China hints at trade war strategy in S. Korea standoff
03/03/2017 08:56
By Adam Jourdan
SHANGHAI, March 3 (Reuters) - South Korean firms are being
squeezed in China, in suspected retaliation for Seoul's
deployment of a U.S. 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 U.S. 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 005380.KS 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.
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. urn:newsml:reuters.com:*:nL3N1GC2QR
On Thursday, Lotte Duty Free, an affiliate of Korean
conglomerate Lotte Group, said it had been the target of a
suspected Chinese cyber attack. urn:newsml:reuters.com:*:nL3N1GF2BZ
"What's happening to Korean companies now is a pretty good
playbook for what might happen to U.S. 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 090430.KS , carmaker Hyundai, and airlines
Jeju Air Co Ltd 089590.KS , Korean Air Lines Co Ltd 003490.KS
and Asiana Airlines Inc 020560.KS . urn:newsml:reuters.com:*:nL3N1GG07F
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 600138.SS , said they were
still offering Korean tours. A customer service worker at Tuniu
Corp TOUR.O , 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 JD.O , 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.
'IT'S BEING COORDINATED'
The consumer backlash followed. The number of posts
mentioning Lotte's Chinese name spiked to nearly 300,000 on
Thursday from a normal level of a few thousand.
Photos posted on Chinese social media showed a large group
of people surrounding a smashed up Hyundai car covered with
black graffiti, prompting alarm over a repeat of issues that
have hit faced Japanese carmakers. Other posts circulated online
called for a blanket ban on all Korean tours.
China's tourism administration posted a statement about
South Korean "travel tips" on Friday, reminding Chinese
holiday-makers "to soberly understand the risks of travelling
abroad and carefully choose their travel destinations."
The administration did not comment on any travel ban.
The normally hawkish state-run tabloid Global Times even
struck a note of caution on Friday, warning vandalism of Korean
products "won't win the support of mainstream public opinion".
However, Gilholm added the wide spectrum of measures taken
against South Korea was unusually aggressive and authorities -
though staying officially on the sidelines - played a role.
"For it to happen nationwide in such a short space of time
it's clearly been coordinated. You don't see that being
announced or admitted, but it's being coordinated," he said.
The Global Times warned last November the United States
could face such a coordinated campaign. If Donald Trump
triggered a trade war with China, Beijing would then target
firms from Boeing BA.N to Apple APPL.O in a "tit-for-tat"
approach.
"If Trump wrecks Sino-U.S. trade, a number of U.S.
industries will be impaired," it said in an editorial.
(Additional reporting by Cate Cadell and Xu Muyu in BEIJING,
SHANGHAI newsroom. Editing by Bill Tarrant.)
((adam.jourdan@thomsonreuters.com; +86 21 6104 1778; Reuters
Messaging: adam.jourdan.thomsonreuters.com@reuters.net))
Keywords: SOUTHKOREA CHINA/DISPUTE