China broke off high-level government contacts with Japan over the continued detention of a fishing boat captain arrested near disputed islands.
The rare move pushed already tense relations to a new low, and showed China's willingness to take a hard line with its Asian rival on issues of territorial integrity.
The move late on Sunday came a day after anti-Japanese protests were held across China on the anniversary of the start of the Japanese invasion of China in 1931 that has historically cast a shadow over ties between the world's second- and third-largest economies.
The latest spat between Tokyo and Beijing was sparked when the Chinese vessel collided with two Japanese coast guard ships on September 7 near islands in the East China Sea claimed by both countries.
The 14 Chinese crew were released last week, but the captain's detention for further questioning - pending a decision about whether to press charges - has inflamed ever-present anti-Japanese sentiment in China.
China's Foreign Ministry said Japan's refusal to release the boat captain had caused "severe damage" to relations.
A ministry statement said Beijing had suspended ministerial and provincial-level contacts, halted talks on aviation issues and postponed a meeting to discuss coal.
"If Japan acts wilfully, making mistake after mistake, China will take strong countermeasures, and all the consequences will be borne by the Japanese side," Chinese Foreign Ministry spokesman Ma Zhaoxu said in a statement.
Takeshi Matsunaga, a spokesman for Japan's Foreign Ministry, said the reported measures were unilateral. "We ask China to respond calmly so as not to escalate the problem further," he said.
The move raises questions about cooperation between China and Japan at international forums such as this week's summit in New York on United Nations goals to fight poverty.