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Store wars

19 September 2012 By John Foley

Are consumers China’s secret weapon? Not when it comes to winning its ongoing spat with Japan. Even if some Chinese shoppers are giving Uniqlo and Toyota a miss, history shows that consumer boycotts have at best a short-lived effect. Economic warfare looks reassuringly hard to wage.

Calls for Chinese consumers to stop buying Japanese sound troubling.

But there’s little evidence they work. In 2003, many U.S. consumers boycotted French wines over that country’s refusal to condone the Iraq invasion. Despite stories of sharp drops in sales, U.S. trade data shows imports increased sharply year on year during the campaign. In 2006, some Muslim countries ditched Danish goods after supposedly blasphemous cartoons, causing alarm at Lego and dairy maker Arla. Even so, a Danske Bank assessment at the time suggested only 2 percent of Danish exports were exposed.

One problem is the “free rider” effect – consumers support boycotts in principle, but don’t want to stop buying products they like. Cars may be an exception, since they’re highly visible and easy to vandalise, so Toyota and Nissan have reason to worry. For other products, however, online retail makes it easy to cheat. It was still easy enough to find Nikon and Sony products on Chinese ecommerce sites on Sept. 19.

Attacks on production and investment can be more effective. The oft-touted example is the “divestment” campaign against South Africa during the Apartheid years, when U.S. students forced college endowment funds to sell shares in companies with South African links.

But China’s development pattern means that’s not an option. The flow of investment has been mostly inward. If anything, the risk is that Japan divests, cutting jobs in the process. Canon alone has 32,000 manufacturing staff in China.

That leaves action from the top. Government-led sanctions, or boycotts by state-owned companies, could affect Japan given the huge trade flows between the two, but not without harming the productivity of Chinese factories that depend on its technologies. Selling Japanese government debt is another threat, though China owned less than 2 percent of Japan’s outstanding bonds at the end of 2011. For now, Chinese nationalism is strong, but the ties of globalisation are stronger.


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