China punishes firm for Taiwan reference

Bloomberg News Service

YOKOHAMA, Japan — China banned Matsushita Communication Industrial Co. from selling mobile phones for a year because its Panasonic-brand handsets displayed a reference to Taiwan as a sovereign nation.

Japan's biggest producer of mobile phones halted sales in August, said spokesman Sadayoshi Hiraoka.

The company made 1 million handsets in China last year and has the capacity to double production. A one-year ban would prevent it from expanding in a market that overtook the United States in July as the biggest for mobile phones, with almost 121 million subscribers.

"A year's absence will probably mean Matsushita will lose ground to rivals" such as Nokia and Motorola, said Yoshio Inamura, an analyst at Tokyo Mitsubishi Asset Management Ltd.

China's punishment of Matsushita is the second time in as many months that it has used its expanding economic clout to further a 50-year quest to reclaim Taiwan, which China considers a renegade province.

Last month the government disallowed a Swiss bank, Credit Suisse First Boston, from participating in a multibillion share sale because the bank had earlier sponsored a tour of Taiwan government officials to Europe.

The disputes may signal a new approach by China to achieve its biggest political goal since regaining sovereignty over Hong Kong in 1997. As Taiwan slides into recession, China has economic leverage like never before.