Japanese firms may look to invest outside of China due to Senkaku dispute, AFP Says

TOKYO (TR) – Japan Inc. is reevaluating the business climate in China as a result of the attacks on Japanese-owned companies last month that were sparked by the two nation’s escalating-territorial dispute over a group of uninhabited islands in the East China Sea, Agence France-Presse is reporting.

The long simmering dispute over the small archipelago Japan calls the Senkaku Islands and China refers to as Diaoyu reignited in August after a Chinese activist landed on one of the islets controlled by Tokyo. The Japanese government effectively nationalized the islands when it purchased three of the five from their private owner last month, further exacerbating the already tense situation, and sparking the Chinese protests.

Two-way trade last year between the Asian economic giants was reported at $343 billion, AFP said, citing Chinese figures. China, the world’s second largest economy, is likely to remain Japan’s largest trading partner despite the dispute, but Japanese firms are beginning to look elsewhere to other countries to invest due to the uncertain risks of doing business there, according to the news agency.

“No one knows when such demos will happen again in China in the near future. The demos reminded Japanese companies of China risks,” AFP cited Takeshi Takayama, an economist at NLI Research Institute in Tokyo as saying. “I think Japanese companies will shift part of their investment from China to other Asian countries for sure,” he said.

Japanese carmakers, including Nissan and Toyota, announced last week they were cutting production in China after demand fell due to the current boycott against Japanese products by some Chinese consumers. Japanese pharmaceutical companies are reporting that Chinese hospitals have also started returning Japanese-made drugs and are refusing to renew purchasing contracts, according to local Japanese reports.

AFP cited the Philippine government, which is locked in its own territorial dispute with China, as saying last week it was “courting [Japanese] companies stung by the territorial spat” with China. Other alternatives include Vietnam, Thailand and particularly Myanmar, which Japan maintained trade and diplomatic ties with during its years of international isolation.

Source: AFP

Photo source: Ehnmark on Flickr

Posted by Michael Blaskoski on October 1, 2012. Filed under National. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry