Looming confrontation between China and Japan - While most attention in Asia was on China's territorial claims in the South China Sea, Beijing has fired up another of its dangerous disputes

On August 5, an unprecedented swarm of 230 Chinese fishing boats, under escort by six Chinese coast guard vessels, sailed into territorial waters claimed by Japan.

Military escalation in the South China Sea is having a powerful influence on Australia's strategic environment.

It was "a unilateral act that raises tensions" Tokyo protested to the Chinese government.

China, unrepentant, said that it was merely operating in waters that were "an integral part" of China. It has since repeated the manoeuvre on a smaller scale.

The circumstances of the relationship were "deteriorating markedly" Japan's Foreign Affairs Minister Fumio Kishida concluded.

It was also the opening move in the reawakening of a dormant Chinese campaign to take control of the islands that Japan calls the Senkaku and China calls the Diaoyu.

The head of the ANU's National Security College, Rory Medcalfe, observes that, after a few years of relative inactivity: "China will want to keep the Senkakus dispute alive."

It's the dispute that pits two historical enemies, the second and third biggest economies in the world, against each other. And it pits Australia's biggest and second biggest export markets against each other.

It also happened to come just four weeks after China's other land grab suffered a major political setback.

Key elements of China's claim to 90 per cent of the South China Sea were ruled to have "no legal basis" by an international tribunal at The Hague.

Almost as soon as that finding was delivered against Beijing, "China started ratcheting up the pressure again" on the dispute with Japan, even before last week's big round of regional summits, including the G-20 summit hosted by China itself, Medcalfe points out. 

Xi met Japan's Prime Minister Shinzo Abe on the sidelines of the G-20 last week. China's leader told Abe that they needed to make progress through dialogue on their dispute because "no progress means regression".

Medcalfe continues: "And now that the G-20 is over, one assumes the Chinese will continue to ratchet up."

But why? Why take the risk? It's part of the project that Xi calls "the Chinese dream of the great rejuvenation of the Chinese nation". Medcalfe, speaking from Tokyo where he has been discussing the dispute with Japanese experts, explains: "They want to be able to isolate Japan as a maritime power. Ultimately, China doesn't want US allies to be able to support each other in a crisis."

And Xi knows that, when he enters any clash with Japan, he is on a popular cause.

A new piece of research by the respected US polling firm Pew explains why. Its title tells the story: "Hostile Neighbours: China v Japan." And the subtitle: "View each other as arrogant, violent; disagree on WW2 legacy."

The poll finds that 86 per cent of Japanese have a negative view of China. And the feeling is mutual. Eighty one per cent of Chinese hold a negative view of Japan.

There has been a marked souring of sentiment in the last decade, according to Pew's polls over those years.

The two peoples see a looming confrontation. Six in ten Chinese are concerned that their territorial dispute will lead to "military conflict" with Japan, according to Pew. The Japanese are even more troubled by the prospect - eight in 10 are concerned.

A war would be disastrous for all; but with such underlying animosity dating back centuries, it could well prove popular in both countries.

ANU's Medcalfe sees it as very unlikely: "The risk of an incident is real but manageable, partly because Japan has been very professional and disciplined in its management of the dispute, and while the Chinese are very busy they are no longer doing the extremely risky manoeuvres they were doing in the past."

If the worst were to happen, how would Australia react? Canberra has no settled doctrine on this. A lot would depend on which country was seen to be to blame, on who was seen to have "started it".

Medcalfe says: "If Japan doesn't start it, it's hard to see the US not getting involved."

Indeed, Barack Obama has stated unequivocally that the US military alliance with Japan would apply to a clash between Japan and China.

"And if the US is involved, it's hard to imagine we wouldn't get involved, even if it's only supporting US operations through the use of the joint facilities, that is, Pine Gap."

But would the Australian navy be taking aim at Chinese vessels? "Japan doesn't need us, although it does need the US," says Medcalfe. "But they would need and expect our moral support and unless they did something gratuitous and provocative I think they would get our clear diplomatic support."

In an effort to help condition Australian thinking about any such decision, a Sydney researcher has published a new paper that recalibrates Australia's economic partners.

A former director of the Australia-Japan Economic Institute, Manuel Panagiotopoulos​, has created a new index that looks at the quality, not just quantity, of Australia's economic relationships.

He takes not only import and exports and investment stocks into account, but also geopolitical alignments because, he says, in times of crisis geopolitics trumps trade.

He applies a "risk discount" to allow for the "misalignment" of strategic interests and finds that, applying a 12 per cent risk discount to China reorders Australia's strongest economic partnerships – it puts the US first, Japan second and China third.

It's another pointer to the increasingly tense and contested matrix of Asian ambitions.

If there is any good news here, it is that all the rivals are courting Australian resources and Australian support. Short of hostilities, that strengthens Australia's position rather than weakening it.

Illustration: John Shakespeare 

Peter Hartcher is the international editor.