October 10th, 2012
07:35 AM GMT
Tokyo (CNN) – As if the world economy didn't have enough bad news, with the ongoing eurozone debt crisis, the slowdown in China and the U.S. teetering on the edge of the "fiscal cliff."
Now the territorial dispute on ownership of East China Sea islands between Beijing and Tokyo is echoing on the global stage, as China's top banker pulled out of the IMF meeting here in a move widely seen as a protest for the Japanese government's purchase of the islands – known as Diaoyu in China and Senkaku in Japan.
Zhou Xiaochuan, the governor of the People's Bank of China, was scheduled to deliver the Per Jacobsson lecture, a prestigious speaking spot reserved for financial luminaries such as Alan Greenspan and PIMCO CEO Mohamed A. El-Erian. His deputy, Yi Gang, will give the address instead, but coming after representatives from China’s four largest banks decline en masse to attend the IMF meetings because they are being hosted by Japan.
IMF officials privately expressed disappointment of Zhou’s decision not to speak at the prestigious lecture.
But speaking on the island conflict with IMF Chief Economist Olivier Blanchard yesterday, he told me it was too early to tell if there will be any macro-economic effects from the conflict.
It's clear the eurozone crisis is starting to have effects in the slowdown of China and the emerging world. Any fight between China and Japan – the second and third largest economies in the world, respectively – will doubtless have an impact on manufacturers and businesses that depend on the massive amount of trade between these two countries. Nearly 20% of Japanese exports last year were sold to mainland China, compared to 15.3% exported to the U.S., according to figures from the Japan External Trade Organization.
China's Xinhua news agency said the island dispute was "now starting to weigh on the world's economy." If true, that’s a weight the global economy would rather lose.
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