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China island row takes bite out of Japan tourism
by Staff Writers
Tokyo (AFP) Dec 5, 2012

China firms worry on business barriers: US official
Beijing (AFP) Dec 5, 2012 - A top US official Wednesday tried to ease fears among Chinese firms of barriers doing business in the US after a Washington committee accused two companies of posing a security risk.

Undersecretary of State Robert Hormats was speaking at a forum in Beijing to promote Chinese investment in the US, two months after the congressional committee said Huawei and ZTE should be excluded from government contracts because their equipment could be used to spy.

A US commission last month also asked lawmakers to consider tighter rules on investment by Chinese state-owned firms, warning they could pose economic as well as security risks.

The US-China Economic and Security Review Commission also said the world's second-largest economy was likely to look to acquire US companies as it diversifies its more than $3 trillion in foreign reserves.

But Hormats, undersecretary of state for economic growth, energy and the environment, told Chinese companies and government officials at the Beijing forum: "Promoting Chinese investment in the United States is, of course, not without its challenges.

"I think this is something that we are all aware of and we need to address and to understand better and resolve."

A high-level body, the Committee on Foreign Investment in the United States (CFIUS), vets companies over security concerns but Hormats said the number of firms that needed clearance before accessing the US market was relatively small.

"We know, for example, that there are Chinese concerns about CFIUS. However, I would simply say one thing about that, which is that CFIUS is limited in scope to cases related to national security, and the number of transactions considered by CFIUS is in fact very few."

Chinese investment abroad has soared over the past decade, in parallel with its huge economic growth.

The sound of Mandarin-speaking tourists and the cash tills they set ringing have become rare in Tokyo's upmarket Ginza district, retailers say, since a flare-up in an island row between China and Japan.

"Until September, we had many Chinese customers and you could hear Chinese spoken in our shop," said Mika Nakatsugawa, who trains clerks at cosmetic firm Shiseido's flagship outlet in Ginza, the Japanese capital's equivalent of Fifth Avenue in New York.

"Then they suddenly stopped coming. This month, some customers are coming back, but it's very slow and nothing like before."

The number of Chinese tourists -- one of Japan's biggest visitor groups behind South Koreans and Taiwanese -- plunged 33 percent in October from a year ago to 71,000 visitors, according to the Japan National Tourism Organization.

And the figure from last year was already weak with tourism still reeling from the March quake-tsunami disaster and subsequent atomic crisis, which sparked a dive in overall visitor numbers.

As airlines cancelled thousands of flights between Japan and China when the long-standing diplomatic row flared in September, Ginza's upscale retailers soon found that once-jammed Chinese tour buses were nowhere to be seen.

To make matters worse, Chinese tourists, on average, spend over $2,100 during their visits to Japan, on top of their airfare, among the highest of any nationality, according to Japan Tourism Agency data.

The flare-up in the decades-long row over an East China Sea island chain sparked a consumer boycott of Japanese products in China and huge demonstrations, prompting Japanese firms operating there to temporarily close stores and factories fearing mob violence.

Tokyo's nationalisation in September of the disputed islands -- located in rich fishing grounds and believed to sit atop vast mineral reserves -- came at a particularly bad time.

Ginza retailers were hoping for hordes of shoppers during a week-long Chinese holiday in October but the spat kept them away.

"Shops in Ginza have been hugely damaged by the diplomatic fight, as everyone had been preparing for shopping sprees," said Nakatsugawa at Shiseido.

"I want the politicians to know the economic impact of this has been big."

The damage has rippled across Japan's economy and damaged a more than $340-billion annual trade relationship with Beijing.

Japan's automakers and electronics firms have seen their China sales take a huge hit, with the country's two biggest airlines -- Japan Airlines and All Nippon Airways -- reporting a steep dive in ticket sales.

And Japan's goal to boost tourist numbers to a record nine million this year has suddenly become a "very hard" target, said Norifumi Ide, head of the Japan Tourism Agency.

Not far from the Shiseido outlet, luggage store manager Koichi Miwa echoed the grim statistics, saying a big part of his customer base just "disappeared".

"The number of Chinese customers literally turned to zero at one point," Miwa said.

Chinese shoppers often splurge on a large number of products to dole out to family, friends and colleagues, retailers said.

Yamada Denki, one of Japan's biggest consumer electronics chains, said some of its outlets in Tokyo's Akihabara district saw a decline in such deep-pocketed customers.

"But our rivals, who pay a commission to tourism agencies to bring in Chinese tourists, may have had a bigger negative impact than us," a company spokesman said.

However, the hollowing-out of Ginza may not just be a matter of Chinese consumers taking out their anger on Japan by staying at home.

Miwa, the luggage retailer, suspects many feared tit-for-tat violence after Japanese in China were attacked and businesses vandalised.

"Once Chinese people start coming here again, they will be relieved to find out they are not treated as badly as Japanese people in China have been."


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