So China and Japan are both threatening conflict in their fairly brutal ongoing argument over a few tiny disputed islands (and their mineral rights):

With global growth slowing, both countries’ leaders might look to a war as a way to distract from economic woe. While a limited war between China and Japan over the islands — perhaps of the scale of the Falkland War between Britain and Argentina in the 1980s — would be unsettling for the global economy, the real question is whether or not such a conflict could spiral into something bigger. 

The first critical point to note is that both countries’ leadership are increasingly hawkish in tone and character. China is in many ways seeking to establish itself on the world stage as a global military and economic powerhouse. Countries seeking to establish themselves on the global stage have traditionally sought out conflict. Japan is an ideal candidate for Chinese hostility. There is a lot of resentment — Japan’s invasion and occupation of Manchuria was brutal, and filled with war crimes (war crimes that the Japanese continue to deny). But more than that, Japan is an American protectorate, dotted with American bases, and subject to a mutual defence treaty. If China is to eclipse the United States as a global superpower, China must be able to show that she can impose her will on America.

And Shinzo Abe, Japan’s new Prime Minister has made it his life’s work to change Japan’s pacifistic constitution. Japan is faced with a twenty year economic depression, falling birthrates, a population of “herbivore” males with an aversion to sexuality. Abe may see hostility against China as a gateway to greater nationalism, and greater nationalistic fervour as a gateway to a national recovery.

First of all, it is critical to note that the United States is not legally obligated under its with Japan treaty to intercede on Japan’s behalf. The treaty states that the United States is required to report any such event to the UN Security Council, instead:

Each Party recognizes that an armed attack against either Party in the territories under the administration of Japan would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional provisions and processes. Any such armed attack and all measures taken as a result thereof shall be immediately reported to the Security Council of the United Nations in accordance with the provisions of Article 51 of the Charter. Such measures shall be terminated when the Security Council has taken the measures necessary to restore and maintain international peace and security.

Very simply, this means that China can attack Japan without fearing an inevitable American retaliation. That fact alone makes a small skirmish fairly likely.

So what if China successfully captured the islands — and perhaps even more Japanese territory — as we can perhaps assume given China’s overwhelming size and military-spending advantages? Well, the United States and presumably the international community other than China’s allies would seek to diplomatically pressure China to stand down and reach a peaceful arbitrated resolution via the UN.

If China refused to stand down and accept a diplomatic solution — that is, if China was absolutely set on staring down the United States — then the United States would be forced to choose between providing military support to Japan — and possibly ultimately escalating up to a global war between China and her allies and the United States and her allies — or facing a humiliating climbdown, and accepting both Chinese sovereignty over the islands, as well as any other Japanese territory that China might have captured, as well as face the possibility of further Chinese incursions and expansionism in the Pacific in the future.

Who will blink first is uncertain. Only the Chinese really know how strong they are, how far they are willing to push, and how much of their threats are a bluff.

On the other hand, as I wrote last year:

The relationship between China and the United States today is superficially similar to that between Great Britain and Germany in 1914. Germany and China — the rising industrial behemoths, fiercely nationalistic and determined to establish themselves and their currencies on the world stage. Great Britain and the United States  — the overstretched global superpowers intent on retaining their primacy and reserve currency status even in spite of huge and growing debt and military overstretch.

Mutually assured destruction can only act as a check on expansionism if it is credible. So far, no nation has really tested this credibility.

Nuclear-armed powers have already engaged in proxy wars, such as Vietnam. How far can the limits be pushed? Would the United States launch a first-strike on China if China were to invade and occupy Taiwan or Japan, for example? Would the United States try to launch a counter-invasion? Or would they back down? Launching a first-strike is highly unlikely in all cases — mutually assured destruction will remain an effective deterrent to nuclear war. But perhaps not to conventional war and territorial expansionism.

The chance of global war in the near-term remains very low. But so long as China and Japan continue their antagonism, the chance of global war in the long-term is rising.