China and Japan: Dispute Over Islands Threatens Economic Relationship

The rapidly escalating tensions between China and Japan over control of the Senkaku Islands will undoubtedly have economic ramifications for the two countries, particularly over the short term. It is unlikely, however, that the dispute will spiral into a military conflict given the importance of bilateral economic ties and China’s paranoia about social stability. While the United States has taken a position of neutrality, it will find this position difficult to maintain the longer the conflict goes on.

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