China said it is limiting its high-level meetings with Japanese diplomats and businessmen.

In the Chinese city of Nanjing, former Chinese Foreign Minister Li Zhaoxing, now chairman of China's Foreign Affairs Committee of the National People's Congress, canceled his participation in a China-Japan business forum. Other high-ranking officials of Jiangsu province, of which Nanjing is the capital, also pulled out.

Cultural exchanges, a longstanding good-will sign of improving bilateral relations, are being put on hold.

The Japanese foreign ministry said a scheduled trip by a group of about 1,000 young Japanese to China's Shanghai World Expo has been canceled.

A Japanese ministry representative said China had decided against the trip, which had been organized on the back of a proposal by Chinese Premier Wen Jiabao during his meeting with Japan's Prime Minister Yukio Hatoyama in May.

"While the exchange program among young people contributes to establishing the base of a stable bilateral relationship, it is quite inappropriate and regrettable for the Chinese side to make such a decision shortly before the departure," a Japanese foreign ministry spokesman said.

At the heart of the dispute is the Sept. 7 detention of Zhan Qixiong, 41, by Japanese maritime authorities on suspicion of deliberately ramming two Japanese patrol boats in the East China Sea.

The Japanese vessels were trying to of stop the Minjinyu 5179 trawler in waters considered Japanese, around the Senkaku Islands -- also known as the Diaoyu Islands.

Japanese authorities said they can hold Zhan until the end of the month, after which they must lay formal charges or let him go. The trawler and the rest of the crew have been released to China.

But because ownership of the islands is disputed between China and Japan -- Taiwan also lays claim -- the Chinese say Zhan is being held illegally and are demanding his immediate release.

The 2.7 square miles of uninhabited rocks and islands lie 106 miles north of Japan's Ishigaki Island and 200 miles from the Chinese mainland. They are also 116 miles northeast of Keelung on northern Taiwan.

At the end of the Second World War in 1945, the islands were under U.S. jurisdiction as part of the captured island of Okinawa. But they have been under Japanese jurisdiction since 1972 when Okinawa was returned to Japan, which controls them and the waters around them.

Ownership of the islands is important because of nearby undersea natural resources, including natural gas.

China's Vice Foreign Minister Wang Guangya made representations to Japanese Ambassador to China Uichiro Niwa in Beijing, urging the Japanese to release the captain or suffer further sanctions.

"The incident created by the Japanese side has severely damaged China-Japan relations," Wang said. What happens next depends on what Japan decides to do.

"Japan shall bear all the consequences that arise," he said.

China demands that Japan immediately release the captain without any preconditions, Chinese foreign ministry spokesman Ma Zhaoxu said. "If Japan acts willfully despite advice to the contrary and insists on making one mistake after another, the Chinese side will take strong countermeasures."

The dispute likely will rumble on until it becomes clear what Japan intends to do with Zhan. If Zhan is detained further, then China could start applying tough economic sanctions against Japan.

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