A dispute between Chinese and Japanese officials over several tiny Islands roughly 370 kilometers off the coast of China has sparked outrage throughout China. The Chinese feel that these islands belong to them and that it was unfair that the Japanese purchased them without negotiation. Consequently many of the Chinese have begun to riot. This dispute is potentially dangerous, economically speaking, for both countries. In recent years, China has developed into Japan’s biggest trading partner along with hosting many Japanese manufacturing factories. Companies such as Panasonic and Toyota have had factories and dealerships set on fire. Honda and Toyota have also shut down plants in China recently due to fear of this happening again. If the tension escalates Japan must find other ways to aid their economy.
A small conflict like this one could affect much more than just these two countries. The argument between these two countries could easily have an effect on the global economy. If Japanese companies such as Toyota and Honda are unable to produce cars in China you can expect for a price hike in Japanese products especially automobiles and electronics. If Japanese car prices rise consumers could be looking for alternate companies to purchase from, such as North American brands Ford or GM. An argument over something as small as a few islands in the middle of nowhere can go a long way in effecting the world’s economy.
http://www.economist.com/node/21563316
http://www.economist.com/blogs/analects/2012/09/anti-japan-protests?spc=scode&spv=xm&ah=9d7f7ab945510a56fa6d37c30b6f1709