Bloomberg News

China-Japan Island Dispute Grows in ‘Blow’ for Global Economy

September 16, 2012

Panasonic, Toyota Report Damages in China as Protests Widen

Demonstrators walk near paramilitary police officers in front of the Japanese consulate in Shanghai on Sept. 16, 2012. Photographer: Eugene Hoshiko/AP

A territorial dispute between China and Japan worsened as Prime Minister Yoshihiko Noda said he’ll demand the Chinese government ensure the safety of Japanese citizens, thousands protested in Chinese cities and Toyota Motor Corp. (7203) and Panasonic Corp. (6752) reported damage to their operations.

Demonstrators took to the streets in a dozen cities across China including Beijing, Shanghai and Guangzhou, calling for Chinese sovereignty over disputed islands and the boycott of Japanese goods. In the city of Shenzhen, police used tear gas and water cannons to stop protesters from reaching a Japanese department store, Radio Television Hong Kong reported.

“I intend to strongly demand that the Chinese government ensure security” of Japanese citizens, Noda said yesterday on public broadcaster NHK’s “Sunday Debate” program.

Tensions between Asia’s largest economies escalated after Noda’s government said last week it would purchase disputed islands from their private Japanese owner, prompting China to dispatch government vessels near the islands known as Senkaku in Japanese and Diaoyu in Chinese. The row comes as both countries grapple with a global economic slowdown and China prepares for once-a-decade leadership change.

“This is another blow for the global economy,” said Andy Xie, formerly Morgan Stanley’s chief Asia economist. “The costs for China may be less FDI but it could be worse for Japan as the bright spot for the economy has been the auto industry.”

Car Sales

Tokyo Governor Shintaro Ishihara triggered the dispute in April when he said he may use public funds to buy the islands. Tensions escalated after Japan’s cabinet approved the purchase of the islands for 2.05 billion yen ($26 million) on Sept. 11. China has said it doesn’t accept the move.

Sales of Japanese-branded passenger cars fell last month in China, compared with gains of more than 10 percent for German, American and South Korean vehicles. China is the world’s largest car market.

A Toyota dealership was damaged by fire in the Chinese city of Qingdao and the company is checking for losses in other locations, spokesman Keisuke Kirimoto said yesterday. Smoke and flames were also reported coming from a Panasonic electronics parts plant in the same city after demonstrations, Tokyo-based spokesman Atsushi Hinoki said.

Shanghai Protests

In Shanghai yesterday, hundreds of riot police watched over groups of protesters as they gathered outside the Japanese consulate chanting, “down with Japan devils, boycott Japanese goods, give back Diaoyu.” There were no reports of injuries in the largely peaceful demonstrations.

Hundreds of protesters in Beijing threw plastic bottles and eggs at the Japanese embassy a day earlier as riot police stood guard at the gates. In Guangzhou, more than 10,000 people marched in protest, the official Xinhua News Agency reported yesterday. Demonstrations also occurred in the cities of Harbin, Nanjing, Hohhot, Changchun and Wuhan, and overseas in Houston and Chicago, Xinhua reported.

Japan’s Kyodo News said Sept. 15 that more than 40,000 people joined the demonstrations in 20 Chinese cities.

“Japan is becoming more and more arrogant and the feelings of Chinese are increasingly being oppressed,” said Xiao Feng, 26, an office worker protesting at the Japanese consulate in Shanghai yesterday after traveling to the city from Jiangxi province. “We need to step up and make our feelings known that they can’t just have their way.”

Island Landing

Activists from Hong Kong plan to sail to the islands on Sept. 18, China National Radio reported on its website. Japan last month arrested and deported a group that departed from Hong Kong and landed on the islets to assert China’s claim.

September 18 is the anniversary of the Mukden Incident, also known as the Manchurian Incident, which took place in 1931 near what is now the Chinese city of Shenyang and led to the Japanese invasion of the northeastern portions of China.

In Japan, the Foreign Ministry announced that Shinichi Nishimiya, the incoming Japanese envoy to China, died yesterday morning after an illness. Nishimiya was sent to the hospital for an unspecified illness two days after his appointment, the ministry said earlier on Sept. 13.

On Sept. 15, Japanese Foreign Minister Koichiro Gemba and Defense Minister Satoshi Morimoto cut short a visit to Australia because of the protests in China, NHK reported.

To contact Bloomberg News staff for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Mariko Yasu in Tokyo at myasu@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net


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