The cooperation on the production of the 10th generation LCD panels has already obtained approval from China's top economic planning agency but "has been delayed due to the widely known reason, including the purchase of the islands by the Japanese government," chairman Rui Xiaowu told reporters on the sidelines of the Communist Party Congress in Beijing.

Officials at Sharp declined to comment.

Sharp's former President Mikio Katayama in June last year said that cooperation with China Electronics Corp had stalled because Chinese authorities were only prepared to approve a 10th generation plant rather than the 8th generation facility earlier agreed. Sharp has so far been unwilling to export its most advanced LCD technology.

Japanese car makers have reported a slide in sales in China since mid-September, when Japan's move to nationalize two disputed islands in the East China Sea, known as the Diaoyu in Chinese and the Senkaku in Japanese, triggered violent protests and calls for boycotts of Japanese products across China.

China Electronics and Sharp, the struggling Japanese electronics maker, entered into a partnership in 2009 to jointly produce Sharp's sixth- and eight-generation TFT-LCD panels.

In April, TPV Technology Ltd, a unit of China Electronics, said it would form a joint venture to build China's first 10th generation TFT-LCD factory. It did not disclose where it would acquire the necessary technology for 10th generation LCD panels, which is solely owned by Sharp.

(Reporting by Lin Qi and Li Ran, Tim Kelly in TOKYO; Writing by Samuel Shen; Editing by Kazunori Takada and Muralikumar Anantharaman)

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