Companies Should Consider Reducing Reliance On China And Japan, Gartner Says - InformationWeek

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Companies Should Consider Reducing Reliance On China And Japan, Gartner Says

As tensions between Japan and China escalate over arguments with origins in World War II, technology companies should prepare to lessen their reliance on the two countries, according to market research company Gartner Dataquest.

TAIPEI, Taiwan — As tensions between Japan and China escalate over arguments with origins in World War II, technology companies should prepare to lessen their reliance on the two countries, according to market research company Gartner Dataquest.

"More than 95 percent of the largest 2,000 companies in the world have extensive interests, investments and employees in China and Japan," said Dion Wiggins, vice president and research director of Gartner. "Most large global companies will have to adjust their strategies and plans if the China-Japan situation remains volatile. For many companies, it is no longer 'business as usual' in northeast Asia."

For the past two months, China and Japan have been embroiled in a diplomatic battle over events during World War II. The conflict, which led to widespread street protests in China, was initially sparked by a school textbook, released recently in Japan, that allegedly glosses over World War II atrocities.

China is also angered by annual visits Japanese Prime Minister Junichiro Koizuimi makes to the Yasukuni shrine, a Shinto temple historically linked with Japanese militarism. In an editorial Wednesday (May 25), the government-run China Daily called the visits "intolerable." Japan considers them an internal matter.

In its assessment, Gartner said the "large disconnect" between the business and political relations of China and Japan could threaten trade between the two partners. That would be a serious matter for both countries. Currently, Japan is China's largest trade partner, with $213 billion passing between the countries last year. Japan is also a top investor, with $48 billion invested from 1979 to 2003, more than the U.S. at $43 billion or Europe, with $28 billion.

As a hedge against escalating tensions, Wiggins said companies "should certainly consider plans to reduce their dependencies on supply of products and services from this region through diversification of supply and the broadening of any new investments to balance the increased risk."

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