China snubs IMF and World Bank in Tokyo over row with Japan

Featured - October 11th, 2012

China decided to pull out its finance chiefs from the IMF and World Bank annual meetings in Tokyo at the last minute in an apparent snub to Japan as it hosts the event at the capital city amid tensions surrounding an ongoing territorial row.

Deputies will lead the delegation in the place of China’s finance minister Xie Xuren and People’s Bank of China governor Zhou Xiaochuan. High-ranking officials usually lead such trips according to Chinese protocol.

Japan’s finance minister Koriki Jojima said the move was “regrettable”. Koichiro Gemba, Japan’s foreign minister, told a news conference that China’s decision would affect the global economy. “I believe it also won’t be a plus for China, considering how the international community will view such moves,” Gemba said.

The slight highlights the souring relations between the two countries following violent protests that has damaged tourism and trade ties. China claimed it would make Japan “responsible” for its actions and threatened to boycott Japanese products, denting Japan’s car industry.

Eswar Prasad of the Brookings Institution and former head of IMF’s China division said that Beijing was “using every economic and political tool at their disposal to protect their territorial rights”.

“From China’s point of view, the benefits of taking a strong stand against Japan far outweigh the costs of not having their officials at these meetings. The IMF and world community needs China a lot more than China needs the IMF and they know they’re in a strong position,” Mr. Prasad told the Financial Times.

Head of Asian research at ING Tim Condon told Reuters that China’s decision was its way of expressing displeasure over Japan’s actions. “It would be very easy for China to escalate the matter if they wanted to and inflict economic damage,” Condon added.

China is tightly holding the reins as it enters a climactic point ahead of its once-a-decade leadership transition to clamp down any signs of political instability.