China Tensions Force Japanese Companies to Retreat

Angry Chinese 

Some Japanese firms have temporarily shut factories and shops in China after angry protests over a territorial dispute, with Chinese state media warning on Monday that Japan could suffer another "lost decade" if trade ties sour.

The volley of warnings from Chinese officials and papers came after a weekend of protests across dozens of cities, some violent. Japanese Prime Minister Yoshihiko Noda urged Beijing to ensure Japan's people and property were protected, reports Reuters.

The Japanese government is warning its citizens about large-scale protests in China on Tuesday, when China marks its official memorial day for Japan's war-time occupation of parts of China.

"I'm not going out today and I've asked my Chinese boyfriend to be with me all day tomorrow," said Sayo Morimoto, a 29-year-old Japanese graduate student at a university in Shenzhen.

The ruling Chinese Communist Party, which rarely allows street protests, opened the door to the display of public anger after Japan's decision last week to buy disputed East China Sea islands, which Tokyo calls the Senkaku and Beijing calls the Diaoyu, from a private Japanese owner.

Beijing called that a severe violation of its sovereignty and the dispute has triggered a wave of nationalist ire that the Chinese government has sought to both channel and contain.

The overseas edition of the People's Daily, the main newspaper of the Chinese Communist Party, warned that Beijing could resort to economic retaliation if the dispute festers, threatening enduring repercussions for Japan.

"How could be it be that Japan wants another lost decade, and could even be prepared to go back by two decades," said a front-page editorial in the newspaper. China "has always been extremely cautious about playing the economic card", it said.

"But in struggles concerning territorial sovereignty, if Japan continues its provocations, then China will take up the battle," the paper said.

Japanese Foreign Minister Koichiro Gemba told reporters on Monday that Tokyo and Washington agree the disputed East China Sea islets claimed by Japan and China are covered by the Japan-U.S. security treaty.

"I did not bring up the topic today, but it is mutually understood between Japan and the United States that (the islands) are covered by the treaty," he said after meeting U.S. Defense Secretary Leon Panetta in Tokyo.

Last week, a Chinese commerce official warned that the quarrel could spill over into economic ties.

Already, however, major Japanese corporations have been bruised by the tensions and resulting protests. A catalogue of temporary closures has underscored the risk of the political dispute wounding economic ties.

Japanese media reports said companies were temporarily curbing operations and cutting travel in China.

Canon Inc will stop production at three of its four Chinese factories on Monday and Tuesday, citing concerns over employees' safety. Panasonic Corp has taken similar steps at its plants in China.

Toyota Motor Corp said it is tallying losses from the violence, including a suspected arson attack on a dealership in eastern China's Shandong province.

All Nippon Airways Co reported a rise in cancellations on Japan-bound flights from China.

At the weekend, Chinese demonstrators looted shops and attacked Japanese cars and restaurants in at least five cities. Protesters also broke into Japanese-run factories in eastern Qingdao on Saturday, according to the Japanese broadcaster NHK.

Qingdao police announced on the Internet on Monday that they have arrested a number of people suspected of "disrupting social order" during the protests, apparently referring to the attacks on Japanese-operated factories and shops there.