Trade links hostage to political hostility

PUBLISHED : Wednesday, 11 May, 2005, 12:00am
UPDATED : Wednesday, 11 May, 2005, 12:00am

Operating in a hostile environment is nothing new to Japanese companies in China.

The first call for a boycott of Japanese products was in 1915, when nationwide rallies protested against the '21 Demands' made by Japan for special rights in China to the government of Yuan Shikai. In 1927, Generalissimo Chiang Kai-shek levied fines of up to 150,000 yuan against Shanghai merchants who sold Japanese products.

In 1930, following anti-Chinese riots in Korea - then under Japanese control - Chiang's Nationalist Party organised a boycott of Japanese imports.

After the Japanese takeover of Manchuria in September 1931, the boycott deepened.

But by 1936, Japan had become the biggest foreign investor, accounting for 40 per cent of the national total, mainly in textiles, chemicals and metal and machinery equipment.

By the mid-1930s, Japan had the largest foreign community in Shanghai, which attracted the major Japanese banks, shipping firms, insurance and trading companies.

After the communist takeover, economic links were cut until 1955, when the first post-1949 exhibition of Chinese goods was held in Japan, followed by a show of Japanese goods in China in 1956. When diplomatic relations were established in 1972, Itochu became the first Japanese trading company invited to resume business. There was no telex or fax and its representative had to communicate by letter, through two designated post offices. At formal meetings, only one Japanese was allowed and at least two Chinese.

Now its business with China is worth US$5 billion a year.

By 1991, one in 30 Japanese had visited China and there were 127 agreements between cities of the two countries.

Since then, China was Japan's largest export market last year, and its biggest investment destination in Asia.

About 600,000 Chinese live in Japan and about 400,000 Japanese reside in China, making them the largest foreign community. But such intense contacts have been let down by their leaders' political differences, leaving Japanese firms hostage to threats of another boycott.