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NEW: Panetta urges both sides to "avoid further escalation"
Two Panasonic factories are damaged from anti-Japanese protests, the company says
Demonstrations in China over the weekend turned violent at times
Tensions have risen between Tokyo and Beijing over a disputed set of islands
The widening fallout from an increasingly volatile territorial dispute between China and Japan prompted a Japanese company to halt work at plants in China on Monday, and the United States to urge the two sides to avoid letting the situation spiral out of control.
The electronics company Panasonic said Monday that it was suspending operations at three plants in China after two of them were damaged amid violent anti-Japanese protests set off by the clash between Beijing and Tokyo over a group of small islands in the East China Sea.
Japan calls the islands Senkaku; China calls them Diaoyu.
The United States, a key military ally of Japan, has called on the two sides to find a peaceful resolution to the disagreement, which is generating more and more unease in the region and starting to hurt economic links between the world’s second and third largest economies.