April 21, 2006: China recently got caught using a "honey trap" (sex scandal) operation on the head of the encrypted communications section of the Japan's Shanghai consulate. The man was being pressured by Chinese agents to hand over sensitive intelligence, or be exposed for sexual activities the Chinese lured him into (a "honey trap"). The Japanese diplomat committed suicide instead, while also alerting his superiors. Having the victim kill himself, instead of cooperating, is always a risk when running a honey trap. When this honey trap blew up, it cost China quite a lot, and the Chinese are trying to make nice to the Japanese as a result. Japan was already pretty steamed about last years anti-Japanese riots, and China has apologized and paid compensation for destroyed Japanese property. But the Japanese were not mollified, and cut off a three decade old program that provided cheap loans to Chinese businesses. The two countries also do billions of dollars in business with each other annually. However, the Chinese need the Japanese (especially for their technology, technical advice and financing) more than Japan needs China. So the Chinese have assured the Japanese that there will be no more riots, and to make that happen, they cracked down on the ringleaders of the anti-Japanese demonstrations, and eliminated any anti-Japanese material in Chinese media.
Both sides continue to spy on each other, but now the Chinese have to be extra careful. This limits what the Chinese can do. Until the Japanese public calms down, which may take another year or so, the Japanese intelligence operatives in China can be bold. For even they get caught, the Chinese will have to suck it in.