Audio Transcript:

Lisa Mullins: I'm Lisa Mullins, and this is The World. The US and China filed trade complaints against each other today. Both nations are claiming to be the victim of unfair trade practices. Now, that would have been enough to overshadow US Defense Secretary Leon Panetta's visit to Beijing today, but Panetta's visit was already overshadowed by something else: a wave of anti-Japanese protests that's sweeping China right now. Some protests have turned violent, and several Japanese companies have had their facilities in China attacked. The tensions follow a territorial dispute that's between the two countries over a group of islands in the east China Sea. The World's Mary Kay Magistad is in Beijing. She's been keeping an eye on the protests.

Magistad: In Beijing, the protests were a little more controlled than they were in other cities. I was standing outside the Japanese embassy for a couple of hours and watching the same group of about 500 protesters go by, singing the national anthem, carrying a picture of Mao Zedong. There were jitneys that would drive by every so often, with dozens of bottles of drinking water, and hand them out to protesters, who would then promptly throw them at the Japanese embassy. At other Japanese facilities – shops, some factories, restaurants – there was some damage done, windows broken, et cetera. And as a result, Panasonic has suspended operations at two of its factories in China. It's closed another. Canon has suspended production in China at three of its four plants. Ito Yokado, which is a well-known Japanese department store, has closed 13 of its supermarkets and almost 200 7-11 stores. The Chinese state-run media have been sort of taunting Japan and saying, we have $240 billion in two-way trade, and if you want to risk all that and have another lost decade of economic depression, you go ahead and keep acting the way you're acting.

Mullins: Is there reason to believe that much of what's going on here has been hyped by the Chinese leadership as a way, as some have said, to distract attention from some of the government's many troubles at home?

Magistad: What's interesting about this all coming to a head at this moment is that we're in the middle of a leadership transition in China. It has not gone entirely smoothly. There are a lot of negotiations behind the scenes. There is a lot of to-ing and fro-ing, and basically a tug of war between different factions within the Chinese Communist party. China analysts had long thought that if there reached a point of crisis where the economy was slowing down, where there was factionalism that was getting in the way of a smooth transition, that there might be some effort to divert the public's attention to a cause that would rally nationalistic support. It may be pure coincidence that this is happening now, just weeks before the leadership transition. But even many Chinese on the Chinese equivalent of Twitter, called Weibo, don't think so. They think the two are connected.

Mullins: Bring Leon Panetta, the US defense secretary, into the picture here. This is his first trip to China as defense secretary. He happens to be there on other missions. At the same time, China is asking him to remain neutral in this territorial dispute between China and Japan. As things heat up, where does the US stand on this? A couple of interesting things about Leon Panetta's visit. He stopped in Japan today on the way into China, and while in Japan, announced with the Japanese government that the US and Japan will have a second advanced missile-defense radar system on Japanese territory. The Chinese really were not happy about this. They said this will only encourage Japan to continue acting aggressively, as it has on these disputed islands, and that this is the US taking sides. Of course, when it comes down to it, the US and Japan have a mutual defense treaty. And the Japanese have pointed out that that treaty would extend into the islands if Japan were to come into military conflict with China.

Mullins: Thank you. From Beijing, The World's Mary Kay Magistad.

Magistad: Thanks, Lisa.