Beijing: The anti-Japan demonstrations in China over disputed islands Monday took an ugly turn with protesters attacking some of the top Japanese firms, including Panasonic and Canon, hitting flourishing bilateral trade.
China is Japan`s biggest trading partner and their two-way trade last year stood at USD 345 billion.
Panasonic has suspended some of its operations in China after anti-Japan protesters attacked two of its factories. Canon has also suspended operations at three of its Chinese factories, according to reports.
Also Japanese car manufacturer Toyota which has huge manufacturing facilities in China was affected as its cars came under attack at several places, including in Beijing.
Though one of its showrooms here was damaged in the attacks, Toyota said operations in its factories are normal.
What started as stray protests in front of Japanese diplomatic missions all over China have turned out to be massive demonstrations, something the country has not witnessed for long as public demonstrations are highly regulated in the communist nation.
The protests started after Japan bought the Senkaku islands called Diaoyu islands by China from a private party for USD 26 million ignoring strong opposition from China.
Though China yesterday appealed to the protesters to be calm, the demonstrations turned violent in several places today.
Asked about the violence, Chinese Foreign Ministry spokesperson Hong Lei said today that while protesters should be peaceful they were "provoked by gravely destructive consequences of Japan`s illegal purchase of the Diaoyu Islands, and the responsibility for this should be born by Japan".
"The course of developments will depend on whether or not Japan faces up to China`s solemn stance and whether or not it faces up to the calls for justice from the Chinese people and adopts a correct attitude and approach," Hong said.
The protests coupled with hard-line stand taken by Chinese government asking Japan to rescind on its move to buy the islands sparked fears that it would have major negative impact on the USD 345 billion bilateral trade in which both countries would loose.
China exported to Japan USD 162 billion worth of goods last year and imported merchandise about USD 183 billion.
The confrontation between the two top economies in Asia could hurt each other badly as their exports markets in EU and US were on decline.
"We are definitely seeing that Japanese companies are being directly affected by the protests," Shaun Rein of China Market Research Group told the BBC.
Observers say that the Japanese firms could shift their bases to other countries in the region as production costs have already on rise in China.
The People`s Daily, the flagship newspaper of the Communist Party of China, meanwhile warned economic and trade sanctions against Japan.
"Would Japan rather lose another 10 years, or even be prepared to fall back 20 years?" asked the daily.
Given the interdependency of the two countries, economic punishments would be a "double-edged sword" for China, who in principle opposes sanctions to solve international disputes and has been cautious in using them, it said.
But for issues concerning its territorial sovereignty, China will meet head-on if the Japanese government continues its defiance, it said.
Terming the economic punishments as the "gun", the paper said the gun is in the hands of the Chinese government, but it is to some extent decided by the Japanese government whether and when to pull the trigger.
Meanwhile US Defence Secretary Leon Panetta is scheduled to arrive here from Tokyo.
In Tokyo, Panetta had urged China to show restraint and protect Japanese people`s property.
Ahead of his visit, Panetta said Washington would stand by its security treaty obligations to Japan but not take sides in the row.
Asked about US stand over the islands, Hong said, "We hope that US side earnestly honour the principles of not taking a stand on the Diaoyu islands issue".