Chinese banks have pulled out of events linked to annual meetings of the International Monetary Fund and World Bank in Japan next week, a report said, as Tokyo and Beijing remain locked in a diplomatic row.

Although many of those apparently planning not to attend gave no specific reasons, Dow Jones Newswires said Tuesday, it is the latest sign that a festering spat over islands in the East China Sea is having a wider impact on bilateral, and now multi-lateral ties.

"Quite frankly, it's Japan-China relations," Dow Jones Newswires quoted an official at the Tokyo branch of the Agricultural Bank of China as saying to explain why the bank was pulling out of IMF-related events.

The bank is still sponsoring and participating in a meeting of the Institute of International Finance, a global association of financial institutions, that takes place in Tokyo on the sidelines of the IMF meeting, the report said, citing another anonymous official.

The Bank of Communications has also pulled out of IMF-related events, Dow Jones reported, adding that China Construction Bank said its China-based officials had scheduling problems that were preventing them from attending.

The Bank of China had not decided if representatives would attend the IMF meetings, it said.

Ships return to the waters

Tensions between Beijing and Tokyo remained high this week, with Chinese government ships returning to waters off Japanese-controlled islands Tuesday, a week after they last left and days after heated exchanges at the United Nations.

Four maritime surveillance ships entered the waters shortly after 0330 GMT, where they remained for around six hours before departing.

It was the first time in about a week that Chinese ships had entered the waters, following a lull in a diplomatic row over the sovereignty of the islands known as the Senkakus in Japan and Diaoyus in China.

Foreign Minister Koichiro Gemba said the Japanese government lodged an immediate protest with China over the latest case, telling reporters: "We want the Chinese side to exercise self-restraint."

In Beijing, foreign ministry spokesman Hong Lei said China was "strongly unsatisfied" with moves by "Japanese right-wingers" to enter waters around the islands.

"If left unchecked, such provocative behavior could complicate the situation, and China is paying close attention," an online statement said.

Official Chinese vessels repeatedly sailed into the archipelago's waters until Monday last week, defying warnings from Japan's well-equipped coastguard.

The islands lie in rich fishing grounds and on key shipping lanes. The seabed in the area is also believed to harbor mineral reserves.

Last week Japanese and Chinese diplomats clashed at the United Nations in New York over the ownership of the islands known as the Senkakus in Japan and the Diaoyus in China.

Japan's deputy UN ambassador Kazuo Kodama retorted that the islands were legally Japanese territory and said "an assertion that Japan took the islands from China cannot logically stand".

China is seeking a bigger say in world affairs, commensurate with its growing financial clout, but commentators say this kind of action undermines that ambition.

"China may rightly demand a seat at the head table, but what signal does it send when they go off in a huff over these types of issues," said Fraser Howie, who has written on China's financial system.

"Such boycotts are pointless. They only harm China and make China out to be a unstable and unreliable partner."

PHOTO CAPTION

Relations between Tokyo and Beijing remain tense over Japanese-controlled islands, as Chinese ships re-enter waters.

Aljazeera