China is trying to impose economic costs on Japan for wading into the issue of Taiwan. But experts say the escalating dispute could ultimately hurt China too.

For years, China has threatened, cajoled and squeezed democratic Taiwan in an attempt to force it to fold without a costly war across the Taiwan Strait. Japan has mostly toed the US line of “strategic ambiguity”, rarely speaking out and officially saying that the dispute can be resolved through dialogue.

Hong Kong's leader John Lee said on Monday his government supported China's diplomatic policy towards Japan and the financial hub would closely monitor the situation and respond appropriately.

Japan and China recently agreed to cooperate more economically. Now, climbing tensions are threatening that cooperation.

China and Japan are two of Asia’s most powerful nations and the region’s biggest trading partners. Yet centuries of intense rivalry mean their economic embrace can never be taken for granted.

Beijing suggested it might reimpose a ban on seafood imports from Japan after warning its citizens to avoid travel there and postponing the releases of at least two Japanese movies.

China called Japan's plan to deploy missiles on an island near Taiwan a deliberate attempt to "create regional tension and provoke military confrontation" on Monday, as a diplomatic dispute simmers between the two nations.

A Japanese official blasted China’s claims that Prime Minister Sanae Takaichi has altered Japan’s position on a Taiwan crisis as “entirely baseless,” calling for more dialogue to stop ties between Asia’s top economies spiraling.