China slowing flow of goods to Japan?

National flags of Japan and China are displayed at Tokyo's Haneda Airport.


STEVE CHIOTAKIS: The dispute between China and Japan over the detention of a boat captain is rippling.
Even though Japan released the captain Friday,
China now demands an apology. And Japan, meanwhile, wants compensation. But behind the tit-for-tat, shipping companies in Asia say China has tightened the flow of goods from its ports to Japan.

Marketplace China bureau chief Rob Schmitz reports.

ROB SCHMITZ: China-based employees of Japanese shipping company Nippon Express noticed something strange a couple of weeks ago. Chinese customs agents suddenly became more interested in the goods the company was shipping to Japan, says spokesman Naoki Seto.

NAOKI SETO: The inspection rate of commercial cargo has risen. It's unusual. If it keeps going on, it will create difficulties for our business.

The Chinese government denies it's slowing down the flow of goods to Japan. But one logistics company we spoke to said customs agents have been inspecting 90 percent of their shipments to Japan -- that's nine times the normal rate. A company spokesman said everything went back to normal this past weekend after Japan released the Chinese boat captain.

Nobody seems to be sure if the "rare earths" trade between the two countries is back to normal, though. China, which produces 97 percent of the world supply, had reportedly put a temporary hold on all exports to Japan. That's been bad news for Toyota, Honda, and Nissan, which need rare earth metals to produce hybrid and electric vehicles.

In Shanghai, I'm Rob Schmitz for Marketplace.

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Rob Schmitz is Marketplace’s China correspondent in Shanghai.
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BTW - this captain/apology tit-for-tat between China and Japan - a red herring! China's been looking for an excuse to increase prices - though I'm sure they would deny this. Internally, China has millions of underpaid workers. Let your imagination take it from there.......

Let's see.....you allow the yuan to float a little, it goes up in value based on market exchange rates, which should make your customers purchase less. So cash flow is shortened, albeit a bit. What do you do? Reduce supply, which drives prices up and voila! Cash flow restored! My theory - Japan is the test case for China. If demand and cashflow do not ebb too much, you might see this policy excercised on the EU or US soon. So much for deflation on already cheap goods.

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