South Korea: China Cracks Down on Another Business

3 MINS READFeb 8, 2017 | 22:31 GMT

Beijing and Seoul have long been at loggerheads over U.S. plans to deploy a Terminal High Altitude Area Defense (THAAD) battery in South Korea. Beijing fears that it is just the start of greater U.S. deployment of anti-ballistic missile systems on the Asian mainland. Although a stalwart U.S. ally, South Korea's economy is deeply intertwined with China's. Beijing has used these trade ties to try to bring Seoul in line.

On Feb. 8, South Korea's Lotte Group announced that Chinese authorities have forced it to halt construction of a multibillion-dollar theme park in Shenyang, the capital of China's northeastern Liaoning province. The Chinese government cited fire inspections as the cause of the stoppage. This comes just a few days after Lotte decided to shutter three retail outlets near Beijing. Lotte is a massive South Korean chaebol, the powerful business conglomerates that have thrived with heavy government support. And the company is tied into the controversial THAAD deployment: It owns a golf course in South Korea that, after a land swap with the Korean government, will be used for the missile battery. In an effort to pressure Lotte — and Seoul — Beijing has also rolled out wide-scale tax audits and safety checks at some branches of its affiliates.

Lotte it has a broad footprint in China. The conglomerate owns 99 department stores and 16 supermarkets there. Its affiliates in China employ some 26,000 people. The Shanyang theme park currently under government scrutiny has already opened a department store and movie theater that were set to be fully operational by 2018.

Perhaps as a result of China's actions, Lotte decided in January to defer its golf course land swap deal with the Korean government. But the conglomerate has said it still plans to cooperate with Seoul so that the government can move forward with its THAAD plans between May and July. South Korea and the United States have said it is possible they will move ahead with full deployment before the country's presidential election, which could be held as early as May 2017.

Beijing's retaliatory measures over THAAD began in late 2016. They have been strategic and selective. The Chinese government has blocked imports of high-tech bidets, cancelled concerts and restricted Chinese tourism — among numerous other measures. Beijing also warned several South Korean companies, including Samsung, that their business in China could suffer because of Seoul's decision on THAAD.

Beijing calculates that increased pressure on South Korean businesses and on an economy that relies on exports to China will change Seoul's mind on THAAD. With President Park Geun Hye in crisis and domestic consumption flagging amid the turmoil, the country may be ripe for a shift in policy. The Chinese government is also exploring connections with South Korean opposition leaders who have voiced support for THAAD renegotiation. But, for now, Seoul is maintaining course and even weighing its option for countermeasures against China — including anti-dumping regulations on Chinese products. 

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