Japan firms brace for SARS impact on China ties
Japan firms brace for SARS impact on China ties
Elaine Lies and Yuko Inoue Reuters Tokyo
Japanese firms braced for the possibility that a deadly flu-like virus could disrupt their vital business in China as a trade official warned on Thursday that the disease could chill Japan's already fragile economy.
Although no confirmed case of the mysterious Severe Acute Respiratory Syndrome (SARS) has yet been reported in Japan, the country has a strong economic presence in Hong Kong and southern China's Guangdong province, where the outbreak is believed to have begun.
While few firms said they were worried yet, others drew up contingency plans to deal with a disruption of business with the region as Japan's government followed World Health Organization (WHO) advice and warned against non-essential travel there.
A senior government official made clear there was no room for complacency in dealing with an illness that has killed an estimated 78 people globally and sickened more than 2,000.
"We're concerned that there could be a very big effect (on Japanese companies)," Vice Trade Minister Seiji Murata told a news conference.
The government later issued the travel warning and said it had classified SARS as an infectious disease under law, meaning it can quarantine people diagnosed with the illness. It said there are now 11 suspected cases in Japan and three possible.
For Japanese firms, China -- with its fast-growing economy, huge market and cheap costs -- has become a critical area in recent years, and their presence has risen steadily in Hong Kong and Guangdong as well as the rest of the country.
Many Japanese manufacturers have shifted production to China, particularly electronics firms.
In 2001, according to the Japan External Trade Organization (JETRO), Japanese direct investment in Guangdong stood at $671 million or 5.2 percent of all foreign investment, second only to Hong Kong.
Small-motor maker Mabuchi Motor Co Ltd said it was now studying plans to shift part of its Guangdong production to Malaysia or Taiwan should SARS appear among employees at its three consignment production plants.
"You never know what will happen and we always assume the worst," a Mabuchi spokesman said.
Hajime Sato at JETRO's Hong Kong office said there are currently 652 Japanese companies registered in Hong Kong, and an estimated 3,000 Japanese-run factories in Guangdong.
Yet despite the growing shadow of the disease, most of these firms were reacting calmly, limiting their response at this point to barring business trips to the area.
"The disease has not spread that widely yet and we don't expect that it immediately will," said a spokesman for Canon Inc which has three plants in Guangdong and sees China manufacturing operations as a key part of its strategy.
Other firms were more wary, saying they were gathering information and preparing to deal with whatever might happen.
A spokesman at Sanyo Electric Co, another firm with a heavy presence in China, said each company division was formulating its own contingency plans. But he added that the impact of even temporary plant closures would be large.
"It is hard to shift volume production lines of digital cameras, for instance, to elsewhere due to different specifications of parts used by our OEM (original equipment manufacturing) customers," said the spokesman.
The Bank of Tokyo Mitsubishi, a core banking unit of Mitsubishi Tokyo Financial Group, has installed a back-up computer system that can be shared in offices in different areas of Hong Kong in case an office closes, a company spokesman said.
Securities firm Nomura Holdings Inc, which has several hundred staff in Hong Kong and around 20 or so in mainland China, also said it is considering how to deal with the closure of its Hong Kong office.
Some companies are already feeling the pinch.
A spokeswoman for cosmetics maker Shiseido said that sales of its products in Hong Kong have been hit since few people are going shopping, adding that a further spread of the disease was likely to depress demand even more.