China's central bank governor to skip key meeting in Japan

Zhou Xiaochuan China's central bank governor was scheduled to deliver a speech at the meetings in Japan

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The governor of China's central bank has pulled out of the International Monetary Fund (IMF) and World Bank meetings being held in Japan.

The move comes amid an ongoing territorial dispute between the two countries.

Relations between the two soured after Japan said it had purchased disputed islands in the East China Sea claimed by both Tokyo and Beijing.

China's four state-owned banks have also skipped the meetings.

Zhou Xiaochuan, the governor of the People's Bank of China, was scheduled to attend the meetings and deliver a speech at the event.

Analysis

It is clearly frustrating the IMF bosses that China's most senior banker and finance chief have decided to boycott the Tokyo meeting. IMF Chief Christine Lagarde has said as much. She appeared to scold Chinese and Japanese leaders like naughty school children when she told them their countries are too important to the world economy to be "distracted by territorial division".

In reality the same speeches will be made at the same venues, albeit by vice-ministers and deputy governors rather than their bosses. China's voice will be heard, even if the world's other financial chiefs would not get any face time with the top guys from Beijing, which is what meetings like these are supposed to be about.

The problem is that China is distracted by a matter of far greater importance to the Communist Party leadership: who will be running the country in a few weeks from now. China's once-in-a-decade leadership change has not been going smoothly. For months the country has been gripped by the Bo Xilai scandal. One of the Communist Party's rising stars has been brought low, his wife convicted of murdering a British businessman, his right-hand man convicted of attempting to defect to the US.

In China history teaches that in times of political flux, it is best to keep your head down and never look soft on issues of nationalism and territorial sovereignty. No senior Chinese political figure is going to want to be seen in Japan right now. The world will have to wait until the new leadership is in place in Beijing before China and Japan can make any real attempt at repairing their tattered relations.

"We were informed two days ago that Governor Zhou's schedule might require him to cancel his lecture in Tokyo," an IMF spokesperson told the BBC.

"It has now been confirmed that his deputy Yi Gang will represent him at the IMF-World Bank annual meetings and will deliver his Per Jacobsson Lecture."

Chinese Finance Minister Xie Xuren is also apparently skipping the meetings. Chinese state media said Vice-Minister Zhu Guangyao would attend.

A report on China's official news agency Xinhua confirmed the make-up of the Chinese central bank delegation.

It also cited unidentified analysts as saying that the four state-owned banks had decided to skip the meetings "because bilateral relations between China and Japan have become strained".

Japan described the Chinese move as "regrettable".

Cars sales hit

The territorial dispute has affected both political and trade ties between the two neighbours.

On Tuesday, Japanese carmakers reported a dramatic drop in sales in China, after recent protests in the country targeting Japanese products and businesses.

Toyota reported a 49% drop in sales in September, while Honda and Nissan's sales fell 40% and 35% respectively.

Other carmakers such as Mitsubishi Motors and Mazda have also reported a sharp drop in Chinese sales.

The protests had led to various Japanese firms temporarily suspending their operations in China.

Dion Corbett, spokesperson for Toyota, Japan's biggest carmaker, said the slump in sales meant that its sales targets for China might be "very difficult to achieve".

The territorial row has rumbled for decades. Both China and Japan claim the islands, called Senkaku in Japan and Diaoyu in China.

Taiwan also claims the islands, which lie in important shipping lanes and fishing grounds, and also close to waters thought to contain natural resources.

This row flared over Japan's purchase of some of the islands from their private owner - a move prompted by a potentially more provocative plan by right-wing Tokyo Governor Shintaro Ishihara to buy them using public donations and develop them.

Since then both Chinese and Taiwanese vessels have been sailing in and out of what Japan says are its territorial waters around the islands. The US, meanwhile, has called for calm, with US Secretary of State Hillary Clinton urging "cooler heads to prevail".

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