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Japan Inc. padlocks China factories amid violence
by Staff Writers
Tokyo (AFP) Sept 18, 2012

Some of Japan's biggest corporate names padlocked factories in China Tuesday as violent anti-Japan protests sparked safety fears, and threatened economic ties worth more than $300 billion a year.

A wide range of firms from electronics giants Sony and Panasonic to Japan's big three carmakers -- Toyota, Honda and Nissan -- temporarily halted production at some or all of their China-based plants.

Nissan, which counts China as its biggest single market, said two of its three factories would be shuttered for at least Tuesday and Wednesday as anger erupted over a simmering territorial row centred on a disputed island chain.

"No facility has experienced direct trouble or direct damage. (But) the safety of our personnel is the highest priority," said Nissan spokesman Christopher Keefe.

On Monday, camera and computer printer maker Canon said it had suspended operations at three plants in southern and eastern China for Monday and Tuesday "to ensure the safety of all of our employees working there".

The closures came as thousands of anti-Japan protesters rallied again on Tuesday to mark the anniversary of the 1931 "Mukden incident", which led to Japan's invasion of Manchuria, a northeastern region of modern-day China.

The current diplomatic battle has raised international concerns and fears of conflict between two of the world's top three economies, drawing in US Defense Secretary Leon Panetta during his ongoing Asian tour.

Panetta called for calm in meetings with Chinese officials, after warning over a possible "misjudgment" that "could result in violence".

The islets, known as Senkaku in Japan and Diaoyu in China, are uninhabited but situated in rich fishing waters and said to sit atop valuable natural resources. They are controlled by Japan but claimed by China and Taiwan.

The row intensified last week when the Japanese government bought three of the islands from their private Japanese owner, effectively nationalising them, and China responded by sending patrol ships to nearby waters.

A business delegation of 175 Japanese executives, headed by Toyota's chairman, said Tuesday it would cut short a regular annual trip to meet Chinese officials, which included talks with Chinese Premier Wen Jiabao.

The group said the change was stoked by warnings from Chinese officials that they could not guarantee the executives' safety.

"Obviously, it's in everyone's best interest to wind the tensions down, especially given Japan's huge investments and exports to China," said Nicholas Smith, an equity strategist at brokerage CLSA.

China and Japan have close business ties, with numerous Japanese companies investing in their larger neighbour and two-way trade totalling $342.9 billion last year, according to Chinese figures.

But the two countries' political relationship is often tense due to the territorial dispute and Chinese resentment over past conflicts and atrocities.

"Japanese companies' sales and reputation with Chinese consumers are likely to be affected, at least in the short term," ratings agency Fitch said in a note Tuesday.

"However, there is little visibility on the extent to which their sales in China might be affected, and how long anti-Japanese protests may continue."

The China Daily newspaper, a government mouthpiece, earlier warned that "Japan's economy will suffer severely if China were to impose sanctions on it. China's loss would be relatively less".

On Tuesday, Honda said it had temporarily closed all five of its China plants -- which make about 970,000 vehicles a year -- due to the violence, while rival Toyota said it had scaled back production but did not elaborate.

Sony, which makes a range of products in China including televisions and cameras, said two of its seven factories would see a one-day shutdown on Tuesday, while Panasonic also announced temporary plant closures.

Fast Retailing, operator of the Uniqlo cheap chic clothing chain, switched off the lights at 42 of its Chinese outlets.

Tokyo "is continuing to press China through various diplomatic channels to ensure the safety of Japanese people and businesses in China", Osamu Fujimura, the Japanese government's top spokesman, told a press briefing Tuesday.

"We want China to deal with the issue in a cool-headed manner with the broad view that Japanese companies have an important role in the Chinese economy and employment."


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