Japan firms halt China operations; protests mount over islands row

18 September 2012 07:34  [Source: ICIS news]

By Fanny Zhang

SINGAPORE (ICIS)--Japanese firms, including major car producer Toyota, have temporarily stopped operations in China for at least two days, as anti-Japan protests sweep across Asia’s biggest emerging market economy over a territorial dispute on islands in the east China sea, industry sources said on Tuesday.

Public demonstrations in China followed Japan’s move to nationalise the islands that are also being claimed by China. The islands are called Senkaku in Japan, and Diaoyu in China.

There are concerns that protests will escalate on Tuesday, as the date - 18 September - in 1931 marked the start of Japan’s occupation of northeastern China.

Other Japanese carmakers Honda and Mazda have decided to halt production in China on 17-18 September, along with consumer goods firms Canon and Panasonic.

The automotive industry is a major end-user of petrochemicals, including styrene butadiene rubber (SBR) and plastics.

Toyota’s plants in Tianjin and Chengdu stopped production from Tuesday, while some of its shops in Guangzhou are also shut, a Toyota dealer said.

With calls in China to boycott Japanese products, sales of Japanese cars are expected to weaken further in China.

 In August, sales of Japanese cars in China fell by 2% year on year, while sales in Germany, American, Korean and French cars sales in China increased by 26.5%, 19.9%, 13.0% and 4.21%, respectively, according to China Association of Automobile Manufacturers.

Japanese car sales in September are expected to plummet, sources said.

Many Japanese cars are burned or damaged in the protests. In Shanghai, a driver burned his own Nissan car to demonstrate his anger against Japan.

Despite current heightened tensions between the two countries, analysts said that the issue should soon calm down since neither of the two Asian economic giants would want a lasting damage to bilateral trade ties.

It remains uncertain how the issue will be resolved.

“Policy makers are wise enough to prevent it from escalating into trade wars. For China, the once-a-decade leadership transition will take place in the coming weeks. So, the government will do everything to maintain social stability at this critical time,” said an analyst who declined to be named.

“For Japan, China is a market too big to lose,” he said.

Sources said that the current jolt is unlikely to result in Japanese companies closing their China operations for good or reducing China investments.

Long-term impacts are yet to be evaluated, according to industry sources.

($1 = €0.76)

Additional reporting by Dolly Wu, Viola Pan

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By: Fanny Zhang
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