yAt some point in time, the banter between China and Japan becomes a serious enough situation that we all have to pay attention to it ? because it is already affecting business relationships.
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It could be just a political ploy to show strength, but China?s official military press release sent out in the People?s Daily said that the military and the National police force need to focus on being able to ?fight and win a battle?. This was reportedly aimed at the Japanese and stems from a dispute over island chains off the coast of Japan ? we?ve spoken much about it.
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The article in the newspaper suggested that the Chinese military will need to increase its live fire drilling and carry out military and police maneuvers in 2013 that would allow it to be ready to engage an enemy, and win a battle.
Separately, China announced that it would conduct an official survey of its ?territorial islands and reefs? according to the AFP. This survey would involve the Senkaku Islands as they are known in Japan ? a region that both Japan and China lay claim to. There are still a number of details missing on this survey effort ? including the date it will be conducted and whether it will involve a ground force or simply an aerial reconnaissance effort. Japan strictly defies the effort and sees it as an infringement on its sovereignty.
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The US is highly involved in the activities in the South China Sea. US and Japanese fighter jets carried out joint air exercises today ? the exercises being carried out near the disputed island chain as a sign to China that the US and Japan alliance is strong and ready to stand to defend that alliance.
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Adding further intrigue to the situation in the disputed island chains and the moves by Japan and the US, ?coincidentally? the China Sovereign Wealth fund which currently holds more than $480 billion in US assets announced that it could cut holdings of US Treasury Bonds because they are ?becoming less attractive?. It?s not a coincidence ? it was a threat aimed at placing some ?cost? in an effort to keep the US neutral.
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We aren?t recommending that businesses change any of their current relationships, it would be fool-hardy to do so. But, it is necessary to go into the Asian markets with ?eyes wide open? at the moment and realize that the political environment is changing rapidly, and at some point a misstep by either the US or Japan could create a difficult business environment. Moves like the one from the Chinese Sovereign Wealth Fund show just how quickly a dispute with military consequences can start in an economic battle framework. Stay tuned, this one is going to get interesting.
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Remember that it was just a year ago that the President released his report on ?21st Century Priorities for Defense? in which it was written that readiness needed to be aimed at supporting stability in the Southeast Asia. As a company that could be trading with Southeast Asia, you need to be aware of the situation and watch the development of it ? especially if you are single sourcing products in the region.
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