Chinese tourists trickling back to South Korea, but experts say time is needed to rebuild trust

The usually bustling shopping street of Myeongdong in Seoul was not as crowded on Dec 12, 2017 when temperatures hovered around -6 degrees in the afternoon. Only a handful of Chinese tourists were spotted by The Straits Times.
The usually bustling shopping street of Myeongdong in Seoul was not as crowded on Dec 12, 2017 when temperatures hovered around -6 degrees in the afternoon. Only a handful of Chinese tourists were spotted by The Straits Times. ST PHOTO: CHANG MAY CHOON

SEOUL - Chinese tourists have quietly returned to the shopping streets of Seoul and K-pop stars are gingerly planning their China comeback, as South Korean President Moon Jae In visits China on Wednesday (Dec 13) with hopes of thawing icy economic relations.

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

But the damage had been done, and experts say it will take time to rebuild trust and return to pre-Thaad friendly ties.

While government-led economic boycotts targeting K-pop, tourism and South Korean companies operating in China 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, and 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 plunged 50 per cent year on year to 3.53 million, according to official data.

While November figures are not yet available, South Korean missions in China said they received about 21,000 individual visa applications last month, a 12 per cent increase from the previous year and the first sign of rebound post-Thaad.

 

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

As temperatures dipped below zero in Seoul this week, only a handful of Chinese tourists were spotted in the popular shopping street of Myeongdong. Sales calls in Mandarin in front of Korean cosmetics stores were largely ignored and shop assistants told The Straits Times that there are not as many Chinese tourists as before.

Mr Kwak Min Sung, a red-clad tourism official who offers assistance to tourists in Myeongdong, said they used to help about 400 Chinese visitors a day. These days, they get only about 200 Chinese inquiries. "There are fewer Chinese tourists after Thaad, but we do see a 30 per cent increase in tourists from Taiwan and Hong Kong," he added.

Mr Michael Tian, a 36-year-old cosmetics marketing manager from Guangzhou, told The Straits Times that he used to visit Seoul four times a year to "survey the cosmetics business here". But he made only two trips this year, and it had to be done "secretively" as the issue remains sensitive back home. "The Thaad problem is not over yet. It has hurt us too deeply," he said.

Mr Tian is unsure if he will visit again soon. He said he came to learn how South Korean cosmetics brands creatively promote and package their products, but lamented there is "nothing new" as the drop in Chinese tourists seems to have dampened their once competitive spirit.

Not all is lost for South Korea though. Experts say the silver lining is the country's quick response in diversifying its trade partnership with other countries, most notably with those in South-east Asia. South Korean retailers including Lotte and Emart that decided to pull out of China have reinvested in countries like Vietnam and Indonesia instead.

Nami island, a popular drama filming site, managed to make up for the Chinese shortfall of 78 per cent through aggressive promotion in South-east Asian markets. Tourists from the region surged to about 568,000 so far this year, up from 368,000 in 2012. The island used to draw 350,000 Chinese visitors a year.

Experts say a boom in South Korea's IT and semiconductor industry 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 firms including smartphone makers imported 19.27 trillion won worth of semiconductor chips and display panels from the company.

China's travel ban will only reduce South Korea's 3 per cent economic growth by about 0.2 per cent, said Dr Hyunju Kang, 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.

South Korea's biggest cosmetics company Amorepacific, which saw its operating profit shrink 30.4 per cent to 519.5 billion won in the first three quarters of the year, hopes there will be "greater opportunities" after the Oct 31 agreement to end the Thaad row.

The company, in a statement, attributed its "recently slowed performance" to a combination of factors, including frayed China-Korea relations, internal shortcomings, and intense competition. It will focus on "driving new and sustained growth through diversification of its global business" in the future.

Meanwhile, South Korean entertainment companies including SM, YG and JYP 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 already featured in an advertisement for health care 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 say it remains to be seen if China-South 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."