THAAD and the Uncertain State of Chinese-South Korean Economic Relations

[aki-san.livejournal.com]

A Lotte Mart is seen closed in Hangzhou, Zhejiang province, China, March 5, 2017. REUTERS/Stringer

The first pieces of the US-made Terminal High Altitude Area Defense missile system arrived in South Korea earlier this month, the latest step a deployment process the Chinese government had greeted with chagrin. Beijing has inveighed against the deployment and criticized the South Korean government for undermining bilateral relations by hosting the missile system.

Chinese citizens, among whom a sense of nationalism is strong, have also taken up the anti-THAAD mantle, protesting and boycotting South Korean businesses and tourism. Several Chinese state-run media outlets have called for organized voluntary boycotts of South Korean businesses and imports. China is Seoul's largest trading partner, receiving one-quarter of South Korea's exports.

Those public protests have fallen heavily on one company: South Korean conglomerate Lotte Group.

Lotte agreed in early March to turn over a golf course to the South Korean government to host the THAAD missile system. In the days after, the company said 23 Lotte Mart stores in China were shut down by authorities there, who claimed the outlets were in violation of fire-safety regulations. The maker of one of China's most popular snacks (among other Chinese retailers) withdrew its goods from Lotte Marts in the country, saying it would "never cooperate" with the South Korean company.

Lotte was also ordered to stop construction on a $2.6 billion theme-park project in northeastern China after Chinese authorities suddenly uncovered safety issues. Cyberattacks targeted Lotte websites, shutting them down, and protesters in China's northeastern Jilin province marched with banners reading, "Lotte supports THAAD, get out of China immediately."

Lotte said on March 19 that 79 of its 99 stores in China were facing business suspensions and had been forced to shut down temporarily. Lotte is heavily invested in the Chinese domestic market, spending nearly $9 billion on its operations there since 1994. The Chinese market makes up nearly 30% of Lotte's sales outside of South Korea. At present, it has 22 subsidiaries in China, with 26,000 employees and annual sales of about $2.6 billion. Lotte's duty-free business in South Korea pulls 70% of its sales from visiting Chinese tourists.

"Lotte's decision has lit a fuse. When foreign firms touch Chinese consumers' nationalistic feelings, it can spark a boycott," Fu Guoqun, a Peking University business professor, told AFP early this month. "This will have quite a huge impact on the company."


A Lotte online shopping inventory store with empty shelves is seen at a Lotte Mart in Beijing, China, March 17, 2017. (AP Photo/Ng Han Guan)

China has also reportedly targeted tourism, pressuring travel agencies there to stop selling group-trip packages to South Korea. Businesses in South Korea's tourism and other industries catering to Chinese visitors also took hits in the days around the THAAD deployment. Chinese companies have blocked South Korean music videos and TV dramas on streaming services in the country. Chinese broadcasters also reportedly canceled appearances by South Korean bands — moves that garnered support on Chinese social media.

At least one K-pop band, MIXX, has reportedly broken up over the THAAD dispute. A Chinese agency managing the band (it had two agencies representing it; the other was Korean) withdrew its investment, making the band unable to continue its promotions. Three of the group's members, all Chinese, returned to China.

"Money spent on K-pop stars will turn into bullets that point towards you and your family in the future," a posting on China's Twitter-like Weibo service said, according to AFP.

In response, Seoul has gone to the World Trade Organization. A South Korean official, stressing that it was not a legal action, told Reuters that it was a request for the trade bloc to examine if Beijing was upholding trade agreements fairly. Beijing, which has not directly linked trade and commerce restrictions on THAAD's deployment, did not respond specifically to South Korea's complaint, instead invoking the role of the public in such trade dealings. (The Chinese public has targeted goods from other countries amid international disputes in the past.)

"We support normal business and other exchanges between China and South Korea," a Chinese Foreign Ministry spokeswoman told a news briefing this week. "But everyone knows this needs a corresponding basis in public opinion."

Both the US and South Korea have repeatedly stated the defensive nature of the THAAD missile system, and Chinese military officials have said they have the means to neutralize THAAD batteries. South Korean lawmakers have stepped up criticism over what they see as a lack of response from Seoul, but direct discussions between the two governments have not been forthcoming, with Beijing declining a request from Seoul to meet at a Group of 20 meeting in Germany this weekend.

Twisting the screws on South Korea's business interests may be a prelude to future deployment of such measures against others. "What's happening to Korean companies now is a pretty good playbook for what might happen to US firms over the next year," Andrew Gilholm, director of analysis for China and North Asia at risk consultancy Control Risks, told Reuters in early March. "Rather than the big dramatic trade war, everything goes to hell scenario under Trump," he said, "it's probably more likely to be manifested as regulatory harassment of companies — one of the lower intensity tools for China."

Business Insider

I also read an interesting article about a sizable increase in Southeast Asian tourists filling some of the hole left by the Chinese tour ban (including news that the Gangnam Galleria Department Store recently signed with two Muslim travel agencies and that four restaurants in Yeouido's 63 Building have gotten halal licenses) but I can't repost the article here because of the source's policies. I encourage you to check it out over there if you're interested in stuff like this.

Comments

[little-giant.livejournal.com]

Thank you for the article, OP. I feel like there was still a lot of confusion regarding how impactful the ban on SK was, so this was insightful

[aki-san.livejournal.com]

You're welcome! This has the potential to hugely impact SK's economy at so many levels, so I thought our community might be interested in learning more.

[ocean-pig.livejournal.com]

I'm not a fan of Thaad but I see that China's back to throwing tantrums to get what they want. The se Asian markets gotten bigger and wealthier so it's smart of Korean businesses to move on when the big fish isn't biting.

Ngl... looking forward to my upcoming sk trip with the lack of mainland tourists.

[pseudo-shigure.livejournal.com]

the interest to go to SK have been growing these last few years from SEA, whether the chinese are there or not. but i guess it's good if now they're trying to focus on us more.

[audiograms.livejournal.com]

Thank you for sharing.

[khimia.livejournal.com]

"The first pieces of the US-made Terminal High Altitude Area Defense missile system arrived in South Korea earlier this month,"

The US are still messy as hell...

[blck-ink.livejournal.com]

i remember seeing some people be really chill when the first rumours about these resctrictions came out saying how unlikely it would be that china would go this far but look at this. even though i feel salty about mixx disbanding i feel more so sorry towards the people who lost their job...

[hibaalhadid.livejournal.com]

I remember when I went to Korea in 2015, there were Chinese tourists everywhere, our tour guide kept complaining about them

glad to know there are more Halal restaurants opening now, looking forward for my next trip, hopefully Korea will recover

[miamaimi.livejournal.com]

Talk about being stuck between a rock and hard place...

[kashchanocchi.livejournal.com]

Forgive me for being pretty uneducated on this issue (please feel free to inform me) but is THAAD basically SK receiving a missile defense system from the US and the Chinese government feels threatened?

[hibaalhadid.livejournal.com]

From what I know the answer is yes

[mycorrhizoid.livejournal.com]

The US is installing the THAAD system in South Korea as protection against potential North Korean attacks because they're allies and the US has bases in South Korea.

China thinks that the system could be turned against them instead.

[dorawa.livejournal.com]

Late, but THAAD is like a defense system in case NK sends a missile toward SK, they can blast it out of the sky in return. But China is friends w/ NK and thinks SK could turn on them too etc

[hibaalhadid.livejournal.com]

Oh now I understand why Taeyeon got a lot of hate on Weibo after she posted a pic of a Lotte candy, people on my twitter were confused too

Also the huge backlash Yixing got after his pic with EXO for LOTTE were posted too, and him not participating in the tour to let the storm pass, I read that SM wants to edit him out from these ads in China (not sure)

[turtles-tszx.livejournal.com]

It's good news for other tourist visiting korea but bad news for the business there? The mainland chinese spend big bucks when they travel. Even if they focus on SEA, we dont spend tht much compared to mainland chinese.

Currently Living in Mainland China

[undeniablysarah.livejournal.com]

So I actually talked to some of my Chinese coworkers about this today and this is what they had to say about it:

1. Chinese people are going to stop buying S.korea products to show how upset they are about THAAD. Two of my coworkers told me they will do this to upset the s.korean economy.

2. They do not like THAAD because they have been told it is being used to spy on China and Chinese people.

Currently in Chinese cities more police and military have been stationed to monitor the saftey of the citizens I have gotten two different answers for this:

1. My students told me the police are actually riot police in case people protest THAAD
2. My coworkers told me the police are growing in numbers in case S.korea attempts to use THAAD to stage an attack

On a positive note my coworkers and students said they hope these issues will be resolved because everyone wants peace. But I must say many people in China have a strong sense of nationalism and believe whatever the news and government says. Some people I talked to didn't know it was a defense system, they thought it was active missiles and most believe it is a way to spy on citizens and government affairs. .

It is a very tricky situation. Being an American here it has been a little awkward.

Re: Currently Living in Mainland China

[aki-san.livejournal.com]

Wow, that's very interesting. Thanks for sharing!

[uguukawaii.livejournal.com]

one thing i have noticed is maybe 3 years ago i saw a lot of chinese tourists out and about particularly in myeongdong but thats just not the case at all anymore, barely any around..... demographics totally shifted