The recent workers' strike in Honda's Chinese facilities has brought into light two-edged realities for Japanese firms operating in China: increasingly confident local workers would now demand for better pays as China's economy continues to expand and other industry sectors that anticipate rising incomes to fuel further demands for premium goods.

Analysts believed that the former is an obvious bane for companies who are now facing the prospect of higher cost operation expenses in China while the latter is the exact boon that would not only sustain China's expansion but also would appease the unrest that could threaten further growths.

The Honda shutdown earned the Chinese workers some 24 percent pay increase while the company, which averages 650,000 units produced each year, lost thousands of vehicles, a scenario that Tokai Tokyo Research Centre auto analyst Mamoru Kato described as wholly unexpected.

He said that Japan was caught totally unprepared, adding that the Honda strike would serve as a precedent for Chinese workers, "who would likely be encouraged to start making more demands and such situations will inevitably increase production costs there."

However, Chinese labour unions seemed to view the incident as merely justified as the All-China Federation of Trade Unions cited that as much as 25 percent of Chinese workers have not seen any pay hikes in five years.

Also, more attentions have been channelled on the dismal working conditions in China with the suicides seen in Taiwan-owned Foxconn, assembler of Dell, Sony, Panasonic and Apple, initiating calls for improved oversight from those directly benefitting from Chinese labour.

Tatsuya Mizuno of Mizuno Credit Advisory said that the incident should prompt Japanese companies to review their trading policies with China, in light also of the growing Chinese economy and the people's improving income possibilities.

Yang Lixiong, a professor in Renmin University in Beijing, affirmed that Chinese employed by foreign companies operating in China are facing limited opportunities, as he cited the case of Honda, where "the management is mostly Japanese. It's very hard for local staff to work their way up. In addition to that, salaries are very low and working conditions are not good."

In adjusting to the current situation and possibly to cancel out the effects of higher wages, Japanese firms are resorting to adjustments in economies of scale that could effectively slash unit or retails costs.

Nissan said it would accelerate production rate to roll out more than one million vehicles per year into China's roads by 2012 while Honda reported that it sold 576,223 units or a rise of 23 percent in the country last year, with Toyota posting a sales jump of 21 percent over the same period.

Sharp joined the fray and expressed its intent to put up 10,000 outlets for its television products this year while fashion retailer Uniqlo said that about 1000 new stores would open up in China by 2020 in its goal to reach its more than 10 billion dollar sales projections.

And analysts are in agreement that better pays should result to more purchasing power for consumers, which is not a bad news for most Japanese firms who are out to compete and corner China's high-end market.

Hirokazu Fijuki from Okasan Securities said that Japanese companies could win the competition by focusing on mid-to-high level consumers since they have already lost out to local companies due to affordability.

At the same time, Japanese firms must address the resentment held by the Chinese against their Japanese counterparts as highlighted by Chinese Honda staff complaint that Japanese co-workers in the same factory are being paid 50-times more than they do.

Mr Mizuno said that such strong sentiments could potentially lead into a more serious political issue if they are not resolve very soon.