Japanese businesses close in China in face of protests

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BEIJING — Japanese factories, restaurants, mini-marts and clothing retailers across China closed en masse Tuesday as protests continued in nearly 100 cities over a territorial fight between the two nations centered on some uninhabited islands near Taiwan.

Nissan, Honda, Toyota and Mazda suspended operations at some plants, as did Sony. Hundreds of 7-Eleven shops run by a Japanese company were shuttered, as were dozens of outlets of the popular Gap-like Japanese clothing chain Uniqlo. Eateries serving Japanese food -- even those with Chinese owners and staff -- closed as well, shaken by weekend demonstrations that saw protesters overturning Japanese cars, looting businesses and setting factories on fire.

Anti-Japan protests, stoked by animus dating back more than a century and often sanctioned by the Chinese authorities, arise periodically in China. But this week’s gatherings have been the largest and most violent since at least 2005.

While Tuesday’s marches were more orderly than those over the weekend and many observers believed the worst mayhem had passed, there was mounting concern that the economic fallout was just beginning.

The closure of businesses and calls to boycott Japanese goods helped drive down the stock prices of many Japanese companies, including Nissan, which fell 5%; Honda, which dropped 2.5%; and Uniqlo parent firm Fast Retailing, which plummeted 7%. Some Chinese companies with close ties to Japanese firms also saw sell-offs in their shares. Chinese firms seized on the nationalist spirit to promote their brands. The search engine Baidu added a cartoon of the disputed islands (topped with a Chinese flag, of course) to its home page. A grocery store in the southern province of Guangdong set up a large display of toothpaste (brand name “China”) in the shape of a cannon, adorned with a red banner declaring “The Diaoyu Islands are China’s!” Meanwhile, several prominent Chinese newspapers with ties to the government carried opinion pieces suggesting the country should slap sanctions on Japan, starting a trade war.

“This is the worst we have seen,” said Tetsuo Kotani, a research fellow at the Japan Institute of International Affairs in Tokyo. “This could be a turning point for Japanese companies, making them reconsider the risks in China and leading them to diversify toward Southeast Asia, South America and Africa.”

The stakes on both sides are high: China and Japan are the world’s No. 2 and No. 3 economies, and their bilateral trade last year was worth nearly $350 billion. China is Japan’s largest export market, while China received some $12 billion in foreign direct investment from Japan in 2011, according to Japanese government figures. More than 3 million Japanese visit China annually.

Prospects for a quick diplomatic solution to the rift seemed dim Tuesday, as both sides dispatched vessels to the waters near the islands. Chinese Defense Minister Liang Guanglie said China hoped to solve the crisis peacefully, but warned pointedly that “we reserve the right for further action” if Japan failed to undo its “mistakes.” Japanese officials, pushed to action by Tokyo’s stridently nationalist governor Shintaro Ishihara, announced last week the government would purchase three of the islands from the Japanese family that has controlled them for decades.

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--Julie Makinen