Issues concerning the Ryukyus were not completely solved by dissolving the domains and institution of the prefecture system. China did not recognize this action and there were repeated requests from the Ryukyus for assistance from China.
United States President U. S. Grant was asked by Chinese authorities to help solve the dispute. He held meetings with high Japanese officials such as Ito Hirobumi to try and negotiate. The proposal put forth by the Japanese delegation was that in exchange for recognition of trade and commercial rights within China, similar to those enjoyed by the European countries, the Chinese would take control of the Yaeyama and Miyako Islands. This was the so so-called "Divided Islands / Expanded Treaty" proposal. .
Negotiations ran into difficulties but, with China preoccupied in border disputes with Russia, it agreed to the terms of the treaty anyway.
In February 1881, representatives from both nations were to meet on Ishigaki-jima Island and sign the treaty officially separating the Yaeyama and Miyako Islands and ceding them to China.
However, before formal ratification China experienced internal revolts and fearing the danger of Japanese incursions into Asia refused to conclude the treaty. Also, perhaps because of the influence of repeated requests from Ryukyuans exiled to China, the treaty was shelved.
In 1872 the Ryukyu Domain was established and in 1879 the domain was replaced with the establishment of Okinawa Prefecture. Through this the political process passed from the "Divided Islands / Expanded Treaty" toward what is called the "Disposition of the Ryukyus."
After this, the Japanese advances into Korea led to confrontation with China, which then led to the Sino-Japanese War (1894-1895). With the Japanese victory in this war, Taiwan became a colony of Japan and the "Ryukyu Problem" faded as they were annexed as part of Japan.