BEIJING (Reuters) – China’s top-ranked diplomat intensified pressure on Japan over a territorial dispute, warning Tokyo on Sunday against making “misjudgments” over the seizure of a Chinese fishing boat in disputed seas.

China’s latest demand marked another diplomatic escalation in the rift between Asia’s two biggest economies, which has set back their efforts to ease decades of distrust.

State Councillor Dai Bingguo made the warning to Japan’s ambassador in Beijing, Uichiro Niwa, summoned in the early hours to hear China’s call for the release of a Chinese captain and crew whose fishing boat collided with two Japanese coast guard ships in disputed seas last week, Xinhua news agency reported.

Dai advises China’s top leaders on foreign policy and serves on the State Council, or government cabinet, outranking the Foreign Minister within the ruling Communist Party hierarchy.

“(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.

Chinese media have said ardently patriotic public opinion could become fired up by the dispute.

On Sunday, a dozen or more Chinese protesters prepared to take a boat from the coastal city of Xiamen to the disputed East China Sea islets, called Senkaku in Japan and Diaoyu in China.

“We’re going to protest, to make it clear that these islands are China’s and there can be no bending on that,” said Li Yiqiang, one of the protest organizers.

But their departure was postponed, with no fresh time set, Li said later. He gave no reasons for the delay.

Authorities have halted such trips before, wary of escalating confrontation at sea and they may have again this time.

Japan’s ambassador, Niwa, gave no indication 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.

On Friday, a Japanese court authorized a 10-day extension in detaining the arrested Chinese boat captain, Zhan Qixiong, whose 14 crew members are being kept on the same island as him.

Japanese prosecutors allege Zhan deliberately struck a patrol ship and obstructed public officers, said Kyodo.

Beijing and Tokyo have so far confined their dispute to diplomatic sparring and avoided measures that would take them back to the icy hostility of several years ago.

COULD WORRY INVESTORS

A step in that direction could worry investors, focused on the two countries’ growing trade flows, which reached 12.6 trillion yen ($150.4 billion) in value in the first half of 2010, a jump of 34.5 percent on the same time last year.

The Japanese ambassador has now been called in by China’s Foreign Ministry four times to hear complaints about the case, which has given an emotive focus to long-running territorial quarrels between Beijing and Tokyo over East China Sea islets.

China called off planned talks with Japan over an undersea gas bed dispute in another part of the Sea and warned that worse repercussions may follow.

On Saturday, Japan made a formal protest after a Chinese oceanic administration ship tried to stop a Japanese Coast Guard vessel 280 km (174 miles) northwest of Japan’s Okinawa island.

On Sunday, the Chinese Foreign Ministry said a Japanese effort to recreate the circumstances of the incident to furnish evidence was “unlawful, ineffective and futile,” according to the Ministry website (www.mfa.gov.cn).

“The only way out to resolving this problem is to immediately and unconditionally release the men and the boat,” said Chinese Foreign Ministry spokeswoman Jiang Yu.

Relations between Beijing and Tokyo have long been dogged by mutual distrust and Chinese bitterness over Japan’s occupation of much of China before and during World War Two.

Since big public protests in China against Japan and bitter diplomatic exchanges in 2005 and 2006, both sides have sought to improve ties.

But they have stubborn disagreements over their sea rights.

Tokyo maintains that China’s exploration for natural gas in the East China Sea threatens gas beds extending under what it deems Japan’s maritime zone. China denies there is such a problem and disputes Japan’s definition of the sea boundary.