A Dangerous Escalation in the East China Sea

The territorial dispute in the East China Sea between the world's second- and third-largest economies entered a disturbing new phase last month with the first direct involvement of military forces. On Dec. 13, Japan sent eight F-15 fighter jets after a small Chinese propeller plane that flew over the disputed Senkaku Islands, called Diaoyu in China. According to Japan, this was the first Chinese intrusion into its airspace since 1958.

There is far more at stake here than a small cluster of islands. Crisis mitigation mechanisms need to be urgently reinstated and communication increased between Beijing and Tokyo to reduce the risks of an accidental clash or escalation. China's continuous testing of Japan's bottom line is a dangerous game, and one that could have consequences for the U.S.-Japan security treaty.

Beijing is bolstering maritime patrols of the disputed waters in a challenge to Japan's de facto administration. First annexed by Japan in 1895, the small cluster of islands and barren rocks came under U.S. control after World War II but reverted back to Japan with the 1971 U.S.-Japan Okinawa Reversion Treaty. They became more desirable a few years earlier when it was discovered that undersea oil reserves might exist nearby. Taiwan also claims the islands, but has enjoyed more amicable overall relations with Japan, and Japan does not officially recognize Taiwan as a sovereign state.

The dispute between China and Japan reignited in September when the Japanese government announced it was finalizing the purchase of three of the contested islands from a private Japanese owner. The government did this mainly to keep the islands out of the hands of former Tokyo Mayor Shintaro Ishihara, a flamboyant nationalist who had announced that the Tokyo Metropolitan Government would bid on them.

Reacting with a series of what it called "combination punches," Beijing threatened economic retaliation, launched joint combat drills by its navy, air force and strategic missile corps, and refused to attend the annual meetings of the International Monetary Fund and the World Bank Group hosted by Tokyo in October. At the same time, violent anti-Japanese protests—the biggest since 2005—broke out across China.

China's most significant move was designed to end four decades of Japan's de facto control of the islands. Beijing announced base lines to formally demarcate its territorial waters and sent law enforcement ships into disputed waters. This new strategy is a stark departure from China's policy under Deng Xiaoping (Beijing's supremo from 1978 to 1992), which aimed to defer the dispute and seek joint exploitation of resources with Japan.

Deng's decision to put aside this fundamental disagreement reflected the deep challenges to resolving the issue of island ownership. Because the dispute is seen in China as related to Japan's imperial aggression, it awakens historical enmities and inflames Chinese nationalism. The Communist Party has long used past invasions and nationalism to bolster its legitimacy, making any negotiations over sovereignty extremely complex.

At the root of this new flare-up is a changing economic and power balance in East Asia. Seeing Japan on a downward slide while its own star is rising, China feels the time is right to stake its ground in the dispute. International law favors the country that has occupied or taken measures to exercise sovereignty. These include submitting claims to the United Nations, naming islands, making maps, conducting law-enforcement patrols, and eventually building structures and inhabiting islands. China believes that it has lost out while Japan administered the islands for decades.

Since Japan's purchase announcement, Beijing has taken legal and operational measures to strengthen its own hand. It is taking similar steps to bolster additional sovereignty claims in the South China Sea, as it clearly desires to become a greater maritime power.

Neither side has a solid legal case. Japan's claim to sovereignty on the basis of "discovery-occupation" centers on the assertion that it found no trace of habitation or control when it formally incorporated the islands in 1895. China claims that historical and legal evidence shows the islands were discovered, named and used during the Ming Dynasty (1368-1644), controlled by the Qing Dynasty in 1895, and seized in the context of Japanese wartime expansion. This, Beijing argues, means they must be handed over based on the post-World War II peace treaty that binds Japan to return Chinese territory.

Continued peace in the region hinges upon the two countries managing their differences. Cooperation on joint resource management in the East China Sea while setting aside—but not renouncing—maritime claims could be a practical way to build mutual trust and reap tangible benefits. In 2008, the two governments came close to such a deal but ultimately failed to overcome domestic nationalist opposition.

Before tensions flared, both sides had realized the danger of maritime accidents and were committed to setting up communications systems between their defense and law-enforcement bodies. But emotion prevailed over reason and those talks were abandoned.

Both China and Japan have stated that a military conflict is in no one's interest. That offers hope. Still, preserving peace requires urgent cooperation to avoid misfires and prevent an accident from escalating into a skirmish. A joint resource-development agreement would take time to negotiate, particularly given the steps needed to calm nationalist anger. But if the two sides are serious about avoiding armed conflict, common ground can still be found. Both Beijing and Tokyo have new leaders who have an opportunity to reduce tensions at sea. They should seize it.