Wed, Apr 20, 2005 page12

• Japanese firms eye China risk

  BUSINESS OUTLOOK A product boycott is the biggest danger for Japanese companies that have invested heavily in China, economists say

  • DPA
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  While political tensions continue to rise with the recent anti-Japanese movement in China, the economic implications are quickly becoming a worry to Japanese firms operating in the country.

  Of concern is not only the physical damage to Japanese stores by protestors, but disruptions to Japanese manufacturing plants by protesting workers and suppliers.

  "But that's not the only problem for Japanese firms," said Yasuo Goto, chief economist for Mitsubishi Research Institute.

  

  A worker installs new lights on a sign that reads ``Japanese cuisine'' yesterday at a Japanese restaurant in Beijing that was vandalized last week. Japanese business owners and employees remain highly concerned over the recent surge of anti-Japanese sentiment and the impact it will have on their operations.

  PHOTO: EPA

  Goto said the biggest threat is the possible boycott of Japanese products in China, with companies like Sony, Toyota and Honda, having much invested in the world's fastest growing economy.

  "China is one of the most attractive markets for many Japanese companies. If the anti-Japan sentiment lasts for a long time, the damage to Japanese firms would be huge," the economist said.

  Hiroyuki Yoshino, an adviser to Honda, expressed concern about the business prospects in China.

  "Many of the participants in the rallies [in China] seemed young and I am afraid our minicar sales could be affected to some extent," he said.

  Honda has three assembly plants in China and was the first Japanese automaker to build cars in China.

  Toyota has also been aggressive in its operations in the Chinese market. According to the spokesman for the major Japanese automaker, Toyota has invested in more than 10 companies in China and sees the market as a very attractive and growing.

  "Toyota has two local plants and we make popular models including, Corolla, Crown and Vios," he said.

  But the Toyota official declined to comment on possible negative business in China.

  Goto also said Japanese retailers will be negatively affected by the anti-Japan sentiment in China. Since last year's deregulation for foreign retailers in China, Japanese supermarkets, convenience stores and restaurant chains, have accelerated their expansion.

  Lawson, Japan's second-largest convenience store chain, was one of the targets of last weekend's riots with three of its 218 stores in Shanghai damaged by vandalism. The company has plans to open 100 more by year end.

  "Yes, we're worried," said a Lawson spokesman in Tokyo.

  But he declined to comment further.

  Japan's major supermarket chain operator Aeon, which has 23 outlets in China under the name of Jusco, was forced to temporarily close two its outlets there last weekend.

  With its cheap labor force China is a very important production base for Japanese firms, with many companies exporting their parts to China for assembly and sending them back home for sale.

  According to the government-backed Japan External Trade Organization (JETRO), Japan imported more from China than any other country last year while China was the second-largest destination for Japanese products to be exported.

  Toshiba manufactures almost all its personal computers in China and Sharp's washing machines sold in the Japanese market are made there.

  Casio Computer, a major Japanese calculator maker, said its Chinese plants make more than 80 percent of its products while Fuji Xerox manufactures 90 percent of its copier machines in China.

  Some firms, including Toshiba and clock maker Seiko, said they are considering precautionary steps to prepare themselves in case the situation worsens as it already has for one Japanese company.

  Japan's Taiyo Yuden said it was forced to keep its condenser plant in Guangdong Province closed on Monday after its employees protested.

  A spokeswoman for the Japanese electronic parts maker said about 2,000 workers out of the total 7,000 at its Guangdong factory took part in the demonstration last weekend.

  "Our factory has eventually started operations on Tuesday after talking to workers individually," the Taiyo Yuden official said.

  The Chinese factory is the main manufacturing base for Taiyo Yuden's electronics parts that are used for mobile phones and digital cameras.

  While the official declined to give reasons for its employees motivation for the rallies, it is believed that the movement stemmed from worries among workers that Taiyo Yuden will not follow the Chinese government's hike in the minimum wage last month.

  "The recent developments may prompt Japanese firms to reconsider their business strategies in China," Goto said.
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