China-Japan spat could derail gas drilling talks

TOKYO: Should the escalating spat between Japan and China over disputed islands evolve into a full-blown diplomatic battle, the economic fallout could include derailing delicate talks over developing potentially lucrative undersea gas fields between the two Asian giants.

Already, Beijing has suspended ministerial-level contacts with Tokyo, and postponed a second round of talks on the natural gas deposits. China also said Tuesday that Premier Wen Jiabao won't be meeting with Japanese Prime Minister Naoto Kan at a U.N. conference in New York this week.