China hits back at Japan after boat captain returns

TOKYO/BEIJING (Reuters) - China on Saturday demanded that Japan apologise for holding a Chinese boat captain, showing little immediate sign of giving ground in a dispute between the two Asian powers after Japan released him.

The fishing captain, Zhan Qixiong, flew out of Ishigaki airport in southern Japan on a chartered plane that took him to Fuzhou, a coastal Chinese city, early in the morning.

An assistant Chinese foreign minister was there to greet Zhan, Xinhua news agency reported.

The ministry said Beijing was still angry over the detention of the captain, whose trawler collided this month with two Japanese patrol boats in waters near islands -- called the Diaoyu in China and the Senkaku in Japan -- that both sides claim.

"This was an action that gravely violated Chinese sovereignty and the human rights of a Chinese citizen, and the Chinese government strongly protests," said a Foreign Ministry statement issued after Zhan flew back to China.

China's claim to the islands was "indisputable," it said.

"It is unlawful and invalid for Japan to detain and investigate the boat captain and to take any legal measures against him," the statement said.

"Japan must offer China an apology and compensation over this incident."

The statement also said the two countries should solve their disputes through dialogue and consultations.

Japanese Prime Minister Naoto Kan said it was time for the two neighbours -- which have Asia's two biggest economies -- to put relations back on a steady footing.

"China and Japan are important neighbors with important responsibilities in the international community," Kan said in New York, where he attended the U.N. General Assembly.

"In order to further grow our mutually beneficial relationship based on strategic interests, I believe it is necessary for Japan and China to handle matters calmly," he said.

The release follows the detention of four Japanese nationals on suspicion of violating Chinese law regarding the protection of military facilities, though Japanese Chief Cabinet Secretary Yoshito Sengoku has denied a link between the two matters.

The dispute over the Chinese trawler has underscored the fragility of ties long troubled by Chinese wartime memories of Japanese occupation and territorial disputes over parts of the East China Sea that could hold rich reserves of gas.

Kyodo quoted a Japanese national resources and energy agency official late on Friday as saying it was highly possible that China had started drilling in a gas field in the disputed waters of the East China Sea. But the report also cited a foreign ministry official as saying there was no confirmation.

Beijing is also involved in territorial disputes with southeast Asian nations in the South China Sea.

The United States welcomed Japan's decision to release the Chinese captain, saying it had defused a potentially dangerous situation.

There had been concern that a prolonged dispute could hurt ties between the world's second and third largest economies, now in the process of swapping places as China overtakes Japan in the No.2 spot.

Japan's sluggish economy has become increasingly reliant on China's dynamism for growth. China became Japan's biggest trading partner last year and bilateral trade reached 12.6 trillion yen (93 billion pounds) in the January-June period, a jump of 34.5 percent over the same time last year, Japanese data shows.

Before the captain's release, China cancelled diplomatic meetings and student visits.

(Additional reporting by Yoko Nishikawa in Tokyo and Andrew Quinn in Washington; editing by Tim Pearce)