Anti-Japan sentiment in China taking toll on bilateral trade

An Expert's View about Political Conditions in China

Posted on: 31 Oct 2012

Anti-Japan protests in cities across China appear over for now, but executives at companies with business ties to Japan foresee mid- to long-term effects of the island dispute on their revenue. Almost half of the 482 respondents in a survey conducted by Chief Executive China Online expect a negative impact on their business this year. Sixty-eight percent predict a loss of 10 percent or less to their annual sales.

With 2011 bilateral trade amounting to $342.8 billion, the implications for the already-slowing China economy may be unfavorable.

Among the China exporters taking part in the poll, almost 30 percent estimated their company's loss at 5 to 10 percent this year. Extrapolated industry-wide based on last year's trade value, revenue could drop by $7.4 billion to $14.8 billion in 2012.

Two-thirds of polled importers of Japan-made goods expect losses of 5 percent or less, which would constitute a $9.8 billion loss in business countrywide

In the short-term, most respondents plan to maintain a low profile, while conducting "business-as-usual" where possible. But they are following developments closely and are ready to react if anti-Japan sentiment continues to grow.

Here is how different types of businesses said they would respond if the situation worsens:

- Manufacturers using Japan-imported parts: Seek new sources (73 percent). Among those who would proactively seek new suppliers, one reason given was the willingness of employees to boycott Japan-made goods (49 percent, multiple choice);
- Exporters: Turn to buyers in China or the EU (59 percent and 40 percent respectively, multiple choice);
- Importers: Honor current contracts, but delay new ones until relations improve (37 percent);
- Retailers: Temporarily stop displaying Japan brands (24 percent) and delay new contracts (11 percent).

One-third of respondents employed at Japan-invested firms in China concede that the impact of recent events has had a "temporary but major impact," but over half maintain that their workforces remain focused and loyal. When asked if their company is likely to stop dealing in Japan-made goods, close their business or shed their Japan investors within the next year, the results were mixed: 45 percent voted "very unlikely," while "very likely" and "somewhat likely" both garnered 11 percent of votes.

The survey, "Current anti-Japan sentiment: How big a risk does it represent to your firm?" was conducted on Chief Executive China Online from Sep. 20 to 24, 2012. A total of 1,113 individual voters initially took part, but 482 who identified themselves as belonging to one of the following categories were allowed to complete the questionnaire:

- Exporters to Japan (31 percent);
- Manufacturers of finished goods containing a high percentage of Japan-made parts/materials (24 percent);
- Resellers of goods made in Japan (24 percent);
- Importers of Japan products (12 percent);
- Japan-invested firms (9 percent)

At 83 percent, the majority of respondents classify themselves as managers, including almost one-third who are top management (CEO, GM) and one-fifth who are marketing/sales managers. Their companies are largely based in southern or eastern China (43 and 39 percent respectively). In terms of annual sales, two-thirds generate $10 million or more, with 27 percent of the respondents reporting corporate earnings of over $150 million.

Read the full report on Anti-Japan sentiment in China taking toll on bilateral trade. Global Sources is a leading B2B portal and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines and trade shows.

Posted: 31 October 2012

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