Report on China-Japan tension stirs IT debate

IT industry insiders are downplaying a Gartner analysis on Chinese-Japanese political tensions.

IT industry insiders are downplaying a Gartner report on tensions between China and Japan. The analysis says that shaky relations between the countries should make companies rethink their reliance on suppliers from Northeast Asia.

Companies "should certainly consider plans to reduce their dependencies on supplies of products and services from this region," said Dion Wiggins, a Hong Kong-based Gartner vice president and research director, in a press release about the report.

The research note, made public Thursday, singles out the China-Japan political conflict as a reason for caution.

However, Harris Miller, president of the Information Technology Association of America (ITAA), disagrees with Gartner's analysis. The ITAA is based in Arlington, Virginia, and represents 400 IT companies, most of them operating globally. Miller says China-Japan tensions do not pose an extraordinary threat. There are many issues, political and otherwise, that could potentially cast a shadow on international trade, Miller pointed out. Sino-Japanese political conflict does not stand out as more important than other issues, he said.

In terms of potential obstacles to trade, "to focus on a particular reason in the world as Gartner is doing, seems to me stating the obvious or hyping something that doesn't deserve it," Miller said. To illustrate the point that businesses can encounter problems anywhere, for many reasons, he noted that Northeast China is an earthquake zone.

Asian industry insiders agree with Miller's stance.

"We don't believe the Japan-China arguments will have any impact on supplies from Asia," said Henry Wang, senior director of public relations at Taipei-based Acer.

In addition, several Chinese vendors, who asked not to be quoted, said that contrary to perceptions in the media, China-Japan tensions have not negatively impacted their business.

Responding to comments about the report, Gartner's Wiggins said that such studies are not meant as a warning or a definite prediction.

"The idea is not to be right here, it's to be prepared for change," he said.

The tensions between China and Japan date back for years, with the latest disputed topics involving Japan's bid for permanent membership on the U.N. Security Council and natural gas beneath the East China Sea.

In addition, last week, Wu Yi, a Chinese vice premier visiting Japan, cut short her stay after Japanese Prime Minister Junichiro Koizumi commented about his plans to visit a Japanese war shrine.

The incident came after anti-Japanese protests in several major Chinese cities last month. Marchers called for a boycott of Japanese goods, protesting what they said is China's failure to accept its wartime history and its request for Security Council membership. However, Japanese companies contacted last month said that the protests did not impact business.

Gartner's research note claims that there is a large disconnect between the business and political relations of China and Japan. The study proposes that companies dependent on production and services from Northeast Asia prepare for a shortage through supply diversification and the broadening of any new investments to balance the "increased risk."

In the Gartner press release on the report, Wiggins said, "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."

But for the ITAA's Miller it's just that: business as usual.

"To be a truly high class global company; you need business continuance plans that involve multiple locations in multiple countries," he said.

Miller, though, agrees with one point in the Gartner report: If anything, Asian political conflict can work as a reminder for management not to "put all [their] eggs in one basket."

"No company, no organization wants to be totally dependent on one facility, on one country, in this global economy," Miller said.

"I was with a big company today, a global systems integrator, and they have a major facility in the U.S., which they control a lot of operations out of. But they also have one back-up facility in Japan and another one in Europe and another back-up facility in Australia," Miller said.

Miller also said that recently he met Japanese officials who indicated that Chinese call centers serving Japan outnumber Indian call centers used by Japanese companies.

China's low-cost labor, recent liberalization of laws and policies and proximity to Japan and Korea has fueled foreign investment in the country during the last few years. Japanese corporations' investments in China exceeded US$48 billion from 1979 to 2003. During the same period, the U.S. invested US$43.6 billion in China, while E.U. countries invested US$28.6 billion, according to Gartner.

The region surrounding Dalian in Northeastern China has a Japanese-speaking population and several Japanese companies operate call centers in the city.

In addition to the increased trade between China and Japan, the two countries are working together on international political problems such as the nuclear threat from North Korea.

Additional reporting by Sumner Lemon in Shanghai and Dan Nystedt in Taipei.

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