October 10th, 2012
07:35 AM GMT
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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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Filed under: AsiaChinaJapan

soundoff (10 Responses)
  1. billy

    They should both invest in amercan prouduction and complaning

    October 10, 2012 at 8:58 am |
  2. Kyle H. Davis

    Yawn... Let's see: If we take China's position, this "spat" has been going on for 133 years. If it hasn't really hurt the economy in that length of time, why would it now?

    But, for those of us who live in a world without self aggrandizing censorship and twisted history, we realize that this is all about the oil and that China never once claimed the islands until the possibility of oil deposits was realized in 1970. And still, if it has not hurt the world economy in 32 years, why would it now?

    China's hunger for oil is growing. I mean... pouring concrete into the ocean off of the Philippines and claiming it as "Chinese sovereign territory"? Come on...

    October 10, 2012 at 9:42 am |
  3. Ferrum Equus

    Mainland China is greedy. In the past they were not able to enforce their demands. Now they can. I see many more conflicts on the horizon with China. They only way to put China back in its place, is to bring back manufacturing to the home soil, so that we have a much better trade balance. It is shame full that China claims the resources of others within just less the 200 miles of the cost of another country.
    The fall of China is already pre-programmed. One can only be a thief that long until the rest world wakes up.

    October 10, 2012 at 10:14 am |
  4. Bruce

    If you guys want to know the reason of territorial dispute ,read more historical books

    October 10, 2012 at 12:22 pm |
  5. Prometheus

    I have nothing against the Chinese people as they are victims of information control and propaganda.
    Their government is corrupt and and commited to outward aggression and subjugation of internal minorities (Tibetans and Uhigurs etc.). Now that they have grown economically they now think its their turn to get at the world, as in the first half of the 20th century. Well, the rest of the world has grown up...but they insist on acting like children.
    If you give children an inch they will ask for a mile... we all know that. Thats what this is all about.

    October 10, 2012 at 12:29 pm |
  6. CaAbT

    The land has to belong to whoever discovered it to have it, just like any inventions and discovery. Using war or any other means to grab it will never work. It only causing it changes hands, and generating many bloody tragedies in humanity on the way…

    October 10, 2012 at 2:21 pm |
  7. Hugh

    From the Chinese standpoint, the dispute of this island has nothing to do with greed or with oil. This island has always belonged to China. With the past invasion of China by the Chinese, this dispute makes the Chinese people feel like been invaded the second time.

    October 11, 2012 at 1:46 am |
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    October 12, 2012 at 8:18 am |
  9. Jesssie

    The Diaoyu Islands were first discovered, named and used by the Chinese. Since the 14th and 15th centuries, the islands have been included in Chinese maps. Foreign maps also show that the Diaoyu Islands belong to China.

    October 17, 2012 at 3:55 pm |

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