The Lotte boycott: Doing China more harm than good?

It has been a month since South Korea's Lotte Group agreed to a land-swop deal with the government that permits the latter to host the United States missile defence system Thaad, which Beijing sees as a threat to its national security.

China has responded strongly against Lotte International, a South Korean retail conglomerate that handed over land on a golf course it owned to the South Korean government for the missile system.

The Xinhua news agency proclaimed that "we don't welcome a Lotte which assists evildoers". The hawkish Global Times said in its editorial: "China has no option but to punish South Korea by saying no to Lotte." The Communist Youth League went a step further and posted a list of Lotte outlets in China on social media Weibo, hinting at its encouragement of a boycott.

Voluntarily or otherwise, retailers and customers answered the call of the state media, and the boycott soon spread across the nation. Big brick-and-mortar retailers and online shopping sites removed Lotte items. New video clips of boycott events were going viral online every day: Customers being harassed for shopping at Lotte Marts, people throwing boxes from the shelves and stepping on them in Lotte outlets, a woman eating and drinking Lotte store food and beverage before putting the rest back on the shelf, goods being destroyed under banners with swear words.

As of now, almost 90 per cent of the 99 Lotte stores in China have been shut (67 forced to close, and 20 more shut by the conglomerate itself). The group has been suddenly and simultaneously inspected by the tax and safety watchdogs. Dozens of supermarkets reportedly failed to meet fire safety standards. One in Beijing was fined 44,000 yuan (S$8,950) for alleged illegal advertising. In Anhui province, officials confiscated 30 radio- monitoring devices from a Lotte store and imposed a 20,000-yuan fine for failing to register the devices.

A Lotte Mart in Shanghai. Targeting Lotte, a business with no say in national security issues in South Korea, has the appearance of picking on the weakest of all the parties in the game. Even for China itself, this move could potentially do serious harm, said the writer. PHOTO: AGENCE FRANCE-PRESSE

Lotte has been doing business in China for over 20 years, employs 25,000 people and has invested over US$5 billion (S$7 billion), according to Lotte chairman Shin Dong Bin. Chinese consumers contribute about 30 per cent of its global sales. In 2016 alone, Chinese tourist spending accounted for about 70 per cent of its duty-free store sales in South Korea.

Besides Lotte, the boycott also has had an impact on other South Korea-related commerce and culture exchange. From cosmetics, Korean soap dramas, kimchi, BBQ, plastic surgery and Korean pop stars to vacation destinations, many Chinese turned away from their once-beloved South Korean icons. Most noticeably, after the National Tourism Administration warned tourists heading to South Korea to "carefully choose their destinations", all Chinese tour agencies suspended their South Korean tours. Airlines and cruise lines also cut routes between the two countries.

Looking back, this is not the first time a large-scale boycott campaign that many consider orchestrated by the state - or at least encouraged by state media - against a foreign investment has taken place. In 2008, French retail giant Carrefour was boycotted before the Beijing Olympics because of protests in Paris over the torch relay event. In 2012, Japanese restaurants as well as automobile and appliance brands became the target of anger amid the dispute over the Diaoyu/ Senkaku islands, some Chinese owners of Japanese cars were attacked and their cars vandalised. And last year, in response to the ruling over the South China Sea dispute by a tribunal in The Hague, dry mangos imported from the Philippines were removed from e-commerce platforms.

Is the Lotte boycott actually doing any good to China? One could argue that by doing so, China made its stance very clear on an issue that is of significant importance to its strategic interest. At the same time, the process also served the purpose of boosting national pride. China demonstrated to the world through its huge buying power its economic muscle as the world's second-largest economy. South Korea may see its gross domestic product fall 0.3 per cent due to the big drop in the number of Chinese tourists visiting the country.

On the other hand, the consequences of such actions become less certain when viewed from other perspectives. Over the last few years, North Korea has continued to test its nuclear weaponry and missile-delivery capabilities despite universal condemnation from the world. Seoul had hoped for Beijing to rein in the Pyongyang regime. South Korea's then President Park Geun Hye attended Beijing's 70th- anniversary celebration of World War II victory, over the objection of its American and Japanese allies. But eventually, seeing no progress in the efforts to stop the North's aggressive posture, Seoul sought to deploy Thaad.

The deployment no doubt has a negative impact on China's interest. However, targeting Lotte, a business with no say in this kind of national security issues in South Korea, has the appearance of picking on the weakest of all the parties in this game. Even for China itself, this move could potentially do serious harm.

The initial troublemaker, Pyongyang, could be further emboldened. On March 16, the regime threatened a nuclear war in the Korean peninsula. It is believed that Pyongyang is planning a sixth nuclear test, which could be far more destructive than the first five. Given the potential danger of nuclear pollution, China's north-eastern regions face the same, if not greater, risks than South Korea does.

And Seoul could be pushed further away. With such an unpredictable neighbour to the north, South Korea doesn't have many options but to take its security concerns very seriously. Seoul clearly is aware of Beijing's worries over Thaad's radar system weakening its strategic capabilities, and as much as it doesn't want to offend China, it insists on the priority of defending its people. Although the boycott hurts, South Korea is unlikely to give up Thaad because of that.

In a globalised world, trade wars will end in a lose-lose situation for all. Lotte's Chinese staff, suppliers and consumers could inevitably suffer "collateral damage". Chinese airlines, cruise lines, tourism and retail industries could also bear significant losses. According to the Yonhap news agency, South Korea may take complaints to the World Trade Organisation and demand compensation for the enterprises affected.

Regardless of the outcome, the incident could cast a shadow over China's investment environment and this won't be good news, especially against the backdrop of the outflows of foreign investment as China's economic growth slows down.

Punishing Lotte by whipping up nationalism is a double-edged sword, and it takes wisdom to balance the competing considerations and chart a responsible course for a superpower with huge responsibilities.

  • The writer is a filmmaker and columnist in Guangzhou, China.
A version of this article appeared in the print edition of The Straits Times on April 07, 2017, with the headline 'The Lotte boycott: Doing China more harm than good?'. Print Edition | Subscribe