A Study on the Impact of Economic Measures upon Diplomatic Conflicts: Focus on China's Export Ban of Rare Earths to Japan

Abstract

In 2010, China's export ban of rare earths elements to Japan was detected in response to Japan's detention of Chinese captain who was fishing near Diaoyu/Senkaku Islands, water at conflict. The incident was a significant event between the two countries due to the fact that it was the first time for China to impose an economic measure against Japan over the territorial conflict. In this connection, this thesis aims at examining the significance of China's use of rare earths export ban as a key economic factor that led a release of the Chinese captain by comparing other economic figures

trade restriction such as import and export, FDI, and business relations between China and Japan during the same period of time. Moreover, this study also aims at revaluating consequences of China's action and the following impacts on both China and Japan. Conclusively, comparison of economic figure shows that China's use of rare earths export ban with price increase by export quota application and Japanese business pressure were significant factors that compelled Japan's decision to release Chinese captain under Diaoyu/Senkaku dispute in 2010. Moreover, evaluation of the impacts of export ban to both China and Japan shows that China's aggressive action actually hurt not only Japan who was depicted as a "weakness" but also China who was "winning". The incident had changed the structure of Sino-Japanese rare earths trade and escalated more of security conflicts which also strengthened anti-sentiments among the public.