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China hints at trade war strategy to counter South Korean-US missile system

South Korean firms are being squeezed in China, in suspected retaliation for Seoul’s deployment of a US missile defence system, highlighting the tools China can deploy to hit back at the corporate interests of trade partners it disagrees with.

world Updated: Mar 03, 2017 20:48 IST
Delegates arrive at the Great Hall of the People for the opening session of the Chinese People's Political Consultative Conference (CPPCC) in Beijing on March 3, 2017. The CPPCC plays a largely symbolic role, with members meeting once a year to discuss social and economic policies, among them wealthy business leaders and members of powerful political families.
Delegates arrive at the Great Hall of the People for the opening session of the Chinese People's Political Consultative Conference (CPPCC) in Beijing on March 3, 2017. The CPPCC plays a largely symbolic role, with members meeting once a year to discuss social and economic policies, among them wealthy business leaders and members of powerful political families.(AFP)

South Korean firms are being squeezed in China, in suspected retaliation for Seoul’s deployment of a US missile defence system, highlighting the tools China can deploy to hit back at the corporate interests of trade partners it disagrees with.

The chill facing Korea Inc, from cosmetics and supermarket chains to autos and tourism, points to a potential risk for American companies, amid a more confrontational stance taken by new US President Donald Trump

In China, state media and grassroots political groups have led angry calls to boycott popular Korean products. Photos on social media and local news websites showed crowds vandalising a Hyundai Motor Co car, and some Chinese tourism firms moved to cancel Korean tours.

Beijing is furious over a joint plan by South Korea and the United States to set up the Terminal High Altitude Area Defence (THAAD) missile system in South Korea. Seoul and Washington say it will defend against nuclear-armed North Korean missiles. But Beijing says its far-reaching radar is targeted at China.

Read | N Korea missile launch: US pledges nuclear defence for Japan, S Korea if needed

The furore echoes protests in 2012 against Japanese firms during a row with Tokyo over disputed islands in the East China Sea. The dispute flared on Monday when Lotte approved a land-swap deal that moved the THAAD system closer to deployment.

On Thursday, Lotte Duty Free, an affiliate of Korean conglomerate Lotte Group, said it had been the target of a suspected Chinese cyber attack.

“What’s happening to Korean companies now is a pretty good playbook for what might happen to US firms over the next year,” said Andrew Gilholm, director of analysis for China and North Asia at risk consultancy Control Risks.

“Rather than the big dramatic trade war, everything goes to hell scenario under Trump, it’s probably more likely to be manifested as regulatory harassment of companies - one of the lower intensity tools for China.”

Korean stocks plunged on Friday, hitting cosmetics giant Amorepacific Corp, carmaker Hyundai, and airlines Jeju Air Co Ltd, Korean Air Lines Co Ltd and Asiana Airlines Inc.

Political pressure

Some companies hinted at feeling political pressure to loosen or cut ties with South Korea. Korean media reported China had ordered tour operators in Beijing to stop selling trips to the country.

Three major Chinese tour operators Reuters spoke to, including China Youth Travel Service, said they were still offering Korean tours. A customer service worker at Tuniu Corp, however, said the firm had stopped providing tours to Korea, citing the THAAD controversy. Tuniu did not respond to requests for comment.

Lotte also said searches for its products had been disrupted on major e-commerce platform JD.com Inc, though it did not directly say this was due to diplomatic tensions. JD.com declined to comment.

The CEO of Chinese retailer Jumei.com posted on his official microblog that his firm would no longer sell Lotte products. The firm did not respond to Reuters requests for comment.

“Some retailers have removed Lotte sales channels over the last week as a result of political pressure,” said a senior China-based retail industry executive, asking not to be named because of the sensitivity of the issues.

The Communist Party Youth League at central and local levels also fanned the flames online, calling for consumers not to buy products including cars, cosmetics and electronics.

“We say ‘no’ to Lotte!” the national-level Communist Youth League wrote in a post on its official microblog page.