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Panasonic, Canon shutter China factories amid violent anti-Japan protests

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An anti-Japanese protester throws a gas canister during a demonstration over the disputed Diaoyu Islands in Shenzhen, China, on Sunday.

Major electronics firms Panasonic and Canon have temporarily suspended production at factories in China after a territorial dispute over a group of uninhabited islets in the East China Sea triggered violent anti-Japanese protests.

Sites linked to auto manufacturers Toyota and Honda have also been attacked in the unrest, which has forced frightened expatriates into hiding and sent relations between Asia's two biggest economies into crisis.

Ratcheting up tensions further on Monday, Chinese state media warned Japan it could suffer another "lost decade" if trade ties soured. Japan counted China as its top trade partner last year, with total two-way trade of more than $340 billion.

Tyrone Siu / Reuters

A demonstrator kicks a glass window of the Japanese Seibu department store during a protest in Shenzhen, China, on Sunday.

A report in the Japan Times on Monday, posted on Twitter, said 1,000 fishing boats were sailing towards the disputed islands - a move likely to further inflame tensions.

"I'm not going out today and I've asked my Chinese boyfriend to be with me all day tomorrow," said Sayo Morimoto, a 29-year-old Japanese graduate student at a university in Shenzhen.

Protests broke out across dozens of Chinese cities at the weekend, some violent, in response to the Japanese government's decision last week to buy some of the disputed islands from a private Japanese owner. The move incensed Beijing.

Much at stake for US as tensions rise in troubled China Seas

In Tokyo, electronics giant Panasonic Corp said Monday it has suspended production at two electronics components factories in China and closed another, telling workers to stay at home after the facilities were attacked by anti-Japan protesters.

Atsushi Hinoki, a Tokyo-based Panasonic spokesman, said another plant in China has been closed after several workers "sabotaged" operations in the factory. The plant will also remain closed until Tuesday - a memorial day in China when it marks the anniversary of Japan's 1931 occupation of parts of mainland China.

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Chinese demonstrators set fire to a Japanese national flag during a protest over the Diaoyu islands issue, known as the Senkaku islands in Japan, in Wuhan, China, on Sunday.

Meanwhile, Canon Inc is set to suspend operations at three of its four plants in China on Monday and Tuesday. It will halt production lines at its laser printer factory in Guangdong, a digital camera factory in Guangdong, and a copier plant in Jiangsu, Japanese media reported.

The protests focused mainly on Japanese diplomatic missions but also targeted shops, restaurants and car dealerships in at least five cities. Toyota and Honda reported arson attacks had badly damaged their stores in Qingdao.

Japan protests after man seizes flag from ambassador's car in Beijing

Many Japanese schools across China, including in Beijing and Shanghai, have cancelled classes this week.

 Japanese Prime Minister Yoshihiko Noda, who met visiting U.S. Defense Secretary Leon Panetta on Monday, urged Beijing to ensure Japan's people and property were protected.

"It is in everybody's interest ... for Japan and China to maintain good relations and to find a way to avoid further escalation," he told reporters In Tokyo.

Panetta said Sunday he is concerned the territorial disputes in the Asia-Pacific region could spark provocations and result in violence that could involve other nations, such as the United States.

'Conflict'
Speaking to reporters on his plane en route to a weeklong trip in the region, Panetta said he will urge countries here to find a way to peacefully resolve their problems. He arrived Sunday in Tokyo, the first stop of his trip.

"I am concerned that when these countries engage in provocations of one kind or another over these various islands that it raises the possibility that a misjudgment on one side or the other could result in violence and could result in conflict and that conflict would then, you know, have the potential of expanding," Panetta said.

The defense chief said his conversations with the Japanese and Chinese would echo what Secretary of State Hillary Rodham Clinton told them earlier this month — that they must find a process for settling the disputes. The U.S., he said, does not take a position with regard to the disputed lands.

Protesters in China attack Japanese factories in a show of anger over a territorial dispute between the two countries. NBCNews.com's Dara Brown reports.

More China coverage from our Behind the Wall blog

The dispute over the islands -- called the Senkaku by Japan and the Diaoyu by China -- intensified last week when China sent six surveillance ships to the area, which contains potentially large gas reserves, in response to Japan's purchase.

The overseas edition of the People's Daily, the main newspaper of the Chinese Communist Party, warned that Beijing could resort to economic retaliation if the dispute festers.

"How could be it be that Japan wants another lost decade, and could even be prepared to go back by two decades," said a front-page editorial in the newspaper. China "has always been extremely cautious about playing the economic card," it said.

A Chinese man holds up a piece of paper with the words "Diaoyu island belongs to China, Japanese get out" outside the Japanese embassy in Beijing, China, Sept 11.

"But in struggles concerning territorial sovereignty, if Japan continues its provocations, then China will take up the battle," the paper said.

China is Japan's biggest trade partner and Japan is China's third largest. Any harm to business and investment ties would be bad for both economies at a time when China faces a slowdown.

Qingdao police announced on the Internet on Monday they had arrested a number of people suspected of "disrupting social order" during the protests, apparently referring to the attacks on Japanese-operated factories and shops there.

China's 7.6 percent growth rate is the lowest in three years – but the country's economic problems appear more dire than the latest numbers indicate. Some believe the government will counter the downturn with a massive stimulus package, a strategy that has left China's local banks saddled with bad debt in the past. NBC's Ian Williams reports from Beijing.

In Shanghai, home to China's biggest Japanese expatriate population of 56,000, one expat said his family as well as other Japanese customers had been chased out of a Japanese restaurant on Sunday by protesters near the Japanese consulate.

Guangzhou police said on Monday, on an official microblog, that they had detained 11 people for smashing up a Japanese-brand car, shop windows and billboards on Sunday.

The Associated Press and Reuters contributed to this report.

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