China, Japan agree to set aside islands dispute amid signs of thaw

China and Japan on Friday agreed to improve ties and put their bitter row over disputed islands in the East China Sea on the back burner, paving the way for the Asian rivals' leaders to meet at next week’s Asia-Pacific Economic Cooperation (APEC) summit.

The agreement, ahead of an expected ice-breaking chat between Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping at the gathering in Beijing, signals a thaw in ties between the world's second- and third-biggest economies. Territorial disputes, regional rivalries and the bitter legacy of Japan’s World War II-era occupation of China have soured Sino-Japanese relations in recent years.

Abe said the two sides were making final arrangements for one-on-one talks, although neither he nor China's foreign ministry confirmed that the talks were set.

"Both Japan and China are coming to the view that it would benefit not just the two countries but regional stability if a summit is held," he told Japan’s BS Fuji television.

But in signs that fundamental problems would not easily be resolved, Abe also said there had been no change in Japan's stance on the uninhabited East China Sea isles at the heart of the territorial dispute — known as the Diaoyu in China and the Senkaku in Japan. Meanwhile China's top diplomat, Yang Jiechi, urged Japan to properly handle sensitive issues like Japan’s imperialist history.

"The two sides have agreed to gradually resume political, diplomatic and security dialogue through various multilateral and bilateral channels and to make efforts to build political mutual trust," the two countries said in statements released simultaneously. The communiqués followed a meeting between Yang and Abe's national security adviser, Shotaro Yachi.

The statements said China and Japan also "acknowledged that different positions exist between them" regarding tensions over the islands in the East China Sea and agreed to set up a crisis management mechanism to prevent "contingencies."

Abe, who has not met Xi except to shake hands since taking office in December 2012, has been calling for a one-on-one meeting at APEC, but insists that no conditions be set for talks.

China has sought assurances that Abe would not repeat his December 2013 visit to Tokyo's Yasukuni Shrine for the war dead, seen in Beijing as a symbol of Japan's past militarism.

Such a promise would be hard for the conservative Abe to make, however, and the Japanese leader told the BS Fuji TV  that the agreement did not cover specific issues such as his shrine visits.

Beijing has also demanded that Japan acknowledge the existence of a formal territorial dispute over the tiny islands, which are controlled by Japan but also claimed by Beijing.

In an English-language commentary, China's national Xinhua news agency called the agreement "an encouraging icebreaker that has been painfully overdue."

"It has brought the relationship between the world's second and third largest economies back to temperatures above the freezing point. Should it be properly implemented, it will mark a turning point in the trajectory of China-Japan relations."

Analysts said the two sides appeared to have found a diplomatic formula that would allow both to save face and set aside the row over the islands, which had threatened to spark an unintended military clash.

"The diplomats made it seem like a win-win situation and helped both sides climb down," said Jeffrey Kingston, director of Asian studies at Temple University's Japan campus, adding that the agreement fell short of China's demand that Japan recognize the existence of a formal territorial dispute.

Wang Xinsheng, a Japan expert at Peking University, said it was clear the two countries had agreed to talks at APEC, but added he did not expect any substantive breakthroughs.

"Questions of history and of the islands will need time to resolve. However, even a meeting and a chat is in itself a success," Wang said.

Wire services