Tiny Pacific Islets Sinking Giant Japanese Businesses in China

Yet when anti-Japan demonstrations erupted across China in 2005 over an accumulation of post-war political disputes, former Chinese commerce minister Bo Xilai warned the boycott would jeopardize China's economic development as joint ventures are rampant and Japanese firms employ some 1.5 million locals.

Chinese authorities squelched the protests that year in part to avoid damaging economic ties. But Bo Xilai has been ex-communicated. Is anyone listening now?

The Japan External Trade Organization office in Beijing is still tallying up business losses from this month's demonstrations and boycotts. It's busy phoning up some of the 4,619 Japanese subsidiaries in mainland China and estimating a toll from cancelled travel plans.

JETRO doesn't expect to report dramatic losses yet but warns of a lag effect that's obvious in six to 12 months even if anti-Japan activity dies down before then. "Direct losses are hard to estimate but may not be too huge for now, yet from today forward we might see something different," JETRO specialist She Xing told me this week. In 2005, he adds, "the government handled protests in a rational manner."

At least 19 massive Japanese firms are listed in New York, putting their shares at risk if their properties, workforces or sales take a sustained hit.

Violent mid-September protests in various Chinese cities prompted temporary closure of many Japanese businesses in China, Capital Economics says. It names Panasonic (PC) and global camera maker Canon (CAJ) plus three signature automakers, Toyota Motor (TM), Honda (HMC) and Nissan (NSANY).

These firms are on the move in China. Toyota hopes to double sagging China sales by 2015 with sales of hybrids and cheaper cars, a Japanese business paper, Nikkei said earlier this month. Chinese local governments are keen on putting drivers into hybrids as pollution stifles the air.

Panasonic is aiming for sales growth in China from 8.5 billion yen in fiscal 2011 to 25 billion yen in fiscal 2015 with what it describes as a full-scale entry into the "Chinese housing equipment and construction market" this year.

Shares for these automakers and electronics firms have fallen 3% to more than 9% since Sept. 14, the day before mass demonstrations swept China.

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