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China, Japan 'too important' for row: IMF chief

TOKYO -- The shaky global economy needs Japan and China to be fully engaged, the head of the IMF said, warning the world could not afford to have the two countries distracted by their bitter territorial dispute.

The warning came as the Asian Development Bank (ADB) slashed its growth estimates for the continent, saying the days of double-digit expansion were over.

Speaking to Japanese media ahead of the annual IMF meeting in Tokyo next week, Christine Lagarde said two of the world's biggest economies needed to show a bit of neighborly tolerance for the good of everybody.

“Both China and Japan are key economic drivers that do not want to be distracted by territorial division,” Kyodo News agency quoted Lagarde as telling reporters in Washington, in an interview published Wednesday.

“The current status of the economy and the global economy needs both Japan and China fully engaged,” she said.

Meanwhile the ADB cautioned Wednesday that developing Asia was seeing a slowdown compared to its previously blistering growth.

The bank said China's gross domestic product (GDP) would expand just 7.7 percent this year, well below the 9.3 percent achieved last year.

Fellow regional standout India would see GDP growth cut to 5.6 percent.

“Developing Asia is slowing down much more than we expected,” ADB chief economist Changyong Rhee told reporters in Hong Kong.

China and Japan, the world's second and third largest economies, have been at loggerheads for months over a group of uninhabited islands in the East China Sea.

Tokyo administers the chain under the name Senkakus, but they are claimed by Beijing, which calls them the Diaoyus.

Chinese government ships regularly venture into waters around the islands, routinely ignoring orders to leave from Japanese coastguard vessels.

Three ships entered territorial waters off disputed Tokyo-controlled islands for the second straight day Wednesday, Japanese coastguards said.

Three maritime surveillance ships “ignored warnings from patrol vessels of our agency... and entered our country's territorial waters” shortly after 12:30 pm (0330 GMT), the coastguard said in a statement.

The three Chinese ships, which were off Kubashima, one of the islands in a chain known as the Senkakus in Japan and the Diaoyus in China, left the immediate area soon after 3:00 pm, the Japanese coastguard said.

The Chinese ships were among four vessels that had been in island waters on Tuesday, remaining for around six hours, despite demands from Japan that they leave.

Increasingly vitriolic diplomatic exchanges, including at the United Nations in New York last week, and mass anti-Japanese protests in several Chinese cities have further unsettled the already fractious relationship.

Lagarde said neighboring countries must display “a certain degree of tolerance.”

Dow Jones Newswires reported late Tuesday that several big Chinese banks had cancelled their participation in events connected to the meetings, in what it said was a sign of the row spreading into the broader economic realm.

“Quite frankly, it's Japan-China relations,” Dow Jones quoted an official at the Tokyo branch of the Agricultural Bank of China as saying.

The bank will withdraw from both IMF-related events and another financial industry conference planned in the western Japanese city of Osaka at the end of October.

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