As the dispute over the Diaoyu Islands between China and Japan is showing no sign of abating, many Japanese factories in China have temporarily halted production to avoid potential losses. Despite the stand-off, businesses predict that more than 90 percent of Japanese companies will not withdraw their investments from China.

This is a small factory located in south-eastern Japan. It mainly produces auto parts and has several investments in China. Though some Japanese companies have halted their production in China, the head of the factory believes the situation will only be temporary, and he doesn’t have any plan to adjust his investment.

A Japanese auto parts producer said, "Even though the relationship between China and Japan is not ideal at the moment, I believe the two countries will maintain friendly relations in the long run."

This view is shared by many Japanese companies with operations in China. So far, there has been no large wave of Japanese companies withdrawing their investments. Analysts say, as China is both a production base as well as a market, Japanese firms won’t easily change their strategies.

But some warn smaller enterprises may have to adjust their investment to hedge against any risks. However, one thing is for sure. Japanese companies just entering the Chinese market are influenced to a great extent.

Idei Nobuyuki, former CEO of Sony, said, "I know many Japanese companies have increased their investment in China last year, as well as in the first half of this year. For some companies just expanding the Chinese market, the impact is quite huge."

The business leader believes the China-Japan relations will recover. But he hopes the political issues won’t affect the trade and economic relations in the future, as Asian countries should rather strengthen their cooperation instead of exchanging swords amid the gloomy economic situation in Europe and the US.

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