An unfortunate anniversary was marked on Tuesday with more unrest over a small group of uninhabited islets, disputed territory in a spat between China and Japan that has escalated into demonstrations and vandalism. Fitch Ratings warned that, should the conflict continue, auto and tech companies could see downgrades to their creditworthiness.
Reuters reported that Tuesday, the anniversary of Japan’s invasion of China decades ago, saw intensification of the demonstrations that have erupted over the islets, particularly after a pair of Japanese activists landed briefly on one of them before departing.
As previously reported by AdvisorOne, Japan had sought to purchase the islands from a private Japanese owner to preempt what the government had thought was an even more inflammatory move—a plan by Tokyo’s governor to buy the islands and build on them. Beijing reacted with fury, regardless, and Chinese citizens have done the same.
The second- and third-largest economies in the world have seen their financial well-being suffer as the demonstrations, which included rock throwing, destruction of Japanese-made cars, breaking windows and even arson, have so threatened Japanese businesses—from retail outlets to factories to restaurants—in China that many expatriate workers have been called home as facilities have been shuttered. Japanese living in China have been warned to stay off the streets.
The turmoil is taking its toll on both Japanese and Chinese companies. Markets have punished the stocks of companies from Nissan and Mitsubishi Motors to Fast Retailing in Japan and even platinum has dropped, with car companies unable to maintain production at their usual rates. The precious metal is used in catalytic converters.
China’s companies were not immune to the damage. They recorded their largest two-day drop in nearly six months over the conflict. Car dealerships suffered, thanks to the fact that they sell Japanese- as well as Chinese-made vehicles. Materials producers fell as well, with copper and mining stocks suffering. Many of the companies do such a large portion of their business with Japan that a protracted dispute could cause substantial harm.