Wrapup 5: China, S.Korea agree to mend ties after THAAD standoff

Lotte Tour Development Co

31/10/2017 09:32

* S.Korea, China to hold summit around Nov APEC meeting 
    * Worsening N.Korea-China ties may have contributed to 
agreement 
-South Korea's Blue House 
    * Stocks surge in S.Korea's China/tourism-reliant sector 
    * For N.Korea multimedia package: https://www.reuters.com/north-korea/ 
 
    By Christine Kim and Ben Blanchard 
    SEOUL/BEIJING, Oct 31 (Reuters) - Seoul and Beijing on 
Tuesday agreed to move beyond a year-long stand-off over the 
deployment of a U.S. anti-missile system in South Korea, a 
dispute that has been devastating to South Korean businesses 
that rely on Chinese consumers. 
    The unexpected detente comes just days before U.S. President 
Donald Trump begins a trip to Asia, where the North Korean 
nuclear crisis will take centre stage, and helped propel South 
Korean stocks  .KS11  to a record high. 
    The installation of the U.S. Terminal High Altitude Area 
Defense (THAAD) system had angered China, with South Korea's 
tourism, cosmetics and entertainment industries bearing the 
brunt of a Chinese backlash, although Beijing has never 
specifically linked that to the THAAD deployment. 
    Beijing worries the THAAD system's powerful radar can 
penetrate into Chinese territory. 
    "Both sides shared the view that the strengthening of 
exchange and cooperation between Korea and China serves their 
common interests and agreed to expeditiously bring exchange and 
cooperation in all areas back on a normal development track," 
South Korea's foreign ministry said in a statement. 
    Before the THAAD dispute, bilateral relations flourished,  
despite Beijing's historic alliance with North Korea and Seoul's 
close ties with Washington, which includes hosting 28,500 U.S. 
troops. China is South Korea's biggest trading partner. 
    "At this critical moment all stakeholders should be working 
together to address the North Korea nuclear challenge instead of 
creating problems for others," said Wang Dong, associate 
professor of international studies at China's Peking University. 
    "This sends a very positive signal that Beijing and Seoul 
are determined to improve their relations." 
    As part of the agreement, South Korean President Moon Jae-in 
will meet Chinese President Xi Jinping on the sidelines of the 
summit of Asia-Pacific Economic Cooperation (APEC) countries in 
Vietnam on Nov. 10-11. 
    South Korea recognised China's concerns over THAAD and made 
it clear the deployment was not aimed at any third country and 
did not harm China's strategic security interests, China's 
foreign ministry said. 
    China reiterated its opposition to the deployment of THAAD, 
but noted South Korea's position and hoped South Korea could 
appropriately handle the issue, it added. 
    "China's position on the THAAD issue is clear, consistent 
and has not changed," Chinese Foreign Ministry spokeswoman Hua 
Chunying told a daily briefing in Beijing. 
     
    RETAIL RELIEF 
    The thaw is a big relief for South Korean tourism and retail 
firms as well as K-pop stars and makers of films and soap 
operas, which had found themselves unofficially unwelcome in 
China over the past year. 
    In South Korea, a halving of inbound Chinese tourists in the 
first nine months of the year cost the economy $6.5 billion in 
lost revenue based on the average spending of Chinese visitors 
in 2016, data from the Korea Tourism Organization shows. 
    The spat knocked about 0.4 percentage points off this year's 
expected economic growth, according to the Bank of Korea, which 
now forecasts an expansion of 3 percent. 
    The sprawling Lotte Group, which provided the land where the 
THAAD battery was installed and is a major operator of hotels 
and duty free stores, has been hardest hit. It faces a costly 
overhaul and is expected to sell its Chinese hypermarket stores 
for a fraction of what it invested. 
    A spokesman for holding company Lotte Corp  004990.KS  
expressed hope that South Korean firms' activity in China would 
improve following the announcement. 
    An official at Seoul's presidential Blue House, who declined 
to be named given the sensitivity of the matter, said 
improvements for South Korean companies would come slowly. 
    Shares in South Korean tourism and retail companies rallied 
nonetheless, with Asiana Airlines  020560.KS  gaining 3.6 
percent and Lotte Shopping  023530.KS  up 7.14 percent. The 
benchmark Kospi index hit a record for a third straight day, 
gaining 0.9 percent. 
    China has grown increasingly angry with North Korea's 
ongoing pursuit of nuclear weapons and ballistic missiles in 
defiance of United Nations sanctions, even as it chafes at U.S. 
pressure to rein in its isolated ally. 
     
    NORTH KOREA TENSIONS 
    The recent deterioration in ties between China and North 
Korea may have contributed to Tuesday's agreement, the Blue 
House official said. 
    Pyongyang has undertaken an unprecedented missile testing 
programme in recent months, as well as its biggest nuclear test 
yet in early September, as it seeks to develop a powerful 
nuclear weapon capable of reaching the United States. 
    The head of NATO on Tuesday urged all United Nations members 
to fully and transparently implement sanctions against North 
Korea.  urn:newsml:reuters.com:*:nL4N1N61T3 
    "North Korea's ballistic and nuclear tests are an affront to 
the United Nations Security Council," NATO Secretary General 
Jens Stoltenberg said in Tokyo, where he met Japanese Prime 
Minister Shinzo Abe. 
    Separately, a South Korean lawmaker said North Korea 
probably stole South Korean warship blueprints after hacking 
into a local shipbuilder's database last April.  urn:newsml:reuters.com:*:nL4N1N628Y 
    Expectations had been growing for a warming in the frosty 
bilateral ties following this month's conclave of China's 
Communist Party, during which Xi cemented his status as China's 
most powerful leader after Mao Zedong.  urn:newsml:reuters.com:*:nL4N1N013I 
    Earlier this month, South Korea and China agreed to renew a 
$56 billion currency swap agreement, while Chinese airlines are 
reportedly planning to restore flight routes to South Korea that 
had been cut during the spat.  urn:newsml:reuters.com:*:nL4N1MO1H1 
    Tuesday's agreement came after high-level talks led by Nam 
Gwan-pyo, deputy director of national security of the Blue 
House, and Kong Xuanyou, assistant foreign minister of China and 
the country's special envoy for North Korea-related matters. 
 
 (Reporting by Christine Kim and Hyonhee Shin in SEOUL and Ben 
Blanchard in BEIJING, with additional reporting by Dahee Kim and 
Joyce Lee; Writing by Tony Munroe; Editing by Lincoln Feast and 
Ian Geoghegan) 
 ((christine.kim@thomsonreuters.com; 822 3704 5665; Reuters 
Messaging: christine.kim.thomsonreuters.com@reuters.net)) 
 
Keywords: NORTHKOREA MISSILES/