Dai is the highest-ranking Chinese official to intercede since the trawler collided with two Japanese patrol vessels near the disputed Diaoyu Islands on Tuesday. Niwa had already been called in by the Foreign Ministry three times.

'[He] solemnly stated the Chinese government's major concerns and urged Japan not to misjudge the circumstances and to make the wise political choice of immediately returning the Chinese fishermen and their boat,' Xinhua reported.

Niwa gave no indication that his government was preparing to back down.

'We have maintained the position that we will solemnly handle the case in strict accordance with domestic law,' the ambassador said, according to Japan's Kyodo news agency, citing the Japanese embassy in Beijing.

The latest twist in the long-running territorial disputes between Beijing and Tokyo over East China Sea islets marked the lowest point in bilateral ties between the two Asian neighbours since Premier Wen Jiabao's ice-breaking trip to Japan in April 2007, said Liu Jiangyong, a professor of international relations at Tsinghua University's Institute of International Studies.

'Both sides reacted strongly over the boat incident, which might make it a tide-turning point in otherwise quite positive bilateral relations for the past three years,' Liu said.

It was 'unusual' that Tokyo apparently intended to prosecute the arrested Chinese boat captain, Zhan Qixiong, under Japanese criminal law, he said. A Japanese court on Friday authorised a 10-day extension of Zhan's detention. Japanese prosecutors allege Zhan deliberately struck a patrol vessel and obstructed officers on duty. The charge carries a maximum sentence of three years' imprisonment. The 14 crew members are also in custody.

'This move left Beijing little choice - because anything less than a hardline diplomatic response would be viewed as acquiescence on Japan's territorial claims over Diaoyu,' Liu said.

The uninhabited islands - known as Senkaku in Japan and Diaoyu in China - lie between Japan's Okinawa island and Taiwan. They are claimed by Tokyo, Beijing and Taipei.

'China wants a rapid resolution to the sensitive territorial issue without rousing nationalistic backlash against the government,' Liu said. 'It has to show its determination on these principled sovereignty issues.'

A Shanghai-based retired People's Liberation Army senior colonel said Beijing had made a 'rare, tough' reaction towards its leading trade partner because it felt 'backed into a corner'. 'When the Japanese authorities handed the captain to its local court, it also sent a message to Beijing that there was no room for negotiation in this case,' he said. 'Beijing felt it had been insulted and was forced to be tough.'

Beijing on Friday also called off planned talks with Tokyo over an undersea gas bed dispute in another part of the East China Sea. On Saturday, Japan made a formal protest after a Chinese oceanic administration ship tried to stop a Japanese coastguard vessel 280 kilometres northwest of Okinawa.

In the latest escalation of diplomatic sparring, Japanese coastguard officials yesterday took the Chinese trawler and its crew out to sea off Okinawa to test the boat's capabilities. According to Japanese public broadcaster NHK, officials also found fish on the boat and were investigating whether they were caught illegally in waters that Japan considers its territory.

China's Foreign Ministry said it firmly opposed any form of investigation by Japanese authorities into the fishing boat. 'Japan's so-called gathering of evidence is illegal, invalid and futile,' ministry spokeswoman Jiang Yu said in a statement. 'China urges Japan to stop actions that escalate the situation and immediately and unconditionally release the crew and ship. This is the only way to solve the problem.'

The retired PLA senior colonel said Beijing's reaction could be linked to a string of US-South Korean naval exercises as well as a US-Vietnamese naval drill in the South China Sea, where China has territorial disputes with many of its neighbours.

'Actually, it may be the United States who was playing a key role behind the games, which aim to challenge and contain China,' the former PLA official said.

'Without the US, we believe Japan would not dare to detain and interrogate our citizens ... In the past, Japan hasn't taken any Chinese protesters away - even when they landed on the Diaoyu Islands to make China's sovereignty claims.'

Ties between the world's second- and third-largest economies improved more than three years ago, when they set aside years of rancour centred on Japan's wartime occupation of Asia. The huge economic flows between the nations, with bilateral trade worth US$238.7 billion last year, helped to cement closer ties.

But despite displays of goodwill, the sources of discord remain. China's increasing naval activities in seas near Japan have made Tokyo nervous. Tokyo lodged a protest with Beijing in April after a Chinese helicopter flew near a Japanese destroyer off Okinawa. A group of Chinese warships was spotted earlier that month in the high seas near Okinawa.

In June, Beijing and Tokyo agreed to set up an emergency hotline and set in place ways to prevent maritime friction, sparked by Beijing's growing naval reach, from getting out of hand.

The two nations have also argued over China's exploration for natural gas in the East China Sea, in areas Japan says could impinge on gas fields in its maritime jurisdiction.

In June 2008, they struck a broad agreement intended to solve the row by jointly developing the fields. Informal talks have recently started, but progress has been slow.