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Asian tussle for dominance

By CNN's Marianne Bray

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S. Korean "sex slaves" during WWII demand an apology from Japan.

Thousands of Chinese protesters take to the streets for a second day.

Japan seeks dialogue to ensure relations do not deteriorate further.

A weekend of protests heightened tensions between the rivals.

HONG KONG (China) -- When thousands of Chinese rallied in the commercial city of Shanghai, pelting the Japanese consulate and smashing some cars and restaurants along the way, they were seething over a troubled and unresolved history.

But as is so often the case with things of the past, the rift between Japan and China is really a battle over the future and "an accelerating rivalry for regional power and influence," analysts such as International Risk president Steve Vickers say.

At the crux of the April unrest, and the barbed exchanges between leaders, is a tussle over which one of the two giants will become the dominant power in Asia in the 21st century.

Distrust between Asia's two leading powers has simmered for more than six decades but it plumbed new depths in April with the biggest anti-Japanese protests seen in China since the two established ties in 1972.

The whitewashing of Japan's wartime atrocities in textbooks -- especially the Nanking massacre and the use of "comfort women" sex slaves by the Japanese -- struck at the very heart of the Chinese.

Protesters across China took aim at Japan's leaders for visiting a shrine for the war dead that includes criminals, its bid for a U.N. Security Council seat and its handling of drilling rights in a part of the East China Sea claimed by both.

While the flare-up cooled down after Japanese Prime Minister Junichiro Koizumi apologized to China's leader Hu Jintao during an international gathering in Jakarta at the end of April, analysts say they will likely remain volatile in the years ahead.

"With the two publics now engaged in a very emotional issue, the long term outlook is far less certain," Eric Heginbotham, a senior fellow of Asia studies at the Council of Foreign Relations, told CNN.

"The political relationship is likely to remain poor, with more frequent and possibly more severe outbursts, unless Japan deals with its history more forthrightly."

China's leaders allowed the massive protests because, analysts say, they are driven by deeper structural issues that won't go away.

The leading power over many centuries, China lost out to Japan in the 20th century. Japan occupied parts of China during World War II, and grew in ascendancy to become the world's second largest economy behind the United States.

But with business in the doldrums in Japan, and China now the world's fastest growing economy, the two are on much more of an equal footing than ever before.

A growing nationalism and a need to listen to public opinion in both nations has pushed leaders into staking tough positions.

"Both sides have to be careful, they have to be responsive to the rising nationalist sentiments in their respective countries, so there is very limited room for maneuver," Joseph Cheng, professor of political science at the Chinese university of Hong Kong, told CNN.

China worried

Beijing is concerned that Japan -- which had to become a pacifist nation following the war -- is adopting a more assertive foreign policy and military posture in the region.

It wants to block Japan from becoming a member of the U.N. Security council because it is worried about Tokyo's political rise, former U.S. ambassador to China and South Korea, James Lilley, wrote in the Asian Wall Street Journal.

Another gripe is that "Koizumi has out-Blaired Tony Blair in becoming the "running dog" and hit-man of Washington, and that in his second term (President) Bush will exacerbate the U.S.'s time honored anti-China containment," says Willy Lam, a Hong Kong-based China specialist.

Beijing knows that Tokyo is working with Washington on a joint missile defense system, and it believes Japan will support the United States to intervene militarily in the event of conflict in the Taiwan Strait.

In February this year, Japan and the United States issued a joint agreement, the first of its kind, which said the status of Taiwan was a matter of mutual concern.

China considers Taiwan a renegade province, and has threatened to use force if the island makes moves towards independence.

Leaders in Beijing also fear that Japan may spend more on arms and become a nuclear power, or turn to Moscow before it turns to Beijing, Cheng said.

Japan flexes muscle

For its part, Japan fears China will use its growing leverage and military prowess to dominate Asia.

Tokyo is not quietly giving up its leadership in the region and has been flexing its diplomatic muscle on the assumption that if it gives in now, it will lose its leverage forever, experts say.

During this diplomatic impasse, Tokyo demanded Beijing apologize for damage to its property in China. It refused to stand down over its drilling rights in the East China Sea.

Beijing refused to say sorry but Koizumi called China's bluff by expressing "deep remorse" and a "heartfelt apology" for Japan's wartime wrongdoings.

But while it is true that the two have staked very tough positions on fundamental issues that will make it hard to back down, it is also true that both nations need each other in the years ahead, making compromise essential.

"Because of the basic integration and the complementarities between the Chinese and the Japanese economies, both sides understand that any damages to the bilateral relationship will hurt both sides equally badly," Cheng says.

China is Japan's biggest trading partner, while Japan invests heavily in China and is its biggest source of visitors, so they both have an interest in putting the relationship on a business-like footing.

"To the extent that Beijing meets Japan halfway on historical issues, adjusting its own depiction of history and agreeing to joint academic work on the war, the prospects will improve," says Heginbotham.

Equally important for China is the need to control its 1.3 billion people, and not let the anti-Japanese sentiments turn into something bigger.

"Chinese leaders do not want to allow the society's sentiments to affect the complete control of foreign policy and they also understand that nationalism can be a double-edged sword," Cheng says.

"Today they march against Japan, tomorrow they can march against the central government."

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