Timebomb waiting to explode

China & Japan are both involved in a hot dispute over the sovereignty  of  a small Island chain known as Senkaku in Japan & Diaoyu in China.The island is very small between 800 m² to 4.32 km².Then why they are they fighting for such a small island,because it is believed to contain  huge oil & gas reserves.One who controls the island can control upto 200 nautical  miles around the islands,by law of the sea.China & Japan are the Asia's first & second largest economies respectively.Any fight between them will affect global trade to a large extent & risks sucking in other nations like US into the conflict.China is increasingly getting agressive  in dealing with it's neighbours because of it's sheer military strength.Moreover Taiwan also claims those islands belong to it.
    Japan has heavily invested in China toyota,sony,panasonic,hitachi almost all Japanese companies have invested in China.They mostly have their manufacturing centers there.More importantly most of the Japanese companies are electrical & electronics companies.Most electronics components need rare earth metals for their manufacture & China produces 99% of rare earths.Rare earths metals aren't necessarily rare they are found all over the world but low cost Chinese rare earths made other producers to cease their operations.
    China has already used this advantage to it's gain.It threatened to stop all rare earths exports to Japan in case the dispute arises(already did).Japan  is trying to reduce it's dependency on China in rare earths by buying them from other countries.Japan signed a pact with India for rare earth  before few months & the Indian plant is expected to be operational soon & start exporting to Japan.Japan has also signed agreements with Kazakastan & Vietnam for rare earths mining & the united states & Australia is expected to start rare earth mining soon.
    Many hope that Japanese investors will shift their investments from China to other competitive  & anti-China & Japan friendly countries like Vietnam,Philippines & India.If that happens then it will result in lot of economic growth in the south east asia.And that's what Uncle Sam exactly wants ,a regional arc of democracies to counter China.Those who have issues with China namely Japan,South Korea,Taiwan,Philippines,Singapore,India are all US allies.US is treaty bound to help most of those countries.Australia another US ally is in a dilemma it don't know which side to choose on one hand China is it's largest trading partner & on the other hand US is it's net security provider.
    China cannot be taken lightly, it has the world's largest army & is also technologically superior.It has the world's fastest economic growth & is also known as "engine of the world".It has just tested it's fifth generation stealth fighter aircraft,only the third country in this world to do so.Can Japan really stop the dragon?who know's may be with the US help.For more information like these subscribe to my blog for email updates.

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