Wednesday, August 22, 2012

More Japanese firms could quit China

Straits Times: Wed, Aug 22

TOKYO - The current upsurge of anti-Japanese sentiment which sparked protests in more than a dozen Chinese cities on Sunday could see more Japanese companies exiting China.

Many firms have been reported in recent years to be pulling out due to business considerations such as high wages and labour disputes.

But now there is the added dimension of the growing political risk posed by anti-Japanese protests, which seem to be happening more frequently.

One of the biggest nationwide demonstrations took place in 2005, sparked by China's anger at the alleged white-washing of Japanese history textbooks. Some Japanese businesses were attacked and their websites hacked.

Large-scale protests erupted again in 2008 after Japanese activists landed on the Senkaku islands, which the Chinese call Diaoyu. In 2010, nationwide protests flared when Japan detained a Chinese trawler captain for ramming his boat against Japanese coast guard vessels and wanted to prosecute him.

Sunday's protests took place after 10 Japanese activists landed on the disputed islands, two days after 14 people, mainly activists from Hong Kong, were deported for attempting to do the same.

Protesters called for a boycott of Japanese goods, Japanese- made cars were overturned in Shenzhen and at least one Japanese restaurant was vandalised.

Such demonstrations are widely seen as a means for the Chinese to vent their frustration at their government over the country's widening income gap, widespread corruption and other grievances.

But Beijing appears to have difficulty controlling young Chinese, who formed the bulk of the anti- Japanese protesters last weekend.

China scholar Koichi Sato points out that the younger generation of Chinese had gone through beefed-up patriotic education that uses China's war with Japan as a base for teaching.

"What we are seeing now is the fruit of China's patriotic and anti- Japanese education that was strengthened in the 1990s after the 1989 Tiananmen incident," said Professor Sato of J.F. Oberlin University in Tokyo.

"The protesters' excuse is that patriotism is not a crime. That makes it difficult for the authorities to clamp down on their activities," he added.

For many Japanese companies, rising wages in China and labour disputes that often result in strikes by workers have already made the country less attractive as a production centre. In some parts of China, wages are said to have doubled in five years.

Jolted by their experiences in past demonstrations, many Japanese companies are taking risk management more seriously and also moving away from a policy of concentrating all their manufacturing centres in China.

"Many export-oriented firms in particular have reduced their output in China and shifted to other countries, especially in Southeast Asia," said Mr Hidehiko Mukoyama, senior economist at the Japan Research Institute, a private think-tank.

But he also pointed out that China's inland provinces, which hold promise for economic growth, may still prove attractive to Japanese firms that plan to target the Chinese consumer market.

Of late, environmental problems and discrimination have added to the woes of Japanese companies in China.

On July 28, paper manufacturer Oji was hit by demonstrations by some 5,000 employees when it tried to install exhaust pipes for waste water at its plant in Jiangsu province which they said would pollute the environment. But the protest quickly took on an anti- Japanese tone.

In March last year, Obayashi, one of Japan's five biggest construction companies, finally shut down its operations in China after only eight years there.

The company found that vital real estate information that it needed to do business was tightly controlled by the local authorities and state-owned companies.

It also failed to get much subcontract work because many Chinese refused to deal with a foreign company.

In the past, anti-Japanese demonstrations in China invariably also affected people-to-people exchanges, including dampening tourist traffic in both directions.

In 2005, for instance, Japanese tour groups to China fell by 50 per cent in the immediate aftermath of the demonstrations.

In the 2010 protests, Japanese hotels catering to Chinese tourists saw their occupancy rates plummet when Chinese travel agencies stopped pushing tours to Japan.

So far, there have been no reports that last weekend's protests in China have hit the tourist sector in either country.

Last Saturday, the Japanese released data showing that Chinese visitors for July had exceeded 200,000 for the first time.

Reports quoted an official of the Japan Tourism Agency as saying that he hopes ties with China would not get any worse.

Meanwhile in Taipei, Taiwanese President Ma Ying-jeou told Japan's NHK network yesterday that Taiwan would not join China in pushing its claim to the Senkakus - known to Taiwanese as Diaoyutai - so as to avoid hurting ties with Japan.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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