An escalating land dispute between China and Japan over the Diaoyu/Senkaku Islands poses a threat to Japanese businesses operating in China. Technology companies in particular could be adversely affected by outbreaks of violence, informal boycotts or official sanctions that could emerge from the feud.

A China Daily op-ed (via Sinocism) is calling for use of a “security exceptions” clause from the World Trade Organization that could allow China to put in place economic sanctions on Japan for nationalizing the islands by purchasing them from a private owner.

Restrictions between Japan and China would have far-reaching economic effects. In the first six months of the year, Japan sent more than $73 billion worth of products into China and $91 billion in goods.

“It’s clear that China can deal a heavy blow to the Japanese economy without hurting itself too much by resorting to sanctions,” the editorial read.

 Threats of sanctions cast gloom over Japanese businesses in China

Patriotic Chinese citizens have already organized informal boycotts of Japanese goods, but official restrictions from the central government would, of course, have a larger impact.

With Chinese protesters even resorting to violence at times, Japanese companies also face threats to their manufacturing operations, many of which are based on the mainland. Bloomberg reported over the weekend that a Panasonic factory and a Toyota dealership in China had both been set on fire. MarketWatch (via Tech in Asia) noted that Japanese companies, including Canon and Panasonic have put a hold on production in China.

Meanwhile, owners Japanese-branded cars have been wary of taking their vehicles out on the road, as protesters have been known to vandalize them.

Rumors had hinted that some of the protests may have been staged by the government, possibly with the help of paid protesters, but the government is now taking steps to crack down on looting and violence, which got out of control in some cities throughout China over the weekend.

The Global Times, often an indicator of the government’s stance, had this to say about the violence:

“Mainstream society clearly opposes violent protests this time. There is no reason to suspect that the government is turning a blind eye to the violence seen over the weekend. This is simply the view of those who make a habit of criticizing the government.”

The paper went on to state that violent protests “should never be condoned” and called on Chinese society to be “firm in pouring more pressure on street violence and working to end it.” With the world anxiously watching the dispute, hopefully the property destruction and attacks will be reined in and an amicable resolution reached.

Images via National TurkChina Daily