Sino-Japan economic ties chill amid political spats

For Japanese firms, the Chinese market has become increasingly important, especially in Japan's own sober economic environment with its dwindling domestic market due to low birth rates and an aging population.

Haruyuki and other Japanese working in China remain optimistic about China's market, with more veering toward the service sector instead of traditional manufacturing.

Ichiro Moritani, CEO of IBC JAPAN CO., Ltd., a foreign investment consulting firm, said the sway from manufacturing to the service sector beefs up the brittle economic ties stretched by souring China-Japan relations.

"If bilateral trade was solely in the automobile industry, for example, it would be high risk if cars cannot be sold, while cooperation in the service industry helps reduce such risk," said Ichiro Mori.

Liu Junhong, a researcher from the Japan Institute of the China Institute of Contemporary International Relations, said increasingly tense global competition has created higher risk for Japanese firms who retreat from China. Western capital would soon fill their shoes, leaving Japan few opportunities to return to China's market, which is directly related to its economic revival.

"The most urgent and utmost thing is whether this sense of crisis could result in political pressure on the Abe administration and help improve Sino-Japan relations."

Zhou Yongsheng, deputy director of the Japan research center at China Foreign Affairs University, noticed that Japanese Prime minister Shinzo Abe said he was eager to improve Japan-China relations in a meeting with Chinese President Xi Jinping at the recent G20 Summit.

Without Japan's good faith in resolving the territorial dispute through negotiation, the already cooled economic situation will continue, Zhou said.

China is willing to promote the healthy development of Sino-Japanese trade rather than the "economic chilling," but only if Japan shows its sincerity in bolstering bilateral relations, he added.