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IMF, World Bank urge China, Japan to overcome differences

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BEIJING/TOKYO, Oct 11 (Reuters) - China's foreign ministeron Thursday defended the withdrawal of its senior delegates fromthe International Monetary Fund meeting in Tokyo as "completelyappropriate" although the head of the multilateral organisationsaid they would "lose out".

China's delegation is being led by the Vice Finance MinisterZhu Guangyao and the vice head of the central bank, Yi Gang,instead of their bosses, in what appears to be a snub to Japanas host of the IMF and World Bank meetings this week.

Japan is hosting the gathering for the first time in nearlyhalf a century and about 20,000 people are expected to attendthe events, which end on Sunday, making it one of the world'slargest international conferences.

The head of the IMF, Christine Lagarde, said she hoped theworld's second- and third-largest economies could resolve theirdifferences "harmoniously and expeditiously".

"I think they lose out by not attending the meeting," shesaid of the Chinese officials. "And they will be missingsomething great."

According to Chinese protocol, only the most seniorofficials usually lead such trips.

When asked about the absence of the senior officials fromthe meetings, Chinese Foreign Minister Yang Jiechi toldreporters in Beijing that "the arrangement of the delegation forthe meeting was completely appropriate".

The disputed group of islands, called Senkaku in Japan andDiaoyu in China, are located near rich fishing grounds andpotentially huge oil-and-gas reserves. Taiwan also asserts itssovereignty over the uninhabited islets.

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GRAPHIC: Map of islandsGRAPHIC: China, Japan navies

Top China delegate pulls out of IMF amid row

Japan PM vows no compromise

Japan car sales in China tumble amid row

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The row escalated in September when Japan bought some of theislands from their private owners.

Both countries have sent patrol boats to waters near thedisputed islands, raising concerns that an unintended collisionor other incident could escalate into a broader clash.

Japanese Prime Minister Yoshihiko Noda said in lateSeptember that his country will not compromise on the islands,but he seemed to adopt a more conciliatory tone in an interviewwith Bloomberg on Wednesday when he called for talks with China.

"We need talks through various channels to make sure thereis no effect on the broader relationship," Noda told the newsagency.

The latest row has been marked by violent protests and callsfor boycotts of Japanese products in China. Japanese carmakersreported a tumble in September auto sales in China, the world'sbiggest car market.

Still, Naoyuki Shinohara, the IMF's deputy managingdirector, said the dispute was unlikely to have an immediatenegative impact on Japan's economy.

"If the situation deteriorates sharply, it might potentiallyemerge as a risk," Shinohara told Reuters in an interview inTokyo.

"But Japan and China are neighbours and have undergone along history. I'm sure the policymakers of both countries arecapable of finding a solution."

His comments were echoed by World Bank President Jim YongKim.

"I'm very optimistic that the leaders of these threecountries will come back to their fundamental understanding ofthe importance of cooperation in the region," he said.

(Reporting by IMF reporters in TOKYO; Ben Blanchard in BEIJING:Writing by Neil Fullick; Editing by Ron Popeski)

Keywords: CHINA JAPAN/