets. Both will have profound consequences for you as an investor.

MoneyWeek analyses the critical issues facing British investors on a weekly basis. And, unlike other publications, we provide you with the solutions to help you turn a situation to your financial advantage.

Take up our offer today, and we’ll send you three of our most important investment reports:

All three of these reports are yours when you take up our 12 issues for £12 offer today.

MoneyWeek has been advising private British investors on what to do with their money since 2000. Our calls over that period have enabled our readers to both make and save a great deal of money – hence our position as the UK’s most-trusted investment publication.

Click here to subscribe for just £12