Chinese tourists trickling back to South Korea

Chinese tourists have quietly returned to the shopping streets of Seoul, and K-pop stars are gingerly planning their China comeback, as South Korea's President Moon Jae In began his visit to China yesterday with hopes of thawing icy economic relations.

He is accompanied by the largest-ever business delegation of 260 company executives, all keen to resume collaboration with their country's largest trading partner.

Bilateral ties were strained last year after China objected to South Korea's deployment of an American Terminal High Altitude Area Defence (Thaad) missile shield. The ties started mending following the signing of an Oct 31 bilateral agreement to move beyond the diplomatic row.

But experts said it will take time to rebuild trust and return to pre-Thaad friendly ties.

While government-led economic boycotts can be lifted easily, the "bigger problem" is the psychological impact of China's anti-Korea campaign, said Dr Lee Seong Hyon, a research fellow at think-tank Sejong Institute.

"It will take some time for Chinese consumer sentiment to recover (and for the Chinese) to buy South Korean products. It will also take time for Chinese tourists to go to South Korea as before," he told The Straits Times.

China's group tour ban resulted in estimated losses of 7.5 trillion won (S$9.3 billion) for South Korea's travel-related industries as the number of Chinese visitors in the first 10 months of the year fell 50 per cent year on year to 3.53 million, according to official data.

And the worst is not over. China's travel ban has been lifted only partially and tour groups are reportedly told to avoid staying at Lotte Hotel or shopping at Lotte Department Store or Lotte Duty Free - a move deemed as punishment for the conglomerate which gave up a golf course to free up land to house the Thaad system.

But not all is lost for South Korea. Experts said the silver lining is the country's quick response in diversifying its trade partnership, most notably with those in South-east Asia. South Korean retailers, including Lotte, that decided to pull out of China have reinvested in countries such as Vietnam and Indonesia.

Nami Island, a popular drama filming site which used to draw 350,000 tourists from China a year, made up for the Chinese shortfall of 78 per cent through aggressive promotion in South-east Asia. Tourists from the region rose to about 568,000 this year, up from 368,000 in 2012.

Experts said a boom in South Korea's IT and semiconductor sector also helped mitigate losses from tourism, beauty and entertainment industries.

Samsung Electronics, for one, registered the highest sales growth of 14 per cent in China in the first half of this year as Chinese companies including smartphone makers imported 19.27 trillion won worth of semiconductor chips and display panels from the company.

China's travel ban will reduce South Korea's 3 per cent economic growth by only about 0.2 per cent, said Dr Kang Hyun Ju, a research fellow at think-tank Korea Capital Market Institute, citing Bank of Korea figures.

"This year's economic growth far exceeded expectations mainly because of the IT and semiconductor boom. The Korean economy is resilient and lucky in that sense," he said, adding that growth estimates for next year will be more optimistic.

Meanwhile, Korean entertainment companies are starting to make plans to stage comeback concerts for their artists in China early next year, according to local reports. South Korean actress Jeon Ji Hyun was featured in an advertisement for healthcare company Mentholatum on Alibaba Group's e-commerce site Taobao last month, while girl group Mamamoo became the first K-pop act to do a TV recording in China this year.

But experts said it remains to be seen if China-Korea ties can go back to pre-Thaad levels as both sides are scarred by the row and will tread cautiously.

Dr Kang warned of future political conflicts if the Thaad issue escalates again. "Efforts to separate politics from the economy will be needed for both countries, considering how South Korea and China are now tied more closely economically."

A version of this article appeared in the print edition of The Straits Times on December 14, 2017, with the headline 'Chinese tourists trickling back to South Korea'. Print Edition | Subscribe