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Mark O'Neill

Customers at a three-storey hypermarket in Xujiahui, one of Shanghai's busiest shopping districts, received a special offer yesterday - one free bottle of Asahi beer for every three they bought.

'This is unbeatable value,' said an enthusiastic but nervous saleswoman. 'You should take the offer while it lasts.'

Ajinomoto was also offering a free packet of soup - and a cup - for every three packets bought.

The promotions are no accident.

Asahi and Ajinomoto are on the front line of the wave of anti-Japanese protests that has swept China over the past two weeks, sparking the biggest demonstrations since 1989.

The two firms are on the list of nine companies named in a statement on April 1 on the website of the China Chain Store and Franchise Association (CCSFA), which accused them of supporting the alleged distortion of history in new Japanese textbooks.

The association called on its 650 members to remove the companies' products from their shelves.

Asahi and Ajinomoto, along with Chugai Pharmaceutical, are the most vulnerable because they sell products directly to the public.

The stakes could scarcely be higher. Last year China became Japan's largest export market, buying US$114.4 billion of goods, up 27.3 per cent from 2003, and Tokyo sees continued double-digit growth in exports over the next five to 10 years as critical to the revival of its listless economy.

Sony says its sales in China will exceed those in Japan by 2008.

Toyota Motor president Fujio Cho said it was only a matter of time before China became the world's biggest car market and Toyota was aiming for 10 per cent of it.

His goal, however, may be slipping out of reach, with protesters calling on millions of people to boycott Japanese products.

Using word of mouth, mobile telephones and the internet - because  state media have been ordered not to report the boycott - the protesters have broken an invisible barrier between politics and economics that the government has maintained with remarkable success for the past 30 years.

Since diplomatic relations were established with Tokyo in 1972, Beijing has followed a dual-track policy - it has used schools and the media to spread anti-Japanese propaganda while at the same time courting investment and trade from Japanese companies.

The policy has been a spectacular success. After years of hesitation, Japanese companies have decided that China is the future and have poured US$45 billion into mainland factories, research centres, hotels and department stores.

The protests threaten the future of these investments and may persuade Japanese firms to invest elsewhere.

The CCSFA list has already had consequences. Many hypermarkets and supermarkets, including Nong Gong Shang, one of the biggest chains in Shanghai, have removed Asahi beer and Ajinomoto products from their shelves. Nong Gong Shang said it did so because customers were not buying them.

In a statement, Ajinomoto said its inclusion on the list was a mistake and denied supporting textbook revision or giving money to the group promoting it, the Japanese Society for History Textbook Reform. 'We are working hard to promote friendship between China and Japan and improve the culinary culture of the Chinese,' Ajinomoto said.

A company official in Beijing said it was hard to estimate the losses from the protests.

'The supermarkets and hypermarkets did not tell us before they removed our products and did not ask us for a statement. From the start, the media has misled and deceived the public. We will send a statement to the CCSFA,' the official said on condition of anonymity.

Asahi also denied giving money to the Japanese textbook society. 'The shops that mistakenly withdrew our products are gradually putting them back. Our sales have been affected but we have no figures,' it said in a statement.

Asahi quoted Masahiko Osawa, its chief representative in China, as saying the company supported the 1992 apology of then-prime minister Tomiichi Murakami, who expressed deep remorse for the great pain and suffering Japan had inflicted on the Chinese people.

Other firms on the boycott list - which includes Bank of Tokyo-Mitsubishi Bank, Hino Motors, Isuzu Motors, Mitsubishi Heavy Industries, Shimizu Corp, Taisei Construction and Chugai Pharmaceutical - have distanced themselves from the textbook revisions.

An Isuzu spokesman said the carmaker had no connection with the textbook society.

A Shimizu Corp official in Shanghai said the firm did not support the revision and there was no reason to campaign against it.

Officials of Chugai Pharmaceutical and Taisei Construction declined to comment on the list, but said that their businesses had not been affected.

The boycott is not restricted to the companies on the list.

A salesman at Bafang Telecom, one of the biggest retailers of mobile phones in Zhengzhou, the capital of Henan province, said it had stopped selling Japanese handsets earlier this month.

Last Thursday, Honda chief executive Takeo Fukui said sales in China remained solid, but he was 'worried'.

'We are taking precautions so that our workers do not stand out. We want to reduce the number of overseas trips,' he said.

An official with the Japan External Trade Organisation (Jetro) in Shanghai said: 'We have not seen a big impact in Shanghai. Our companies are still sending people to China. But we ... are being careful.'

A  Jetro official in Beijing said the boycott was affecting consumers, but its impact on business was limited. 'Economics is economics and politics is politics' he said.

'The greatest fear in Japan is that China will reduce its imports from Japan. If that happens, the outlook for the Japanese economy is even more gloomy.'



Japanese firms revise strategy