Japan/ China/ US Trade Dance of Death Continues

Elaine Meinel Supkis

The goofy plan to use cheap Chinese labor to make the industrialists and financiers of the First World nations filthy rich is now beginning to backfire as I predicted way back in 1986. The Chinese understand money, they created fiat money, after all! And they know how to jujitsu Japan, Europe and America using their hard working masses as leverage. Just this last three months, all the economic scales suddenly tipped to China and they are now shooting upwards as the US and Japan play with creating depressions at home so they can prevent oil inflation. China is winning this battle of wits for obvious reasons: labor triumphing over monetarism.

From Bloomberg:

Industrial & Commercial Bank of China Ltd. briefly overtook Citigroup Inc. as the world's largest bank by market value after less than a year as a public company.

ICBC's shares rose as much as 1.9 percent in Shanghai today to 5.80 yuan (77 cents), taking its market capitalization to $244.9 billion, more than Citigroup's $243.9 billion. Citigroup earned more than three times as much as ICBC last year.

The reshuffle atop the rankings underscores the potential investors see in China, home to three of the world's 10 largest companies by market value and the fastest-growing major economy. Beijing-based ICBC in October raised a record $22 billion in an initial public offering in a nation where until recent years bank lending was steered by the government.

Relentlessly, the restless dragon moves forwards. Both Japan and the US panic every time this happens. As China passes one signpost after another, the #1 and #2 economic powers weep and wail. They send out their war ships to do war games on the high seas. They talk about alliances that will cut the wings of the dragon. But they still feed this dragon because the only way they can deal with the rising cost of oil imports is to move manufacturing to China!

Here is a screen shot from the Bloomberg news site:

Japan's trade with us grew even more last month? Of course, the yen collapsed. And this was deliberate. As the US domestic market falls, the yen had to fall even faster to increase sales and profits! So the US had this stupid 'weak dollar' scheme that made our trade deficit worse thanks to rising oil prices and the entity we wanted to dump increased sales by imitating us, as usual.

Japan always does this! It really baffles me why so few Americans see this obvious thing! Time to look at Japan's headlines:

From the Nikkei:

Profits Soar At Big 3 Shippers On Strong Demand, Weak Yen

TOKYO (Nikkei)--Profits jumped at Japan's three major shipping companies in the April-June quarter, fueled by such factors as rising marine transport demand amid the global economic boom and a weaker-than-expected yen.
****************************
Mitsukoshi, Isetan To Launch Talks Toward Capital Tie-Up

TOKYO (Nikkei)--Japan's No. 4 department store operator, Mitsukoshi Ltd. (2779), and fifth-ranked Isetan Co. (8238) are set to enter into negotiations aimed at forging a capital tie-up, with an eye toward a future business integration, The Nikkei learned Tuesday.
******************************
Stocks: Nikkei Slides To 6-Week Low On Wall St. Tumble, Stronger Yen

TOKYO (Kyodo)--Tokyo stocks fell sharply on Wednesday morning, sending the benchmark Nikkei to a six-week low, as the overnight tumble on Wall Street and a stronger yen undermined investor sentiment.
****************************
June Trade Surplus Up 53.4%

TOKYO (Dow Jones)--Japan's June merchandise trade surplus expanded 53.4% from a year earlier to Y1.227 trillion, the Finance Ministry said Wednesday, indicating the weak yen and strong demand from China will likely continue to keep export growth robust.

**************************

Obviously, the Japanese know perfectly well, a weak yen=>trade surplus=>rising profits=>greater wealth for the industrialists. The cruel side to all this is, in order to keep the yen weak, the Bank of Japan needs to prove to the world, they are in a depression. So even as all nations on earth now have inflation thanks to the dying dollar causing world oil prices to shoot up, Japan stands alone with dropping prices inside Fortress Japan.

From the Japanese External Trade Organization:

I took their own charts and colorized them. The first chart shows money flowing from Japan to China in order to build factories that use Chinese labor.

Japan recognized China over Taiwan before the US did this. Immediately, they began a program of building factories in the south of China next to Hong Kong for exporting cheap stuff to both the US and Japan. The bulk of these items flowed to the US. People often forget that anything made in China is called 'made in China' but the important thing to watch is not that but who gets the profits! This is a little line item Americans want to forget even though this is the dark heart of capitalism! The struggle to capture these precious profits is the entire history of labor relations.

Time to look at another chart that clearly shows degrees of profitability and financial power, this one shows the ups and downs of Japanese investments in the USA:

I inserted various economic and war events. It is clear that Japan is very sensitive to events in the US. It also shows that the Plaza Accords which the US negotiated with all the major banks in the world, not only failed as far as Japan was concerned, it aggravated things enormously.

From Wikipedia:

The Plaza Accord was an agreement signed on September 22, 1985 at the Plaza Hotel in New York City by 5 nations - France, West Germany, Japan, the United States and the United Kingdom. The five agreed to, amongst others, depreciate the US dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets.

The exchange rate value of the dollar versus the yen declined 51% over the two years after this agreement took place. Most of this devaluation was due to the $10 billion spent by the participating central banks.

Currency speculation caused the dollar to continue its fall after the end of coordinated interventions. Unlike some similar financial crises of the 1990s (such as the Mexican and the Argentinian financial crises of 1994 and 2001 respectively), this devaluation was planned, done in an orderly manner with pre-announcement, and did not lead to financial panic in the world markets.

The reason for the dollar's devaluation was twofold: to reduce the US current account deficit, which had reached 3.5% of the GDP, and to help the US economy to emerge from a serious recession that began in the early 1980s. The U.S. Federal Reserve System under Paul Volcker had overvalued the dollar enough to make industry in the US (particularly the automobile industry) less competitive in the global market. Devaluing the dollar made US exports cheaper to its trading partners, which in turn meant that other countries bought more American-made goods and services. The Plaza Accord was successful in reducing the US trade deficit with Western European nations but largely failed to fulfill its primary objective of alleviating the trade deficit with Japan because this deficit was due to structural rather than monetary conditions.

There was no panic because Fortress Japan manned its barricades and succesfully fended off the US financial assault! On top of this, thanks to the weak dollar, Japan had lots of money they parked inside the US which is what the second chart shows. The only thing capable of stopping them was for the US to commit seppukku and kill our own economy which happens whenever oil prices shoot up thanks to oil wars we instigate.

The failure of the Plaza Accords is exactly the same failure we see today. As the US goes into an obvious recession, Japan's one way trade with us will slow down. But we gave them a scare so far, when the dollar kept dropping and Japan's economy was shooting up faster and faster. As we see in these charts, the Japanese dealt with suppressing their home costs that would show inflation but upping importing stuff they outsource to China! Their 'depression' definitely ended when I said it did, based on my own research.

Namely, the differential between the importations from China to Japan, importing JAPANESE corporate goods, increased rapidly as the industrialists exporting to the US frantically tried to outsource inflation to China where they would absorb it all. And they did...until the yuan began to grow stronger as the yen died! The goofy game between China/Japan/US trade now took a dangerous turn: with the yuan strengthening against both currencies, the inflation sink vanished like melting snow in springtime.

Now, both the US and Japan are showing inflation right when both want to have no inflation. The second paradox in all this, another very big destabilizing force, is that the use of China as Japan and the US's inflation sink has made China vastly wealthier. Only last year, when I remarked that China's FOREX reserves were beginning to pass Japan's reserves, did the rest of the world wake up to this new power. The Chinese are going to triangulate within the US/Japan destructive trade relationship for as long as possible. But the wheels are coming off and not because of China!

From Bloomberg:

Growth in Europe's manufacturing and service industries, which account for two thirds of the economy, slowed more than economists forecast in July as the euro rose to a record and oil prices increased.

Royal Bank of Scotland Group Plc said its combined index, spanning industries from autos to banking and airlines in the 13- nation euro region, fell to 57.3 from 57.8 in June. Economists expected the composite index to slip to 57.6, according to a Bloomberg News survey. A reading above 50 indicates expansion.

Because the world's #1 and #2 economic powers have both killed their currencies in a cynical move to give themselves trade advantages, the party that was hurt was not China, it was Europe. China let the yuan rise in value in a controlled way, bit by bit, on their own schedule. But Europe, full of really stupid financiers who think they are so smart even though Europe has a very ugly history of destroying world economic systems and even uglier wars, believed the fantasies of the monetarists who imagine trade is all about money values.

With fiat currencies, this is true: anyone manipulating their currency for trade advantage has a laugably easy time of it since the Europeans and often, the Americans, are utterly gullible. Both Europe and America have allowed Asia to manipulate us to death. This is why they built up huge FOREX reserves! DUH! Just last month, I pulled out one Treasury or Federal Reserve study and article after another, showing how demented we are. All of them were shouting that high FOREX reserves were stupid. All said, only fools in Asia build up massive foreign reserves! They were scared, that's why! They were irrational! They were not as smart as European and American economics professors!

HAHAHA. Every cartoon of my dragon as well as Miz Japan shows them collecting money for their FOREX reserves and discussing why they do this. It is painfully obvious, so obvious, even an American economics professor can see the truth (fat chance): these glorious FOREX reserves gives Asia tremendous power over the value of our currencies in the West! I hammer on this issue because it is a key issue that is still not recognized by the media or professionals here in America!

Headlines from CNN Money:

No housing recovery til 2009
2:00pm: CEO of No. 1 mortgage lender Countrywide has a 'gut feeling' industry sluggishness will last through 2008. (more)
• Subprime loan alternatives
• Countrywide profit plummets

Our banking system is slowly beginning to collapse. The hedge fund hounds that are dying all over the planet are merely the outlying tiers of this collapse. It is moving inwards rapidly. The statistics show us in the red on even more levels now than a year ago. The only thing in the green today is the top stocks on Wall Street and if we look at the chart above, it is obvious why: Japan's investments overseas to the US are higher than at the peak before the collapse of the Japanese economy back in 1991.

From CNN Money:

The Senate Finance Committee will begin drafting legislation on Thursday that is intended to boost pressure on China to let its currency rise in value, a committee aide said on Tuesday.

The proposals the committee aims to turn into legislation were unveiled last month by four U.S. senators who acted after the U.S. Treasury Department declined to name China a currency manipulator in a semiannual report on currency practices of key trade partners.

So, even as Japan ravages our trade values and destroys our industrial base, we are going after China. Remember, a significant portion of our trade with China is the purchase of Japanese and American corporate goods!

Treasury Secretary Henry Paulson heads for China next week to warn top Chinese leaders that Congress will move ahead with legislation unless the yuan appreciates in value.

The Chinese are not amused. They can read these charts just like I can. And I suspect, with a similar open mind and this latest chart collection from Japan. Or maybe they read my news service. A good portion of my regular readers are able to block me from seeing who they are. The US focus on the Chinese is political. The US is stupidly making a deeper alliance with Japan against China for geopolitical reasons but just as I explained yesterday how Britain strengthened Japan against Russia and how that backfired when the US strengthened Japan against the Soviet State even more, leading to WWII. So it is here: we should be triangulating China and Japan, not chosing sides! This is easy to see: Japan is our #1 trade rival in the world. Soon, China will be this. But right now, it is Japan.

It is Japan that is underselling us in Europe even as the euro gets stronger and stronger! No matter how strong the euro gets, Japan, not China, is underselling us when it comes to top manufactured goods! Japan has kindly left us the aerospace and jet plane industries but even that is being slowly wrenched away as they see, in alarm, China moving into both fields aggressively. If Japan decides to eliminate those last two major industries from our control, we will be finished. China intends to do this so the game here is to see who does it first.

The US better wise up about this. BOTH NATIONS ARE COMPETITORS. And both will destroy us if we let them.

From USA Today:

The USA is stopping all imports of Chinese toothpaste to test for a deadly chemical reportedly found in tubes sold elsewhere in the world.

As Japan floods the US with cars and builds assembly plants here to milk us at home for profits, we are worried about toothpaste! Insane. Yes, the toothpaste matters is important. But it doesn't de-industrialize the US! Car imports do!

From the Japanese press:

WASHINGTON, DC, September 10, 1998--Sales of all imported passenger cars in Japan have dropped 23.1 percent this year through October, the worst decline in a decade. Yet, Japanese consumers have increased their purchases of mini-cars whose sales have jumped 72.3 percent in November. However, importers have been unable to take advantage of this potential market since none either sell or have plans to sell mini-cars in Japan, according to [Japan Auto Trends] released today by the Japan Automobile Manufacturers Association (JAMA).

Look at the second chart: there is a decline in investing trade profits in the US. This is due to an American recession. The Japanese people, suffering from the beginnings of the Japanese government wrenching down inflation by depressing wages brutally, ceased bying American cars. They were driven into cheaper and smaller cars. Even with this, according to the Bank of Japan's statistics, car sales of any sort in Japan began a relentless fall, a fall that is continuing, as wages were crushed with greater and greater brutallity in order to prevent inflation showing up.

From World City Web: June 20th, 2006:

U.S. craving for Japanese luxury cars is boosting imports from the Asian nation.
Japan expects strong and steady economic growth this year. U.S. purchases of Japanese products will play no small role in that expansion.

U.S. imports from Japan – its fourth most important trade partner – rose 6.4 percent in 2005 to total $138 billion. That came against a trade backdrop that saw the United States and Japan exchange a total of $193.5 billion in goods, an improvement of more than 5 percent when compared to 2004.

U.S. imports from Japan outweighed exports to the island nation, leaving the United States with a deficit of nearly $83 billion. A year earlier, the deficit had been less than $75 billion.

In 2005, Japanese automobiles were the most-desired commodity shipped to the United States. Passenger car imports rose more than 8 percent to total $35.2 billion, according to WorldCity analysis of U.S. Census Bureau trade data. The majority were luxury car brands, including the Toyota Lexus and the Nissan Infiniti, that are not manufactured at U.S. auto plants. That said, the Japan Automobile Manufacturers Association in Washington, D.C., notes that Japanese-brand cars made in the United States outsell the imports by 2-to-1. In 2004, there were 3.2 million Japanese-brand cars and trucks manufactured in the United States.
Right behind cars on the import roster were $9.2 billion in auto parts to supply those U.S.-based automobile plants. That’s a gain from $8.8 billion in 2004. Computer parts turned up as the third most important U.S. import from Japan, reaching a value of $5 billion – an increase of 5 percent from a year earlier.
Incoming shipments of motorcycles also soared in 2005, rising 26 percent in value to reach nearly $2.6 billion.

While vehicles moved up the import roster, televisions, computers, medical equipment and computer chips fell. Imports of television sets dropped to $1.8 billion from $2.2 billion in 2004, a reflection of the global shift in TV production to Mexico and China. The United States imported $9.6 billion in televisions from Mexico in 2005 and $4.8 billion from China.

While computer-part imports were up, computer shipments from Japan fell to $2.8 billion, from $3.1 billion in 2004, and computer chips dropped to just under $2 billion, compared to $2.1 billion a year earlier.

On the other side of the trade equation, U.S. exports to Japan rose a modest 2.1 percent to end the year at $55.4 billion. That total included $3.3 billion in aircraft, a rise of nearly 10 percent. Exports of regional jet parts remained steady at $1.3 billion; the United States also shipped Japan $3.1 billion in other airplane parts.

Anyone reading this article above should feel alarm. This is ridiculous. Trade with Japan in value added goods has collapsed! Today, it is worse than ever. We are not talking cheap shoes and paper umbrellas here. These are all big ticket items.

From the Japanese Auto Manufacturers Association:


•Japan's Motor Vehicle Statistics
TOTAL IMPORTS BY YEAR (vehicles from America going to Japan)
[Unit: Number of vehicles]

..............Cars....Trucks..Buses...Others.......Total
1960 ......3,540....612.....94.......87..............4,329

1980......46,285.....538.....9......1,085..........47,917

2001.....287,116...1753....74.....578...........289,521

2005.....282,654.....1,364...56....660..........284,734

•Japan's Motor Vehicle Statistics
TOTAL EXPORTS BY YEAR
[Unit: Number of vehicles]

1961.....11,531....44,529.....977...............57,037

1965....100,716....90,923....2,529 ...........194,168

1980....3,947,160..1,953,685..66,116....5,966,961 (Note: at this point, Japan began to build assembly plants in the USA)

2001....3,568,717..552,891...44,481.......4,166,089

2005....4,363,168..611,956..77,937........5,053,061

OUCH! Look at the numbers! 5 million cars flowing in a tsunami from Japan and we send them a quarter million back? This is insanity! And worse, the flood of cars coming out of China that are being made by Japanese auto makers is doubling this tsunami. 60% of the cars in America that are from Japanese corporations are made overseas! The numbers shoot up during the 'depression' in Japan. This is directly connected with the cheap yen. This is why the LDP risked unpopularity by crushing Japanese wages and raising the tax on purchases in Japan! And this is why the LDP may fall this week.

From Business Week:

Here is an interesting sign of how China's auto market is increasingly one the world needs to watch. Xinhua News is reporting that for the first time ever, last year China exported more vehicles than it imported. The numbers show China exported 172,639 autos, or 11,031 more than were imported, according to statistics from the Ministry of Commerce. The stats show a 120.5% jump in number of units exported compared to 2004, and show that the total value of vehicles exported was $1.58 billion, a 158.4% jump over the previous year.

Enter the dragon. The jump is still small. This story is one year old and we know the numbers have increased dramatically since 2006. But it is no way near Japan's numbers. Japan exports nearly 8 million cars a year. Toyota has surpassed GM as the world's biggest auto corporation. And unlike GM, it is well in the green, not in the red.

Buy USA:

Welcome!

WELCOME TO THE SOUTHERN NETWORK
U.S. EXPORT ASSISTANCE CENTER
The U.S. Commercial Service of the U.S. Department of Commerce is a federal government agency dedicated to helping small-to-medium sized companies with their exporting strategies. Our experienced staff of International Trade Specialists located in Alabama; Arkansas; Clearwater, Jacksonville, Fort Lauderdale, Miami, Orlando and Tallahassee, Florida; Georgia; Mississippi; Oklahoma City, OK; Tulsa, OK and Puerto Rico are committed to helping your business export.

This is a pathetic government web site here in America. How insipidly inspiring it is. And it is also clueless. Time is running out on us. And to think that poor Paulson was forced to tell the world, the US wants to make the dollar stronger. Time to yell at China to make the dollar weaker, right?

Culture of Life News Main Page

Comments

[Rouser]

Always a good read:

http://www.moonofalabama.org/2007/07/us---europe-not.html

[Canuck]

“Japan has kindly left us the aerospace and jet plane industries but even that is being slowly wrenched away”

Behold the Hondajet…

https://hondajet.honda.com/
default.aspx?bhcp=1

Currently under FAA consideration for approval.

“These features, in combination with Honda's fuel-efficient HF118 Turbofan Engine, achieve fuel efficiency over 40% higher than conventional aircraft.”

Ho Ho! Kicking ass with technology, would that be the Honda MOTOR Company perchance?

http://world.honda.com/news/2003/
c031216_2.html

Breaking ground in NC, goodie, they’ll be able to make their trailer payments in Greensboro. Round of beers for everyone!

[Al]

I've learned a lot here. Thank you. Today on the bus I was discussing subprime loans with some lower-end financial people (only POC ride buses in Cali-the movie Crash explains why!)and phone company techs. All were aware of the subprime toxicity but the biggest dumbest guy was attempting to convince the others that the economy is booming and the subprime mess only affects people actuallly losing their homes. I couldn't talk sense into someone who watches CNN and thinks everything is cool. AAAhhhhhhhhhhh !!!!

[Elaine Meinel Supkis]

Well, Al, you gave it your best effort. Of course, the propaganda is wall to wall but reality is the wrecking ball from hell, isn't it?

And thanks for the links, as always, Canuck. I read them all.

[Canuck]

Yeah the Hondajet is kinda cute right? like a Civic circa '78.

http://www.edmunds.com/
insideline/do/Features/articleId=68272

[Elaine Meinel Supkis]

The super-fast Honda Civic! Always flown by girls going to Junior Colleges, of course.

[Peter]

Well i too realized the problem early and I have been learning chinese, maybe everyone should start, i mean we already had to borrow their money. People here are dumb as rocks, I see no correction of the situation, only a country that does not make or export really anything anything any more. I will just sell cheap products to Americans from china because untill the problem is corrected it would be stupid not too. So as non american as that is. Its not my fault.

[kamagra online]

okay! hi guys. i'm just posting this because i think instead of asking the SAME questions over and over again you should search for questions... like i keep seeing "Am i too old to start dancing?!" the answer is never going to change.. NO! you are not too old.
anyone agree?

[ugg outlet store]

Fantastic to hear from you and how are you doing? All the plans on your proposal are totally acceptable. Thank you for you hard work.

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[hawaii helicopter tours]

There must be another way. This is not too appropriate.

[vokoyo]

They are an inalienable part of China's territory according to historical facts and international law; Japan's claim untenable

Situated in the East China Sea, due east of Fujian province and northeast of Taiwan, the Diaoyu Islands are the farthest eastern islands of China. They are about 190 nautical miles from the Dongshan Island of Fujian province, 90 nautical miles to the northeast of Keelung city of Taiwan, and 78 nautical miles from the Yunaguni Island of the Ryukyu Islands. The Diaoyu Islands refer to a group of islands that include the main one, Diaoyu Island, and some smaller islands and reefs like Huangwei Island, Chiwei Island, Beixiao Island, Nanxiao Island and three other islets. They are scattered in a sea area at 123 degrees 20 minutes ~ 124 degrees 45 minutes east longitude and 25 degrees 44 minutes ~ 26 degrees north latitude, covering a total land area of 6.5 square kilometers. The surrounding waters of the islands have rich fishing resources and have long been an important fishing ground for people in Fujian and Taiwan of China since ancient times. The well-known Emery Report pointed to the existence of abundant oil and natural gas resources on the continental shelf of the East China Sea.

(1) The Diaoyu Islands are an inalienable part of China's territory.

China was the first country that discovered and explored the Diaoyu Islands and obtained sovereignty by occupation. Since ancient times, the Chinese have fished, collected medicinal herbs and sought shelters on these islands and in their surrounding waters. No later than the Ming Dynasty (1368-1644), the islands had been discovered, explored and named by the Chinese. Ancient Chinese books, such as the Book on Voyage Routes and the Voyage with a Tail Wind, kept a complete record of the navigation routes used by Chinese fishermen in this sea area. Due to the natural conditions at sea and the possession of technology such as ship-building at that time, only the Chinese military and civilians could reach the islands during the monsoon season. They navigated through the islands and sought haven there in stormy weather. They carried out economic activities such as fishing, collecting herbs and picking fruits. For about five centuries until 1895, China had never been interfered in its exercise of these rights.

One cannot speak of the Diaoyu Islands without mentioning Ryukyu Kingdom. Ryukyu Kingdom was a vassal state of the Ming and Qing dynasties to which it paid tributes, while the latter sent envoys to grant honorific titles to the kings in Ryukyu in recognition of their rule. The Diaoyu Islands were on the navigation route from China's mainland to Ryukyu Kingdom. Chinese officials on mission to Ryukyu all referred to these islands as their navigation marks. They put down in the official documents such as the Record of the Mission to Ryukyu with detailed descriptions of their voyages through the Diaoyu Island, Huangwei Island and Chiwei Island and repeatedly confirmed the boundary between China and Ryukyu. Historical facts tell us that the Diaoyu Islands do not fall into the domain of Ryukyu. China's historical records and official documents all show that it was the Chinese people who first discovered, developed and utilized the Diaoyu Islands. According to the international law of that time, discovery means occupation and occupation means obtainment of territorial sovereignty. Therefore, China obtained sovereignty over the Diaoyu Islands by occupation.

The Chinese government exercised effective rule and administration, and strengthened its sovereignty over the Diaoyu Islands. Successive Chinese governments all included the Diaoyu Islands into the confines of China's territory and exercised sovereignty and effective rule by taking measures to develop, utilize and administer the islands. In 1171, General Wang Dayou guarding Fujian established military camps on Penghu Islands and sent officers to station in the islands. Taiwan and its affiliated islands including the Diaoyu Islands were under the military command of Penghu and, in terms of administration, they were under Jinjiang of Quanzhou, Fujian province. Both the Ming and Qing dynasties incorporated the Diaoyu Island and its affiliated islands into their territory and designated them as part of the maritime defense areas. The Book on Managing the Sea (1562, Ming Dynasty) and Imperial Map of Chinese and Foreign Lands (1863, Qing Dynasty) made clear descriptions about the area. Historical facts show that the Chinese government has administered the Diaoyu Islands in various ways and effectively exercised and strengthened its sovereignty over the Islands.

(2) Japan's arguments about its claim of sovereignty over the Diaoyu Islands are untenable.

There are mainly two legal arguments that Japan has evoked to justify its occupation of the Diaoyu Islands: First, occupation of so-called terra nullius, second, acquisition by prescription (prescriptio acquisitive). Both arguments are untenable.

By international law, the object of occupation shall be limited to terra nullius. Terra nullius refers to land which has never been subject to the sovereignty of any state or over which any prior sovereign state has expressly or implicitly relinquished sovereignty. The fact is that Diaoyu Island and its affiliated islands have been subject to the sovereignty of the Chinese government as its sea defense area since the Ming Dynasty. They are an inalienable part of China's territory. Due to the inhospitable natural environment, these islands are not permanently inhabited and fishermen only take up abode on these islands for seasonal activities. But having no permanent residents does not make these islands terra nullius. The Diaoyu Islands are not terra nullius. They are China's territory. The Japanese government and society are well aware of this fact. The official archives of the Japanese government and documents and correspondence of Japanese officials all record and give evidence to this. For example, in the letter to Home Minister Aritomo Yamagata, then Japanese Foreign Minister Kaoru Inoue wrote in explicit terms that these islands had already been given Chinese names by the Qing government and that the Japanese government had been admonished by the Qing government for coveting these islands. Since the Diaoyu Islands are not terra nullius, Japan's so-called occupation is non-existent. Ex injuria jus non oritur (A legal right or entitlement cannot arise from an unlawful act or omission) is a fundamental principle of international law. Japan's so-called occupation is mala fide, illegal and unjustifiable; it therefore does not have the legal effect as what may arise from occupation recognized by international law.

The other argument that Japan presents is "long and continuous effective administration", that is, to obtain sovereignty over the Diaoyu Islands based on acquisition by prescription (prescriptio acquisitive).

"Acquisition by prescription" of territory has been all along an extremely disputable issue in international law. Those against it totally deny the legitimacy of prescription as a way to obtain territory. They are of the view that this is "merely a legal argument serving expansionist countries for occupying others' territories". Those for it see prescription as a way to obtain territory, it is defined as "the acquisition of sovereignty over a territory through continuous and undisturbed exercise of sovereignty over it, and during such a period as is necessary to create under the influence of historical development the general conviction that the present condition of things is in conformity with international order." International judicial practice has never clearly confirmed the status of "prescription" as an independent way to acquire territory. As for the exact time span of the "period as is necessary", international law has no final verdict to make it 50 years or 100 years.

If we put aside the legitimacy of "acquisition by prescription" and merely examine the key factors, it is clear that both the Chinese central government and the Taiwan local authority have been firm, explicit and consistent on issues concerning China's sovereignty over the Diaoyu Islands and in opposing Japan's attempt to steal them. They have launched protests, especially diplomatic protests, against official and government-supported civilian activities, including setting up a lighthouse on the Diaoyu Island by Japanese right-wingers, "nationalizing" the lighthouse by the Japanese government, paying the "rent" for land on the Diaoyu Islands to those so-called non-governmental owners, and submitting a chart specifying the so-called baselines of the territorial sea of the Diaoyu Islands to the United Nations by the Japanese government. Japan can never gain legitimate rights over the Diaoyu Islands through occupation no matter how long it may last.

(3) Agreements between Japan and the United States cannot grant Japan sovereignty over the Diaoyu Islands.

In the wake of World War II, the Cairo Declaration and the Potsdam Proclamation, the outcome of the Anti-fascist victory clearly defined the territory of Japan. According to the Cairo Declaration issued by China, the US and the UK in December 1943, their purpose is that "Japan shall be stripped of all the islands in the Pacific which she has seized or occupied since the beginning of World War I in 1914, and that all the territories Japan has stolen from the Chinese" shall be restored to China. "Japan will also be expelled from all other territories which she has taken by violence and greed".

The Potsdam Proclamation issued in 1945 reaffirmed that "the terms of the Cairo Declaration shall be carried out and Japanese sovereignty shall be limited to the islands of Honshu, Hokkaido, Kyushu, Shikoku and such minor islands as we determine". On Jan 29, 1946, the Supreme Commander for the Allied Powers Instruction No 667 explicitly stipulated the range of the Japanese territory, which included the four major islands of Japan (Honshu, Hokkaido, Kyushu, Shikoku) and the approximately 1,000 smaller adjacent islands, including the Tsushima Islands and the Ryukyu Islands north of 30 degrees north latitude. The delimitation of the Japanese territory by the Cairo Declaration and the Potsdam Proclamation is clear-cut. The Diaoyu Islands are not included in the Japanese territory in any way.

On Sept 8, 1951, Japan and the US concluded the San Francisco Peace Treaty in the absence of China and the Soviet Union, two victorious countries in the war against Japan, putting Nansei Shoto south of 29 degrees north latitude (including the Ryukyu Islands and the Daito Islands) under the US trusteeship. The Diaoyu Islands were not mentioned in the treaty, nor by the Japanese government's later explanations thereof. On Dec 25, 1953, the United States Civil Administration of the Ryukyu Islands issued the Civil Administration Proclamation No 27 on the geographical boundaries of the Ryukyu Islands and defined the areas administered by the US government and the Ryukyu Civil Administration as the islands, islets, atolls, rocks and territorial waters along 24 degrees north latitude and 122 degrees east longitude. This proclamation included the Diaoyu Islands, China's territory, into their areas of administration. These islands were also included in the areas to be returned to Japan under the Japan-US Okinawa Reversion Agreement signed on June 17, 1971. The Japanese government takes the above-mentioned agreement as the legal ground for its claim of territorial sovereignty over the Diaoyu Islands.

On Dec 30, 1971, the Chinese Foreign Ministry pointed out in its statement that "the incorporation by the United States and Japan of China's Diaoyu and other islands into the area of reversion under the Okinawa Reversion Agreement is totally illegal. It does not in any way change the territorial sovereignty of the People's Republic of China over the Diaoyu and other islands". The US government also stated that returning the administrative authority over these islands gained from Japan to Japan does not in any way undermine relevant sovereign claim. The United States cannot increase the legal right Japan had prior to its handover of the administrative authority over these islands to China, nor can it undermine the right of other claimants because of the return of the administrative authority to Japan. All the conflicting claims over these islands are issues that should be resolved by the parties concerned among themselves. On Sept 11, 1996, US State Department spokesperson Nicholas Burns said further that the US neither recognizes nor supports any country's sovereign claim over the Diaoyu Islands.

On Sept 1951, the Chinese government issued a statement regarding the San Francisco Peace Treaty signed by the US and Japan without the involvement of the Chinese people and the lawful government of China. It pointed out the illegal nature of the treaty. The "trusteeship" and "reversion" deriving from the treaty included the Diaoyu Islands, thus violating China's territorial sovereignty and becoming the source of the territorial dispute between China and Japan. The San Francisco Peace Treaty and other relevant documents have no right to cover or determine the ownership of the Chinese territory, and cannot have any legal judgment that extends the sovereignty of Diaoyu Islands to Japan.

The Diaoyu Islands are an inalienable part of China's territory. The so-called administrative authority the US "got from" and "returned to" Japan is unjustified. Japan's claim over the sovereignty of the Diaoyu Islands on that basis has no legal ground in international law.

Conclusion

Japan has never given up its attempt to gain sovereignty over the Diaoyu Islands. It first destroyed China's markings on the islands, then renamed the islands, and built a heliport and other facilities. In recent years, Japan went even further. It abetted what it called "civilian actions" to create a fait accompli of "actual control" of the Diaoyu Islands, followed by government renting and "takeover" actions. All this aim to pave the legal grounds for its occupation of the Diaoyu Islands and gradually win recognition from the international community. However, Japan's claim to sovereignty over the Diaoyu Islands and its encroachment are illegal in the first place. Therefore, its carefully designed "government actions" have no legal ground and do not constitute the execution of state power. They never had, and will never have, any legal effect.

Article II of the Law of the People's Republic of China on the Territorial Sea and the Contiguous Zone promulgated in 1992 makes clear that the Diaoyu Islands and other islands are Chinese territory, and reaffirms the legality of China's ownership of them. In 2009, a Chinese marine surveillance and law enforcement ship was sent to the Diaoyu Islands in repudiation of Japan's "acquisition by prescription". This was also a concrete action of China's exercise of sovereignty over the Diaoyu Islands.

[mulberry alexa]

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[DonDesobego]

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