By Nam Hyun-woo
Domestic banks are paying keen attention to China’s retaliation over Korea’s decision to deploy a U.S. Terminal High Altitude Area Defense (THAAD), amid growing fears that Beijing’s responses may affect their business.
According to sources Tuesday, five domestic banks ― KEB Hana, Shinhan, Standard Chartered Korea, the Industrial Bank of Korea (IBK) and Woori ― have payment guarantees extended to Lotte’s affiliates in China. The amount reportedly surpasses 328 billion won ($285.8 million).
Lotte, the fifth-largest conglomerate in Korea, is being hit hard in its businesses in China after its deal with the defense ministry last month to hand over one of its golf courses as the location for the anti-missile system.
In apparent retaliation against the conglomerate, Chinese authorities have suspended the operation of 39 stores of Lotte’s retail chain Lotte Mart in China.
This is a problem for KEB Hana, whose payment guarantees for Lotte affiliates in China amounts to 215 billion won.
“We are yet to hold meetings or make decisions regarding the guarantees, but we are closely monitoring risks coming from the THAAD issue,” a KEB Hana Bank official said.
Other banks also said they believe the risks stemming from the anti-missile system are “not imminent,” but said they are paying attention to China’s moves because it may affect other Korean firms there.
“We are paying attention to the potential impact on small- and medium-sized enterprises (SMEs) doing businesses with their Chinese counterparts,” an IBK official said.
“There is no reported case of China’s retaliation among financial businesses so far,” said a bank official asking not to be named. “Rather, banks should not be satisfied with that and should think about changing their business strategies in China drastically.”
So far, domestic banks’ China branches have been focusing on doing businesses with Korean firms operating there. Observers say that banks should have tactics to diversify their strategies given that the country’s economy “still remains a lucrative market.”
“It is expected that China will not expand its retaliatory measures to the financial sector, because it will be internationally regarded as crossing the line,” said Prof. Kim Man-gi at Sookmyung Women’s University.
“However, we have to know that it is extremely difficult to restore relations with China and domestic banks should not be just satisfied that the retaliation does not affect them now,” the professor said.