Dangers of a Sino-Japanese Trade War

Protests against the Japanese purchase of the Senkaku / Diaoyu Islands took place in various Chinese cities recently, including Beijing, Shenzhen, Luoyang and Xi’an amongst others.  Japanese branded products, including numerous cars (and even a camera belonging to a protestor) were attacked and destroyed by the angry crowds.   Panasonic and Toyota as well as Nissan reported damage to commercial properties (a factory and car dealerships respectively).   Canon has also closed some facilities whilst Japanese clothing chain Uniqlo chose to shut several locations, and covered signs at others.  Protestors have also targeted Chinese owned Japanese branded products - images of which cannot be encouraging for prospective customers.  Meanwhile, some Chinese protestors are calling for consumer boycotts of Japanese branded products.

Consumer boycotts can be damaging and reflect a level of political risk inherent in doing business in foreign markets – they are by no means limited to China.  This aspect of political risk is troublesome, but with the growing importance of China’s market, “political risk with Chinese characteristics” must be accepted as part of the business environment. Readers may remember previous rounds of anti-Japanese protests in the mid-2010s, as well as the targeting of Carrefour and MacDonald’s branches in 2008 in response to instability in Tibet and the Olympic torch protests.  In a globalized world strong brands and their logos are often taken to represent a country as much as its embassies or flag. If a large brand is operating successfully in a foreign market, they may effectively be on the front-lines of disagreements over which they have no control.  

Consumer boycotts can take various forms and be over various issues. In Europe and the U.S., they often occur over perceived immoral or unjust actions by companies, including safety concerns, actions in developing countries, poor environmental records, and the mistreatment of workers. Examples of these could be the boycotts against Nestle in the late 1990s and the more famous protests against Nike over its labor practices.