On 15 August 2012, 14 Chinese from Hong Kong were arrested by Japanese coastguards in Diaoyu Islands by the East China Sea. Seven of the Chinese were returned to Hongkong by air on 17 August and another seven by boat on 22 August.

Diaoyu (meaning “fishing” in Chinese) Islands are group of 5 very tiny islands situated in the East China Sea between Taiwan and Okinawa. Since the Ming Dynasty, the Chinese have used these islands as a military front against Japanese pirates and 17^th century sources showed the maritime boundary to be between the Diaoyu (also known as the “Senkaku” islands to the Japanese) and the Ryukus where turbulent waters mark the edge of the continental shelf (see map).

The Senkaku Islands came to be annexed by Japan in 1895 following the first Sino-Japanese war, which they occupied along with Taiwan and its surrounding islands and water until the end of WW II in 1945.  Japan’s claims over the islands were subsequently nullified following the Treaty of San Francisco signed in 1951 when administration was transferred to the US.  Sovereignty over these islands have been disputed by China since 1972 when US ceded control of administration over these islands.

Whilst the US Secretary of State, Hillary Clinton has reaffirmed that the US saw maritime security as of central importance to the US in this region, the US has been careful to appear neutral in these disputes.  Nevertheless under Article 5 of the US- Japan Treaty of Mutual Co-operation and Security, any military attack or threat to Japan may be viewed as an attack and threat to the US.

After 9 years of involvement in the Iraqi military campaign and economic recession in the US since 2008, President Obama has expressed his wish to shift US’s attention to new economic investment and political influence in Asia.  A strong US presence in Asia may now be even more important to the Obama administration in this election year.

Diaoyu Islands remains a complicated dispute of territory and sea water and what is patently clear is that it would not be possible to reach a solution that suits both sides. To file this case with the International Court of Justice for arbitration would be one of the ways to reach a solution. But neither China nor Japan want these disputes to be settled by the International Court of Justice and risk surrender of their sovereignty.

In the meanwhile the region remains a hot spot for conflicts between China Japan, S Korea (with regard to another set of disputed islands) and the United States and is especially important as there are vital natural resources to be exploited in the continental shelf.

With slow economic growth and domestic politics to deal with in both China and Japan, their respective Governments have so far chosen a more assertive foreign policy with regard to the dispute. However any miscalculation in military moves from either party will risk destabilizing the region.

To date, as far as I am aware, the UK government has not expressed any comments on the recent Diaoyu Islands dispute. Liberal Democrat party policy has always been on the side of peace and the settling of disputes by diplomacy in conformity to international law which must be the right answer.

For all practical purposes, I suggest China and Japan consider setting up a regional ocean research centre, regional typhoon forecasting unit and nature reserve in these Diaoyu Islands which can be jointly run by both China and Japan.

What is certain is that an unresolved dispute is a ticking time bomb for the region.

* Andy Yau is a political observer and researcher on China's peaceful rise since 1990. Andy is a life member of the Chinese Liberal Democrats.