Rage over islands purchase affects Japan-China trade


MITSUBISHI, Canon, Mazda and Uniqlo were among the leading Japanese household brands finding their China business devastated by angry protests over a disputed chain of islands. China believes the islands, called the Senkaku by Japan and Diaoyu by China, were illegally invaded and occupied by the Japanese during the second World War. They were returned to China when Japan was defeated.

Last week, the Japanese government bought three of the five islands from the family that owns them, prompting protests in China. The Chinese military sent six surveillance vessels to the area, and yesterday about 1,000 Chinese fishing boats set sail for the islands. While there are fears the tensions could escalate into a more serious conflict, the initial fallout looks likely to be felt on trade between Asia’s two biggest economies. China is Japan’s largest trading partner, and Japan is China’s third largest. In 2011 the countries’ bilateral trade grew 14.3 per cent to €263 billion.

In an editorial in the China Daily newspaper entitled “Consider sanctions against Japan”, Jin Baisong, deputy head of a think tank linked to the ministry of commerce, wrote that China was in a position to deal a heavy blow to the Japanese economy without hurting itself too much by resorting to sanctions.

“Instead of blindly boycotting Japanese goods, China should work out a comprehensive plan which should include imposition of sanctions and taking precautionary measures against any Japanese retaliation,” wrote Mr Jin.

Diplomats have warned Japanese expatriates to stay indoors as anti-Japan sentiment is expected to ratchet up across China today for the anniversary of the Mukden incident in 1931, when Japan seized Manchuria in northeast China, triggering 14 years of occupation of China by Japan.

Normally, the anniversary is marked by people sounding their horns in the city of Shenyang in what used to be Manchuria, but this year much more extreme protests are expected. Shanghai, home to the largest population of Japanese expatriates at 56,000, is gearing up for a large rally.

Honda, Mazda and Nissan have all suspended production for several days, while Fast Retailing Co, Asia’s largest apparel retailer, said it had closed some of its Uniqlo outlets in China. The 7-11 operator, Seven I Holdings, said it would close 13 of its Ito Yokado supermarkets and 198 convenience stores in China. Canon will stop production at three of its four Chinese factories, while All Nippon Airways reported a rise in cancellations on Japan-bound flights from China.

There were efforts to cool the wrath of protesters yesterday, with text messages sent to mobile phones in many cities urging people to obey the law.

Foreign ministry spokesman Hong Lei said the Beijing government would protect Japanese firms and citizens and called for protesters to obey the law, although his message also included a reminder of who the Chinese government considers to be at fault here.

“The gravely destructive consequences of Japan’s illegal purchase of the Diaoyu Islands are steadily emerging, and the responsibility for this should be borne by Japan,” he told a news conference.