Japanese companies across China are reeling from the effects of demonstrations and boycotts over the disputed Senkaku/Diaoyu Islands, temporarily shuttering their storefronts. As the scale and animosity of Chinese protests shows no signs of abating, it appears increasingly uncertain when many will be able to open again.
That embattled group includes some of Japan’s best-known brand names and national champions, long favored in China for quality and status, ranging across a wide breadth of industries, from automotive to electronics to retail.
Japanese automobile companies, which have relied on th China in past years both for new assembly plants and as a major boost to sales, have been some of the most visibly targeted.
Honda (NYSE:HMC, Tokyo:7267) will temporarily close down all of its five major assembly plants in China for Tuesday and Wednesday. Toyota (NYSE:TM, Tokyo:7203) is leaving temporary closure decisions to subsidiaries to decide on their own based on local conditions. Nissan (Tokyo:7201) will close temporarily two of its three factories in the country. Mazda (Toyko:7261) has decided to suspend production at its Nanjing plant for the next four days. Concerns about safety, attacks and internal sabotage are no doubt at the top of rational for the decisions.
Honda, Toyota and Nissan dealerships in China have all been attacked and set fire to over the past week. According to the Associated Press, China sales represent 20 percent of Honda’s global sales, 10 percent of Toyota’s and more than 25 percent of Nissan’s.
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Sony (NYSE:SNE, Tokyo:6758) has also decided to suspend two of its seven factories in China on short terms. Two Panasonic (NYSE:PC, Tokyo:6752) factories in China, variously in Qingdao and Suzhou, have been damaged by attacks in the past week. Canon (NYSE:CAJ, Tokyo:7751) will temporarily close down three of its factories in China, giving 20,000 employees leave for two days.
Kobe Steel (Tokyo:5406), one of Japan’s largest steel manufacturer, will suspend operations at four factories by Wednesday, including those that produce machinery and steel products.
Fast Retailing (Tokyo:9983), the owner of popular clothing retailer Uniqlo, will suspend operations at 19 of its outlets in China, nearly half of its 42 total locations in the country. The company has said that it did not condone the posting of Chinese nationalist signs on its storefronts, which employees may have decided to do on their own to ward off attackers, saying it takes no stance on political issues.
China Daily, a state-owned newspaper, noted that 13 Ito Yokado supermarkets and 198 7-Eleven convenience stores were closing down over the midweek due to operating concerns. Ito Yokado and 7-Eleven are the two major components of Seven & I Holdings (Tokyo:3382), the fifth-largest retailer in the world. The company had already shuttered 40 7-Eleven stories in Chengdu.
Mitsumi Electric Co. (Tokyo:6767), which produces controllers for leading video game consoles like Nintendo and Playstation, has suspended work at two of four factories it operates in China on Tuesday.
“Japanese companies play an important role in the Chinese economy and employment," Osama Fujimura, the Japanese chief cabinet secretary, said to reporters in Tokyo. "We believe we should be calm and make rational judgments from a broad perspective.”
The Japan External Trade Organization said that China-Japan trade amounted to some $344.9 billion over 2011, a record high. Whether that historic peak in economic relations will eventually work to constrain tensions from expanding further or simply heighten the ability to threaten economic damage from one side to the other remains a major point of contention between regional analysts.
Sharp (Tokyo:6753) and Kawasaki Heavy Industries (Tokyo:7012) mentioned no intention to suspend operations and said it would continue operating as usual throughout the week.
According to Bloomberg, Japan Airlines (Tokyo:9201) said that 5,000 passengers have already canceled trips between the two countries over the September to October period. The vast majority, some 4,000 cancellations, are for trips from Japan to China, an indication that Japanese travelers may be prone to concern of their safety. But for All Nippon Airways (Tokyo:9202), Japan's largest airline, some 3,800 seats from Japan were canceled through to the month of November, compared to 15,000 from China. Japan’s National Tourism Organization told the news organization that it expects as much as a 20 percent drop in Chinese tourists due to the territorial dispute.
The Japan Times, citing the Japan External Trade Organization, says that more than 22,000 Japanese companies operate in China. The Japanese Finance Ministry says Japanese companies pay nearly $6 billion in China every year in corporate taxes and are a major contributor to job growth.