By Jennifer Cheung

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

Panasonic has been at the forefront of Chinese workers’ anger over Japan’s “purchase” the island chain last weekend. Its factory in Qingdao was set on fire, while its facilities Zhuhai [2] and Suzhou were confronted by outraged workers. As a result, Panasonic decided to suspend operations until after the highly sensitive anniversary of the Japanese invasion of China on 18 September 1931. The consumer electronics giant told [3]21st Century Economic Herald on 17 September that while the factories in these three cities had seen protests, the situation had now stabilized.

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.

A Lion Corp worker in Qingdao told 21CEH 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.

The labour volatility at Japanese factories reflects not only the deeply entrenched anti-Japanese sentiment of many workers, but also the hierarchical corporate culture of these firms and the communication difficulties between Chinese workers and Japanese management. Moreover, Japanese factories are often highly profitable, giving workers the incentive to strike in a bid to obtain a fair share of those profits.

On 13 September the official All-China Federation of Trade Unions (ACFTU) added to the anti-Japanese mood by announcing [4] 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. But it stopped short of directly encouraging worker protests.

Many Japanese firms have had long-term expansion plans in China, hoping to capitalize on the country’s vast domestic market and relatively low labour costs but those plans may now be changing. 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 and the islands protests have now altered the political environment as well.

Aside from workers’ protests, the boycotts of Japanese products that flared up across the country over the weekend, will also likely impact Japan’s technology, automotive and apparel companies as well.

Japanese companies are reportedly [5] either withdrawing their employees from China or suspending business trips to and within the country. Sony has reportedly [6] 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 18 September. Department stores like Ito Yokado and fashion retailers Uniqlo have also announced [6] business closures on 17 and 18 September.