China shuts 23 Lotte stores amid missile row

A closed Lotte Mart outlet in Hangzhou, Zhejiang, on Sunday. Although workers at some outlets say the closures were related to fire safety, the shutdowns are seen as the latest in a series of incidents affecting South Korean firms in China because of
A closed Lotte Mart outlet in Hangzhou, Zhejiang, on Sunday. Although workers at some outlets say the closures were related to fire safety, the shutdowns are seen as the latest in a series of incidents affecting South Korean firms in China because of the political stand-off.PHOTO: REUTERS

Beijing clamps down on S. Korean group after its land swop allows Seoul to install Thaad

SEOUL/SHANGHAI • The Chinese authorities have closed nearly two dozen retail stores of South Korea's Lotte Group following inspections, ramping up pressure on the conglomerate amid a diplomatic stand- off that has cast a chill over business ties between the two nations.

Lotte said yesterday that 23 of its supermarkets in China had been shut, from Dandong city on China's North Korean border to the wealthy east coast and southern Changzhou, marking a wide clampdown on the group in its biggest overseas market.

A Lotte Mart spokesman could not provide further details, but workers at three stores said the closures - which they said were temporary - were related to fire safety. They asked not be identified because of the sensitivity of the issue.

The Anhui fire department said in a post on its Sina Weibo microblog account yesterday it had temporarily shut two Lotte Mart stores because of fire risks, part of a broader regional sweep over the last month that had led to the closure of 30 stores belonging to a range of companies, including Lotte.

The Lotte closures are the latest in a series of incidents affecting South Korean firms in China after cyber attacks and a ban on sales of travel tours to South Korea. Lotte Mart had 115 stores in China as of January, contributing to sales of some three trillion won (S$3.7 billion) in 2015.

Political risk experts say the chill facing South Korean firms demonstrates Beijing's playbook for hitting back at the corporate interests of trade partners it disagrees with through state media and tightening regulations.

The incidents come after Lotte approved a land swop outside Seoul last week that will allow South Korea to install the United States Terminal High Altitude Area Defence (Thaad) system, in response to missile threats from North Korea.

South Korea's military said earlier yesterday that the North had fired four ballistic missiles into the sea, prompting Acting President Hwang Kyo Ahn to call for Thaad's swift installation. But Beijing has objected to the Thaad deployment, saying it has a radar capable of penetrating its territory, while state media has called for a boycott of South Korean goods and services.

On Chinese social media yesterday, photos and videos circulated of protests outside Lotte stores, while others showed Lotte outlets with their steel grates pulled shut.

Outside one store, a red banner with large white characters read: "South Korea's Lotte has declared war on China. Lotte supports Thaad. Get the hell out of China."

Political risk experts say the chill facing South Korean firms demonstrates Beijing's playbook for hitting back at the corporate interests of trade partners it disagrees with through state media and tightening regulations.

The Lotte Group in a statement on Sunday said it was seeking assistance from the South Korean government regarding the issues it was facing in China, where it employs around 20,000 people - a third of its overseas staff.

Yesterday, shares in Lotte Shopping, of which Lotte Mart is a business division, fell as much as 4 per cent compared with a near-flat benchmark share price index .

The stock regained some ground in afternoon trading.

Lotte's troubles expanded to other South Korean firms last Thursday as China's Tourism Ministry instructed tour operators in Beijing to stop selling trips to South Korea from March 15. The order has since spread to other regions across the mainland, an official at Korea Tourism Organisation said yesterday.

The moves have prompted backlash from South Korea, whose Trade Minister, Mr Joo Hyung Hwan, said on Sunday that he had "deep concerns" over China's actions.

China's Foreign Ministry said yesterday it welcomed South Korean companies to invest and operate in China, but added that they "must operate in accordance with the law and compliance".

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 07, 2017, with the headline 'China shuts 23 Lotte stores amid missile row'. Print Edition | Subscribe