We’re no longer in the 1930s when an Asian war could remain only in Asia. In the age of globalization, if these two long time enemies go over the cliff, they drag much of the world with them.

The situation between these two Asian giants deteriorated last week with widespread demonstrations by mobs of Chinese, many of them students, against Japanese shops and diplomatic facilities in a number of cities in China, including Beijing and Shanghai. Tens of thousands of Chinese were involved. Windows were smashed cars overturned. Japanese property was destroyed. Japan’s trade minister said of China, “it’s a scary country.”

It is crystal clear that these protests were not spontaneous. The Chinese government organized them, tightly controlled the path and actions of the demonstrators, and then ordered the protesters to disband when the point had been made. In unleashing these protests, the leadership in Beijing, with the 1989 events in Tiananmen Square etched on their minds, was taking a huge risk. At some point the protestors could turn on the ruling party and demand the democracy they never achieved in 1989. Nationalism once unleashed cannot always be controlled.

As with any two long term enemies, each one has a list of grievances with the other. The Chinese contend that the Japanese never fully apologized for atrocities they committed in the Second World War. To rub salt into the wound, the Japanese leadership periodically visits a war memorial which the Chinese contend is a way of honoring war criminals. Most recently, the Education Ministry in Tokyo has developed a new textbook which the Chinese claim plays down the atrocities.

The Chinese have taken steps of their own to exacerbate the growing conflict. Japan has been seeking a position as one of the permanent members of the UN Security Council, which it deserves. In response, China had served notice that it will block that application because the Japanese have demonstrated their lack of morality by failing to deal with their aggressive past. Of course, the cultural revolution and the Tiananmen Square massacre weren’t exactly exercises in high minded morality.

Then there are border issues. Both parties have stepped up their claims to disputed islands and undersea gas reserves on their territorial border. If the Japanese continue with their intention to drill for gas, the Japanese exploration boats may be confronted by Chinese naval warships. It’s anybody’s guess who will prevail in that game of chicken.

Oil is another source of conflict. After the United States, China and Japan are the two largest importers of oil. They have clashed over rights to buy this increasingly scarce resource from Russia and Middle Eastern countries.

Finally, there is Taiwan. Several weeks ago, some geniuses in the Bush administration decided, for reasons that are unclear, to encourage Tokyo, which is rapidly remilitarizing, to enter into an agreement with the United States threatening to go to war with China if Beijing makes an effort to take control of Taiwan. This was like scraping chalk on a blackboard. The Chinese responded with legislation authorizing military action if Taiwan took steps toward independence.

All of this outward show of animosity comes at a time when China and Japan are hugely interdependent economically. The trade between the two is vast. But even on this point, the Chinese are prepared to spit in Japan’s eye. Beijing has moved to improve its relations with India, thereby demonstrating to Tokyo, that they can look elsewhere for a giant Asian trading partner with technical know how.

All of these events are manifestations of a deeper issue. China and Japan are locked in an intense competition for military and economic superiority in Asia. The stakes are huge. Both are determined to prevail.

With their history of animosity, the economic and political competition between China and Japan has turned bitter. The old wounds have never been addressed and are still raw. The United States had better find a way to cool things down rather than adding to the problem.