- The Washington Times - Thursday, March 23, 2006

TOKYO — Japan said yesterday it was freezing its loans to China through the end of this month because of worsening relations between the two nations, which increasingly have become economic rivals.

Criticism is mounting in Japan that China’s booming economy no longer needs the handouts. The two also are squabbling over natural resources and the bitter legacy of World War II.

Chief Cabinet Secretary Shinzo Abe said Japan won’t give any more of the loans to China during the current fiscal year, which ends next Friday. He said the government may release the loans again next month if the situation improves.

“We have decided to waive a plan to provide loans for fiscal 2005, considering the current situation surrounding the Japan-China relations,” Mr. Abe said. “We will monitor future development in Japan-China relations while continuing discussion [on the loans] within the government.”

China reacted coolly to news of the suspended loans, appealing for dialogue.

Chinese Foreign Ministry spokesman Qin Gang said the two countries are facing “a complicated situation, and we have severe hardship in our relations.”

“We should have exchanges and consultations over the differences and problems, and properly resolve those issues,” he said at a briefing. “On Japan’s credit to China, we think this issue should also be resolved in line with this principle.”

Ties between Japan and China have deteriorated in the past year as the two feud over maritime gas deposits near disputed islands in the East China Sea, interpretations of World War II history and other issues.

The United States has expressed concern about the growing tensions between the two Asian powers and urged them to find common ground and overcome their differences for the sake of stability in the region.

“We have encouraged good relations between China and Japan, and even though there are difficulties in that relationship, China and Japan also share a lot of interest and, indeed, a lot of trade and commerce and a lot of economic relations,” Secretary of State Condoleezza Rice said last Friday during a visit to Australia.

China reportedly proposed joint exploration of separate gas deposits, but Japan said it had no intention of jointly developing gas fields near the islands — called Diaoyu by China and Senkaku by Japan.

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