China's free trade push tested by Thaad spat

Chinese residents holding posters of the late communist leader Mao Zedong, during a protest calling for a boycott of South Korean goods in Jilin, in north-east Jilin province on Sunday. South Korean retail giant Lotte has been forced to shut down doz
Chinese residents holding posters of the late communist leader Mao Zedong, during a protest calling for a boycott of South Korean goods in Jilin, in north-east Jilin province on Sunday. South Korean retail giant Lotte has been forced to shut down dozens of stores in China.PHOTO: AGENCE FRANCE-PRESSE

South Korean companies in the country are facing boycotts, store closures, cyber attacks

SEOUL • Chinese President Xi Jinping has in recent months championed an international system of rules for free trade.

Now, his country's treatment of South Korean companies amid a missile shield spat is raising questions about those globalisation credentials.

Since the July decision to install the Terminal High-Altitude Area Defence (Thaad) system, South Korean companies in China have reported cyber attacks, store closures and fines. State-controlled media has called for a boycott of South Korean goods and services.

Thaad is supposed to help South Korea protect itself from a North Korean military attack but China sees it as a threat that will break "the strategic equilibrium in the region".

South Korea is now saying it could consider action at the World Trade Organisation or via its bilateral free trade deal arrangements, as China retaliates for its move to deploy the United States system, with the first missile launchers arriving this week.

South Korean retail giant Lotte has been forced to shut down dozens of stores in China, it said yesterday as the diplomatic row worsened. The company's board had agreed to provide golf course land to the South Korean government for the Thaad site.

HOSTILITY

This behaviour works against China's own interests... It is difficult in the Chinese system to show economic friendship, or even economic neutrality, during moments of political friction.

MR FRANK LAVIN, a former US undersecretary of commerce for international trade.

Chinese officials have shut down 39 out of retail chain Lotte Mart's 99 stores in the country over fire safety concerns, a Lotte spokesman said.

Each Lotte Mart employs about 130 Chinese workers, the spokesman added, noting that the suspensions, if prolonged, would put nearly 5,000 jobs at risk.

Meanwhile, the China National Tourism Administration has ordered travel agents to stop selling tour packages to South Korea starting from next Wednesday, according to the state-run Korea Tourism Organisation.

Goldman Sachs Group estimates that Chinese curbs on visitors to South Korea could reduce tourism revenue by about US$5 billion (S$7.05 billion).

And in the latest instance of suspected discrimination, China has rejected applications from airlines including Jeju Air to add charter flights between the two countries this month, Yonhap News Agency reported yesterday.

This adds to similar rejections in January and February.

No reasons have been given for any of the rejections. A Jeju Air spokesman confirmed the March rejection when contacted.

Bus rental companies, hotels and travel agencies will suffer, along with tourist attractions such as a teddy bear museum and a hall of holograms singing K-pop in Jeju province.

The effects of the spat are also being felt on the Korean mainland.

China's major Internet-streaming companies pulled popular Korean programmes, which can include soap operas and historical dramas, off their platforms, China's state-run Global Times newspaper reported on Sunday.

Government pressure could eventually hurt sales of Korean cars, mobile phones and chemicals, said Mr Kim Kyung Hwan, a strategist at Hana Financial Investment Co in Seoul. China is the largest market for Hyundai Motor Co.

China has a history of using trade to help it achieve its foreign policy goals. During a dispute with Japan over islands in the East China Sea in 2010, Japanese trading companies found China was refusing to fill orders for rare-earth elements.

The Philippines was also a target during a stand-off with China over the Scarborough Shoal in the South China Sea in 2012. China told tourists to avoid unnecessary travel to the Philippines, and increased quarantine and inspection of fruit shipped from the Philippines.

"This behaviour works against China's own interests," said Mr Frank Lavin, a former US undersecretary of commerce for international trade. "It is difficult in the Chinese system to show economic friendship, or even economic neutrality, during moments of political friction."

BLOOMBERG, REUTERS, AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on March 08, 2017, with the headline 'China's free trade push tested by Thaad spat'. Print Edition | Subscribe