Island row could cause Japanese firms to pull out of China

09/26/2012
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The Chinese crowds may have stopped smashing Japanese cars and stores for now, but trouble still seethes beneath the surface, and it’s causing Japanese companies to rethink their Asian strategies. Forty-one percent of those polled recently expressed concerns over their business plans.

TOKYO (majirox news) — The continuing rift between Japan and China over the disputed Senkaku Islands is starting to cause worries among Japanese businesses concerning their future plans. Some companies have already suspended their operations in China, and others are nervously eyeing the situation.

“There are 22,000 Japanese companies doing business in China,” said Masayoshi Watanabe, director of overseas business for Japan External Trade Organization. “They work in retail, services, consulting, manufacturing and in joint ventures with other Chinese companies. We really won’t know the full economic effect until later.”

And Prime Minister Yoshihiko Noda has warned that deteriorating relations with China could have a negative impact on the global economy.

“We have not yet received complaints from Japanese companies about logistics in China,” Watanabe said. “We will just have to wait and see how the situation develops.”

It’s not just the riots and smashed windows that are causing a rethink. Japanese companies are concerned about China’s recent measures. Customs inspections have been stepped up, and some Japanese firms have been banned from bidding on contracts. In fact, 41 percent of Japanese companies see trouble ahead with some considering pulling out of the country and shifting operations elsewhere

Toshiaki Hama, who works in the IT business, said, “I don’t believe Japanese companies should leave China. The Chinese authorities are just grandstanding for their people.”

It goes further than simply worries about profit. Some Japanese companies are seriously thinking of moving away out of China to other Asian locations. Some commentators say that Japanese businesses have always come off worst in the past with regard to China-Japan clashes, though withdrawal of Japanese investments in China would lead to disruption of some kind in the Chinese economy.

Michiyasu Shimizu, a businessman said,”It’s terrible that the people who have doing business with China have been affected, especially the ones who have had their buildings and products damaged.”

With Japanese economy sluggish, any disruption, such as the current dispute, is unwelcome.

The two-way trade between the two countries is currently worth $345 billion per year, but this could change as the friction between the two countries increases. The row will cause long-term harm to both countries’ economies unless steps are taken soon.

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