China has suspended all senior government-level exchanges with Japan, after a Japanese court extended the detention of a Chinese fishing boat captain arrested near disputed islands earlier this month.
The Chinese foreign ministry says it has also suspended talks on increasing the number of flights between the two countries.
The sailor has been detained since 8 September, the day after his fishing vessel collided with two Japanese coast guard boats near the islands, known as Senkaku in Japan and Diaoyu in China.
Japan has returned the ship and its crew but still holds the captain, Zhan Qixiong, 41, despite repeated demands from China for his release.
The disputed islands are close to strategically important shipping lanes, offer rich fishing grounds and are thought to contain oil deposits, the BBC reports.
Japan currently controls them, but both countries claim ownership.
On Friday, small protests against Japan took place in several Chinese cities, marking the anniversary of the 1931 Mukden incident, that led to Japan's occupation of north-east China.