Japanese Factories Halt Production In China As Island Dispute Escalates

The escalating crisis between China and Japan over the barely inhabitable Diaoyu/Senkaku Islands has forced many Japanese-owned businesses in China to close temporarily in mid-September.

Although Sony announced Tuesday that two of its factories in China would resume production on September 19 after a two-day closure, Panasonic China instructed its factories to use their own discretion to decide whether to resume production or not, according to Chinese media report.

Panasonic has been at the forefront of Chinese workers’ anger over Japan’s “nationalizing” the island chain on September 10. Its factory in Qingdao was set on fire, and its facilities in Zhuhai and Suzhou were confronted by outraged workers last weekend. As a result, Panasonic decided to suspend operations until after the highly sensitive anniversary of the Japanese invasion of China on September 18, 1931.

Other Japanese factories forced to suspend operations include toothpaste maker Lion Corp, camera and office equipment manufacturer Canon, and auto makers such as Honda, Mazda and Nissan.

The labor volatility at Japanese factories reflects not only the deeply entrenched patriotic sentiment of Chinese workers, but also the hierarchical corporate culture of these firms and the communication difficulties between Chinese workers and Japanese management.

On September 13 the official All-China Federation of Trade Unions (ACFTU) added to the anti-Japanese mood by announcing that, in “the name of 258 million trade union members and the whole working class,” it strongly condemned the Japanese government’s infringement upon China’s sovereignty. It stopped short of directly encouraging worker protests.

Facing protestors across 50 cities in China, Japanese companies are reportedly either withdrawing their employees from China or suspending business trips to and within the country. Sony has reportedly canceled some of its marketing activities in China and Lawson, Japan’s second largest convenience store franchise, said it’s likely to temporarily close stores in Chongqing on September 18. Department stores like Ito Yokado and fashion retailers Uniqlo have also announced temporary business closures .

The boycotts of Japanese products that flared up across the country over the weekend will likely impact the top line growth of Japan’s technology, automotive and apparel companies. Meanwhile, labor observers are worried if the boycotts would affect employment of Chinese workers as Japanese factories in general are a big employer of Chinese labor force. Canon reportedly sent its 22,000 workers on paid annual leaves during September 17 and 18.

A Lion Corp worker in Qingdao told 21st Century Economic Herald that the factory closed in order to guard against casualties if protests escalated. “Now we are on paid leave. We hope the factory can resume operation soon,” he said.

Many Japanese firms have had long-term expansion plans in China, hoping to capitalize on the country’s vast domestic market and relatively low labor costs. Yet recent waves of workers’ strikes (such as at Honda in the summer of 2010) and government initiatives to encourage collective bargaining and democratic trade union elections (Ohms Electronics in Shenzhen this year) have changed the working environment in Japanese-owned factories considerably.

This year’s anti-Japanese protests in China have overtaken those in the spring of 2005 in terms of overall scale and the number of participating cities. The demonstrations in 2005, sparked by Japan’s revision of a history textbook, spread to around 20 cities in China and lasted around 2 months.

Forbes