Beijing retaliates against South Korea’s economy over THAAD
China has already taken a number of retaliatory measures against South Korea in the content, tourist and retail sectors. Survey shows that 56.2 per cent of businesses feel they will be “negatively affected”. Beijing has banned tour packages to South Korea and forced the closure of more than half of retail giant Lotte’s hypermarkets. Asia’s fourth largest economy could lose up to US$ 7.3 billion or 0.53 per cent of its GDP, dealing a harsh blow to its growth prospects.
Seoul (AsiaNews) – China has taken hard line against South Korea’s decision to deploy the US THAAD missile defence system.
The net effect has been that South Korean products are being boycotted, and Chinese hotels are refusing to take South Korean tourists. In South Korea itself, this has had a major impact on the economy.
In July of last year, South Korean authorities agreed to install the Terminal High Altitude Area Defence (THAAD), an advanced US defence missile, as a deterrent against North Korea’s nuclear threat.
South Korean military sources say that the deployment could be completed within one or two months, and the system could be operational as early as April.
Beijing has slammed the step, saying that THAAD will be used against its military. To show its anger, it has taken various measures against South Korea’s economy.
According to a survey by the Korea International Trade Association among companies in the content, tourism and retail sectors, published on 12 March, 56.2 per cent of the respondents said that China’s economic retaliation has already “negatively affected” their businesses, with 32.9 per cent responding that they will feel the pinch of Sino-South Korean tensions.
For example, South Korea’s biggest trading partner banned the sale of tour packages and subsequently forbade Chinese air carriers from increasing Korea-bound flights.
As a result of this, more and more Chinese tourists are cancelling reservations, raising concerns in Seoul about how much the tourist sector might suffer.
Last year, Chinese tourists accounted for nearly half of some 17.2 million foreigners who visited South Korea, and 44 per cent of these 8.1 million inbound Chinese travellers came on tour group packages and spent about ,080 per individual, according to the Korea Tourism Organization.
Another example is South Korean retail giant Lotte, which agreed on 28 February to host the controversial missile defence system on land that is part of a golf course it owns in Seongju, a region in south-central South Korea.
By 1 March, the number of Lotte Mart stores facing business suspension stood at 55, that is more than half of its 99 stores in mainland China. In many cases the authorities cited fire safety reasons.
Asia's fourth-largest economy is now expected to suffer some US$ 7.3 billion in losses – a 0.53 percent on-year drop of its annual GDP, Credit Suisse said in its latest report.
In another report by Seoul-based NH Investment & Securities Co., South Korea's growth is expected to slow by 0.25 percentage point, if its exports of consumer goods to China shrink by 20 per cent on-year and the number of Chinese tourists falls by 20 per cent from the previous year.
A separate report by a local think tank showed the worse scenario for the country's economy. IBK Economic Research Institute said losses from the THAAD impact could amount to as much as 17 trillion won (US$ 14.7 billion), with the growth rate possibly slowing down by 1.07 percentage points.