I agree. Beijing is under pressure to produce favorable results at a time when its leadership faces a complicated transition, slowing economic prowess, unprecedented fallout from the Bo Xilai situation and other prominent scandals that have rocked the very top of the Communist Party — including recent revelations that Premier Wen Jiabao appears to have amassed a $2 billion fortune illicitly, using his position to gain wealth and power.
Fourth, I am hard pressed to imagine how Japanese companies can come out on anything other than the losing end of the stick no matter how the Senkaku/Daioyu Island situation plays out.
And with more than 20 years of doing business in this part of the world, that’s not an easy conclusion for me to reach.
Japan has built its entire economy on exports for decades and the conscious shift to embrace China in the late 1990s will haunt Japanese corporations for a long time to come if Japanese and Chinese leaders cannot come to some sort of agreement.
If there is a bright spot it is this: Capitalism works because there are ebbs and flows in capital markets that are caused, many times, by factors well beyond rational expectations.
That means there for every loser, there is a winner.
I expect German and Korean car makers to immediately fill any gaps left by pressured Japanese automakers. Both VW (PINK:VLKAY)and Hyundai (PINK:HYMLF) come to mind, for example. GM and Ford will both make competitive moves as well if they’re smart.
In like fashion, other non-Japanese, non-Chinese air carriers will move to service demand if it resumes. This will allow both nations to draw closer together without either losing face by directly “serving” the other.
Home appliance makers are more problematic in that both industries are effectively commoditized at this point. There is very little in the way of technology or other competitive advantage that can’t be taken up by local Chinese companies.
Perhaps that’s an opening for American manufacturers if the upcoming anti-Chinese presidential election rhetoric doesn’t effectively tank them, too.