Two Chinese patrol boats left waters disputed with Japan as Asia’s two biggest economies strove to repair their biggest diplomatic rift in at least five years.
After kowtowing deeply enough and releasing the Chinese sea captain, Japan is reporting that China’s patrol boats have left the disputed Diaoyu/Senkaku Islands in the East China Sea. From London it looks like shipments of Chinese rare earths and oxides will soon be trading unrestrictedly again from China to Japan.
Chinese Boats Leave Disputed Waters as Japan Ties Thaw
Oct. 6 (Bloomberg) -- Two Chinese patrol boats left waters disputed with Japan as Asia’s two biggest economies strove to repair their biggest diplomatic rift in at least five years.
The ships departed this morning, Japan’s Chief Cabinet Secretary Yoshito Sengoku told reporters in Tokyo. They had been patrolling since Sept. 24 close to islands in the East China Sea claimed by both countries. A Sept. 7 collision in the area between a Chinese trawler and two Japanese Coast Guard boats sparked a row that threatened trade ties, and comes amid rising tension over China’s territorial ambitions in the region.
Improved relations would help reassure Japanese exporters, which sold 10.2 trillion yen ($122 billion) of goods and services to China last year in their largest market. Sengoku said it was “hard to know” whether the boats withdrew because of a meeting in Brussels on Oct. 4 between Prime Minister Naoto Kan and China’s Premier Wen Jiabao in which they agreed to promote a “strategic mutual relationship.”
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But China’s actions have greatly disturbed the world, which gets up to 97% of rare metals from China. Greatly disturbed Japan, which is now racing to secure alternative supply. So far Japan has done a deal with Vietnam to open up possible supplies there, although that may be like jumping out of the frying pan into the fire. Vietnam just like China, is another communist run state with a largely command economy, and quite capable of also cutting of Japan if it felt needs must. Besides China can always cut a deal with Vietnam over another group of disputed Islands in the South China Sea. I’d rate this card no more than a five.
Yesterday Japan announced a deal with Mongolia, to prospect for REEs and refine them there if any are found. But Mongolia is an unlikely saviour of far away Japan. Landlocked, heavily dependent on trade with China and to a lesser extent Russia, in any new dispute over the Diaoyu Islands, and there very likely will be one now that China is aware of Japan’s great weakness, their US ally’s response was tepid, Mongolia is highly unlikely to stand by Japan against its own best interests. Besides, Mongolia is where Imperial Japan lost the first battle of World War Two at Khalkin Gol, to the USSR, though it wasn’t recognised as such until after the war. Mongolia is an iffy card in the game at best. Perhaps a six or a seven.
So that leaves me in a rainy London this morning, thinking that Japan still needs to get an Ace or a King to play in this rare metals game. A good company with real prospects, located in a sound rule of law location, where contracts are respected and enforced, product shipped, and not landlocked and subject to hidden pressure or backroom deals. Australia and Canada are natural fits, and I wouldn’t be surprised to see some sort of deals announced or even a takeover attempted before year end. My guess would be a company with good prospects for HREs, and receptive to jump starting shareholder value.
Graeme Irvine. London.