The world watches in bewilderment as two of its largest economies inch ever closer to war. It's all the more puzzling given that the countries have become close trading partners in recent years and the arguments between them seem trivial.
Their economies are so interdependent that any confrontation - let alone a full-scale war - would surely bring ruin to all.
The scene described is Europe 100 years ago. It may be an exaggeration to compare today's Sino-Japanese tension to Europe on the eve of the first world war, yet there is a danger of history being repeated.
Viewed from today's perspective, the tragedy appears unavoidable and for many Europeans of the time, the conflict seemed unthinkable. But the unthinkable could happen again if the lessons of history are ignored.
Listening to retired generals and government advisers at the third Sino-US Colloquium in Hong Kong last week, it was hard to shake off a sense of déjà vu.
Xiang Lanxin, a Kissinger scholar and an expert on international history and politics, said the root of the problem, as it was 100 years ago, is the lack of trust and understanding between the major players.
The three key players in East Asia - China, Japan and the US - are all undergoing tremendous transformation at home and are introspective in their thinking. None of them has formulated a clear diplomatic strategy that others can trust and understand - even though to their leaders, their plan seems to be clear and focused.
"The problem here is the difficulty of reading others' minds," Xiang said. Without a clear understanding of others' strategic intentions, any move could be interpreted in the wrong way.
China, praised by British historian Professor Paul Kennedy 20 years ago for having the most coherent and forward-looking plan among major powers, seems to have lost its clear purpose.
For more than a decade, Beijing faithfully followed the famous t aoguang yanghui principle set down by late paramount leader Deng Xiaoping . An imperfect translation of the phrase is "to keep a low profile and nurture your strength".
The main thrust of the concept is that China needs a long period of peace to develop and time is on its side. If China can modernise its economy, the external problems will melt away. The best move is not to take any unnecessary initiatives. With some patience, the sheer momentum that this growth creates will bring to China what reckless adventures cannot achieve.
This position has, however, become increasingly difficult to maintain. In many ways, China is a victim of its own success. Its economy has doubled in size in the past decade. China has surpassed Japan as the second largest economy and is projected to overtake the US in the next 10 years. Lying low, many argue, is now almost impossible.
While taoguang yanghui has never officially been ditched, Beijing is starting to seek a replacement. Under outgoing President Hu Jintao , China temporarily toyed with the idea of "the peaceful rise of China". The emphasis on "peaceful" is an attempt to persuade the world - particularly the dominant hegemony, the US - that China does not seek to revise the status quo as it grows stronger. But the term was deemed problematic from the start.
"It is a most misleading and ideology-motivated concept. It suggests that this is something new, which is historically incorrect," Xiang said, pointing out that the country had always been the world's leading economy, at least until the 1820s.
China's new leadership, under Xi Jinping , prefers the catchphrase "national restoration", Xiang says. It implies that Beijing does not seek a new world order - it just wants to revert to the millennia-old tradition.
That tradition, however, is vague and hard to define. Before the arrival of Western powers, China exercised undisputed sway over East Asia. Its "foreign policy" was non-interventionist by nature, focusing on a subtle influence and prestige over acquiring territorial gains. It exercised authority through an elaborate system of tributes.
While that is clearly impossible in modern times, many still believe China's tradition of benign power projection is the answer to defining the country's new role. Observers note China's more assertive stance towards rival claims in the South China Sea, and in the East China Sea with Japan over the Diaoyu/Senkaku islands, but Beijing stresses it did not make the first move in these disputes. Chinese leaders still prefer to delay territorial settlements, but they have to act tough when the country's prestige is at stake. A large part of the reason for this is the need to keep internal pressures under control.
Beijing's primary concern for the future is still its domestic situation, Xiang said.
"As the world is talking about a China threat, the Chinese government is talking about internal revolution. The leadership today is reading [French Revolution scholar Alexis de] Tocqueville, while countries like Japan worry about China's intention to take over their territories," Xiang said.
"This is absurd. The Chinese leaders realise the condition in China today is more like pre-revolutionary France in 1789 [rather than Germany in 1913].
"There is a dangerous trend of [the party] resorting to nationalistic sentiment to consolidate its position. This is like riding a tiger - it's easy to get on its back but hard to get down."
Chinese leaders, in their own way, have gone to painstaking lengths not to appear assertive to their neighbours. They have gone as far as to refrain from using the phrase "great power" in official text or speech, for fear that it may lead others to see China as developing hegemony. Instead, they use the phrase xinxing daguo.
"They hesitate even in how to translate it. Sometimes they use the term 'big country' - referring to the physical size, which is absurd," Xiang said.
With Beijing struggling even to find the right word to describe its strategy, it's no wonder that its neighbours have misgivings and difficulty working out China's true intentions.
In comparison, the American outlook seems much clearer. In 2010, US President Barack Obama announced that the US was to return to Asia-Pacific, pivoting away from other parts of the world towards East Asia. He pledged to be the first "Pacific president" of the US.
It calls for a concentration of American resources to strengthen its presence in the region on all fronts - economic, diplomatic and security. The core of it is to strengthen its alliances and also its military presence.
"We will not downsize our presence in the Asia-Pacific even as we have to scale back the overall military spending," said Walter Sharp, retired four-star general and former commander of US Forces Korea. Sharp stressed that the US presence was the key to peace in the region and respect for international rules.
William Fallon, retired four-star admiral and former commander of US Pacific Command, said the "pivot to Asia" was in line with America's long-term demographic and economic shift towards its Western regions.
"This is not a panic reaction [to the rise of China]," he said.
Still, to many Chinese officials and observers, America's new stand is flawed. America's alliance system in Asia-Pacific, forged during the cold war, was built with a clear objective: to counter and contain the Soviet Union. The containment strategy, as diplomat George Kennan explained in his famous "Long Telegram" in 1947, is based on the premise that the Soviet Union did not see a chance of long-term peaceful coexistence with the capitalist world.
It was an expansionist power by nature and needed to be countered. The best approach was not through direct military confrontation, but to unite the Western world and wait for the internal weakness of the Soviet system to undo itself.
Pan Zhenqiang , a retired PLA major general, said in order to revive the old alliance system, Washington needed a new enemy. It could not be a mere rogue state like North Korea, but must be comparable to the old Soviet Union.
"In our view, the US strategy is contradictory. It has left behind unanswered a critical question: what kind of role should China play in this security structure? For all the benefits to contain China, the US is also keenly aware that China has become an indispensible partner to its own prosperity and sustained security," Pan said.
By not clearly spelling out the role of China in this new structure, Washington will keep Beijing guessing on its real intention and send confusing signals to countries in the region. In the long run, these confusing signals may create unnecessary tension, Pan argued.
With its revolving-door leadership, it's hard for Japan to have a consistent regional strategy. The dominant sentiment of the day is centred on regaining the status of a "normal country" within the international community and responding to China's growing influence and assertion.
While the majority of Japanese believe it's time for the country to put its wartime past behind it and return to the international community as a fully fledged member, the question for them is what kind of "normal country" should it be?
Tokyo could simply be more willing to speak out and act over its national interests, without changing its peaceful constitution or weaning off its onedimensional reliance on the US for defence protection. A more radical approach, as advocated by the likes of former Tokyo governor Shintaro Ishihara, is for Japan to become a fully fledged great power, restoring its right to keep a powerful army and pursue an independent foreign policy. Japan would not only be responsible for its own defence, but would become a linchpin for East Asia's peace and security.
As Japanese themselves can't agree on the extent of the "normalcy" the country should return to, its neighbours are also divided. Some Southeast Asian countries would welcome the second scenario as they hope a more assertive Japan could counter China's influence.
For countries in East Asia - China, South Korea, North Korea and even Russia - the reaction is far more negative.
While many Japanese people think they have put the past behind them and rightly point out that Japan has undergone tremendous change since the second world war and made significant contribution to the world's peace and prosperity, its neighbours are not convinced.
Today's Japan may be very different from the militant Japan of 70 years ago, but the country has never really cleansed its wartime past like Germany did in Europe.
"The dominant value in Japan is postmodernism, not nationalism," said Professor Soeya Yoshihide of Keio University. He said any concern that Japan might return to its militant and nationalistic tradition was far-fetched, since the country has evolved so much.
But the Chinese participants disagreed. "Unfortunately, we don't feel Japan is willing to address the issue [its wartime past] and China is not alone in this. South Korea - which is also a key US ally - also repeatedly asked Japan to reflect on its past. Nobody can accuse South Korea of acting to advance China's agenda," Pan said.
Ultimately, Beijing knows that despite Tokyo's tough posture, Japan lacks the political will and consensus required for a major showdown.
At the same time as China engaged in a war of words with Prime Minister Shinzo Abe's government, Beijing invited former Japanese prime minister Yukio Hatoyama for a high-profile visit. It knows that Japan's internal friction and the lack of a unified strategy will force it back to the negotiating table.