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He urged Japan to create conditions for improved China-Japan ties through concrete action.

"I have always been optimistic and looking for the best results. But of course that also depends on the attitude of the Chinese officials," he said, adding that his Chinese friends include very successful businessmen.

For his part, Kishida said Japan and China have witnessed high-level exchanges recently, adding that his country is ready to work with China to boost cooperation in economy, trade and anti-terrorism.

Though China-Japan ties have improved in the past few years, the momentum is still fragile, said Yu, adding that both sides need to pay close attention and handle matters properly as there are various complicated and sensitive elements.

These small business clusters making a single product are typical of Zhejiang and a double-edged sword. Resource and labor intensive manufacturers have lost dominance as capital drains into Southeast Asia where costs are lower. There is also government pressure to "empty the cage for new birds" -- shutting down polluters to make room for environment-friendly, high-value added industries.