By Kazunori Takada and Jane Lanhee Lee
NANJING, China (Reuters) - Tensions between China and Japan are at their worst in years over rival claims on a group of islands, angry crowds have overturned Japanese cars in one Chinese city and a man ripped the flag off the Japanese ambassador's car in Beijing.
But in shops and department stores in China's main cities, there appears to be no let-up in the purchases of Japanese gadgets, clothing and other products. Even in Nanjing, at the heart of the historic animosity between the Asian giants, it's business as usual.
"I don't like Japan but as the Western saying goes 'politics is politics and economics is economics'," said a young man walking out of an outlet of Japanese electronics retailer Yamada Denki Co Ltd in downtown Nanjing, holding a shopping bag.
"I care more about the quality of the things I buy."
He only gave his family name, Liu, and said he was 27 years old.
Chinese officials and media have fiercely attacked Japan for the dispute over the islands, saying Beijing needs to take a strong stance, including the use of military power if needed. On Thursday, Chinese Vice Minister of Commerce Jiang Zengwei said economic and trade ties could be affected by the row.
China is the world's second-biggest economy and Japan is the third-biggest. Any disruption in their ties could have consequences for the global economy, which has already been buffeted by the debt crisis in Europe and the lack of a cohesive recovery in the United States.
But so far there has been little evidence to suggest such rhetoric is affecting the man on the street. In Shanghai and Beijing, demand remains steady for Japanese goods and merchandise.
Even in Nanjing, the site of the 1937 Nanjing Massacre by Japanese troops and where anti-Japanese sentiment runs high compared with most other Chinese cities, people were queuing up in front of Japanese restaurants.
Shop owners and sales clerks said there had been no let-up in the crowds at Japanese shops and restaurants near Xinjiekou, one of the busiest shopping districts in the city, since tensions spiked this month after Japan said it was buying the islands from its private Japanese owner.
But the risk is rising that Japanese businesses, which are already having to confront a slowdown in China's economy, will be affected by the row.
"The economic impact between the two countries will depend on the Chinese government counter-measures," said Yu Jingping, a professor at Nanjing University's School of Economics, adding that tensions between the two countries were at their highest in years.
"I think the impact could be incredibly big."
Tadashi Yanai, chairman and president of Japan's Fast Retailing Co, Asia's largest apparel retailer, told Reuters last week that Japan's strained ties with its neighbors were a source of anxiety while some Chinese travel agents have been reported to be cancelling tours to Japan.
Japanese businessmen say an increasing number of Japanese firms are refraining from, or being asked by local Chinese officials to cancel or postpone, large-scale sales promotions, news conferences and other public events due to the territorial dispute.
Earlier this week, the Shanghai municipal government renamed a marathon scheduled for December to exclude the name of the Japanese sponsor, Toray Industries Inc.
"Many Japanese firms are worried about the economic slowdown in China and they are eager to boost demand among the consumers," said Hiroyoshi Ikeda, chief executive officer of MYTS Group, which provides consulting and accounting services to Japanese companies in China.
"So obviously the fact that they can't hold large-scale promotion campaigns now will be a blow."
A CONVENIENT EXCUSE?
Nissan Motor Co Ltd's Chief Operating Officer Toshiyuki Shiga said last week that Japanese car manufacturers were having difficulty in holding big, outdoor sales promotion campaigns, and that may have hurt August sales.
But quantifying the extent of damage the territorial dispute is having on companies is not easy, especially as China's overall economic growth is slowing.
Wang Zhaoshen, a sales manager at a Nissan dealer in Nanjing, said the political tension had not had much impact on sales so far and that the slowdown in the overall market was a bigger concern.
"He (Shiga) must be using it as an excuse," he said, adding rising labor costs and petrol prices were the real problems for car makers.
But just across the road, a manager at a Toyota Motor Corp dealership said 5 percent of his clients had cancelled purchases since the flare-up in tension, citing the island dispute.
"I don't know if that's the real reason and there's no way of finding out," he added.
While economic trade between Asia's two biggest economies has continued to grow over the past decade, Japan's behavior before and during World War Two, when it occupied much of China, remains an unhealed wound for many Chinese.
"As a Nanjing native, I've always felt animosity towards Japan because of the massacre," said Liang Yan, 30.
She said she prefers to buy non-Japanese goods but reluctantly chooses products like cameras and lenses from Japanese manufacturers because of their high quality.
"If China gets stronger and its product quality improves, I'll consider switching to Chinese products."
(Additional reporting by Anita Li and James Topham in TOKYO; Editing by Raju Gopalakrishnan)
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