Nikkei falls to 7-week low as China market rout fans economy concerns

TOKYO, July 8 (Reuters) - Japan's Nikkei share average fell to a seven-week low on Wednesday as investors feared a relentless selloff in Chinese shares could hurt Japanese companies relying on strong demand from China.

The Nikkei .N225 fell more than 2 percent to as low as 19,907.51 points, its lowest level since mid-May, as equity prices around the world suffered from uncertainty over whether Greece will stay in the euro zone.

"Today is a 'China day'. This is going to affect the real economy. Chinese people who had made fortunes on stocks should have been spending a lot but that is likely to change," said Seiki Orimi, senior investment strategist at Mitsubishi UFJ Morgan Stanley (NYSE: MS ) Securities.

Companies with high exposure to China led the losses, with construction equipment makers Komatsu Ltd 6301.T and Hitachi Construction Machinery 6305.T falling 5.0 percent and 3.4 percent, respectively.

"The ripple effect from the market correction (in China's economy)has yet to show up," wrote Bank of America (NYSE: BAC ) Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."

As concerns about Chinese economy hit commodity prices, trading houses, which have big commodities business, also tumbled.

Sumitomo Corp 8053.T fell 4.2 percent while Mitsubishi Corp 8058.T 3.3 percent.

Itochu Corp 8001.T fell 8.4 percent, taking an extra hit from a Nikkei business daily article that its plan to buy a stake in Bosideng International Holdings 3998.T was rejected by the Chinese apparel company's shareholders.

Other casualties included tourism-related shares, which have benefited from shopping sprees by a surging number of Chinese tourists visiting Japan. Department store operator Isetan Mitsukoshi 3099.T fell 3.9 percent.

As Japanese cosmetic products are popular among Chinese tourists, drug store operators and cosmetic companies were among the worst-hit

Drug-store operator MatsumotoKiyoshi Holdings 3088.T fell 4.6 percent while cosmetics manufacturer Shiseido 4911.T dropped 4.6 percent.

Mainland Chinese shares fell sharply on Wednesday despite a series of measures that Beijing has rolled out nearly daily for the last two weeks to support share prices. The CSI 300 Index .CSI100 felling as much as 8 percent at one point.

It has lost more than 30 percent from its seven-year peak hit in mid-June.