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Japanese firms react to protests in China

By: Steve Toloken

September 21, 2012

GUANGZHOU, CHINA (Sept. 21, 2:35 p.m. ET) — The anti-Japanese protests that swept China in the last week prompted injection molding machine maker Nissei Plastic Industrial Co. Ltd. to temporarily shut down production there as a safety precaution, as other Japanese plastics firms said they had stepped up monitoring of events.

Nissei said it closed its Taicang factory Sept. 18 after hearing reports of local demonstrations being planned in the territorial dispute between the two countries over ownership of a chain of islands.

It’s not clear if any other Japanese plastics firms closed factories. Several contacted by Plastics News said they did not stop production.

But some larger Japanese automakers and electronics manufacturers did close factories temporarily after some facilities were damaged in demonstrations. In large cities like Guangzhou, Japanese restaurants closed and covered their signs after some were vandalized in protests.

“As we received information regarding a plan for the anti-Japanese demonstration march at Taicang city on Sept. 18, we casually shut off the Taicang factory for security of every staff,” Nissei said in an email to Plastics News.

Japanese plastic companies said they had not seen any significant impact on business to date, but said the events could have longer-term repercussions. The firms seemed to be choosing their words carefully, and expressed hope that issues surrounding the islands, called Diaoyu by China and Senkaka by Japan, would be settled amicably, given time.

“We have not closed any facilities so far,” said a statement from equipment maker Sumitomo Heavy Industries Ltd. “We do not see any serious impact from Japanese customers yet; however, we will watch the situation carefully.”

Nissei said the impact on business and customers was minor, although it added that it received one order for molding machine spare parts from a Japanese customer that had equipment damaged in the demonstrations, and an inquiry from a Japanese auto parts maker about its maintenance policy on machines damaged in protests.

“We do not expect any serious and direct effect on us,” Nissei said.

Compounder and material supplier Mitsubishi Plastics Inc. said it did not stop production at any of its China facilities. It said it believed that the any economic harm would be less than from either the March 11, 2011, tsunami and nuclear crisis, or the flooding in Thailand last year that damaged many Japanese factories there.

Japanese industry figures suggest the impact of the islands dispute could be significant, if the tensions spill over into the closely linked economies of the two countries.

Sumitomo officials, for example, told Plastics News last year that 40 percent of their Japanese-made presses are sold to China, including to Japanese companies operating there.

In addition to an export market, China has also become a more important production base for the Japanese industry.

Japan’s plastics machinery trade association estimated last year that production of Japanese injection molding machines in China doubled, to about 2,400 presses, as Japanese firms expanded their capacities in the mainland mostly to meet local demand.

The protests could prompt a rethinking among Japanese businesses about China, Sumitomo said: “All Japanese companies will be forced to review their China businesses in a broad sense.”

Nissei said Japanese companies could be hurt by a boycott of their goods, or by some tightening of Japanese companies in administrative procedures, such as restrictions on work permits and visas, strict conditions on custom duties, or adding some difficult conditions to transfer price restrictions.

“Taking into account every aspect of the circumstances, it is quite clear that Japan-China issues may become a huge barrier against the business in China,” Nissei said, although the company also sharply criticized the Japanese government in its statement for not taking any actions to fix Japan’s structural problems, even as companies have adjusted their strategies and sought out foreign markets.

“They just postpone their decisions and do not find out any solution,” Nissei said. “We are not satisfied with such governmental behavior.”