About 41 percent of Japanese firms see an escalating territorial row with China affecting their business plans, with some considering pulling out of the country and shifting operations elsewhere, a Reuters poll showed yesterday.
The Reuters poll comes as relations between Asia’s two biggest economies have hit their lowest point in decades over a dispute centered on an uninhabited group of islands in the East China Sea that are also claimed by Taiwan.
Customs officials in the port city of Tianjin near Beijing have told Japanese companies their imports will be inspected more frequently, the Asahi Shimbun reported, in a worrying sign that Japan’s shipments to China could slow. Automaker Honda Motor Co said it was already making contingency plans.
“We are trying to forecast things in advance and preparing as much as possible to avoid any impact on our business,” Honda CEO Takanobu Ito told a news conference.
Street protests in China have forced some Japanese firms to suspend operations in that country, and the share prices of Japanese firms with exposure to China have tumbled.
However, the Reuters survey of 400 large and medium-sized companies, of which roughly 260 responded between Aug. 31 and Sept. 14, was taken before the worst of the protests, which damaged factories, restaurants and retail stores.
“We’re worried that Chinese workers could start boycotting production lines at Japanese firms in China or start making unreasonable demands for wage increases,” one transportation equipment manufacturer said.
Firms in sectors such as wholesale, transport equipment and electric machinery were among those expecting the most fallout from worsening relations with China and other parts of Asia.
Some of the firms which see friction with China affecting business plans have suffered not only from rowdy protests involving damage and consumer strikes, but other problems as well.
“We were stranded at customs there even as we followed proper procedures for exporting parts,” one machinery firm said.
A transport machinery company complained that it was excluded from bidding in China.
“We need to consider closing our base in China and withdrawing our personnel,” one metal products company said.
Others voiced caution about investing in China, while considering putting off plans to make inroads into Chinese markets or seeking alternate sites.
“We have had many diplomatic clashes in the past, and in the end this always comes back to hurt Japanese companies who are in China,” said Naoto Saito, a senior economist at Daiwa Institute of Research.
“This is likely to happen again, so companies will seriously start to question whether they want to go to China or tap other markets,” Saito said.
Japanese companies could bypass China for Southeast Asian countries such as Indonesia, Malaysia or Thailand, Saito said.
China, the world’s second-largest economy, and Japan, the third-largest, have total two-way trade of about US$345 billion, but some experts believe anti-Japan sentiment could prompt firms to rethink investments in China in the longer term.
“The impact on our business so far has been small, but Japanese and non-Japanese employees at our offices in Shanghai and Hong Kong have been subjected to harassment,” one services sector firm said.