In September of 2012, when Japanese government announced that they have bought the Diaoyutai Islands (known as Senkaku Islands in Japan) from a private owner to a national property, it immediately provoked a sensitive sovereign dispute in the East China Sea. After Japan's announcement, the Sino-Japanese relations are frozen rapidly; people on both sides emerged aloud hostility with unceasingly protest afterward. Following the cessation of bilaterally diplomatic activities, both countries not only downgraded their economic exchange, but also escalated the military tension to a possible conflict scenario. Although China is the secondlargest economy of the world while Japan is the third one, and both economic developments are mutually depended, there were still many unsolved issues existed between them, such as resource exploitation, geographic strategic position, and regional balance of power. The sovereign dispute of Diaoyutai Islands is one of the core national interests of both countries. The issue which could be monitored as an indicator for observing future bilateral relationships. If there is no effective way to reduce tension of the East China Sea, the situation could either escalate into a military conflict, which may destabilize regional security, or destroy economic developments, which may cause another global economic recession.