Lotte to remain in China despite losses
By Yoon Sung-won
More Korean companies are falling victim to escalating Chinese retaliation against the deployment of a U.S. anti-missile system here.
Lotte affiliates are suffering the most from China's retaliatory acts after the group decided to provide real estate for the Terminal High Altitude Air Defense (THAAD) battery.
As of Wednesday afternoon, the Chinese government has shut down 55 Lotte Marts in the country, up from 23 earlier this week. This is more than half of the 99 Lotte Mart stores in China. The company is expected to lose 50 billion won in sales if the suspension lasts for a month, according to the industry.
Lotte World is also suffering from a sharp decrease in Chinese tourists. The company said the number of visitors from China to the amusement park dropped by 20 percent in January and February year-on-year. It said 20 percent of its 8 million visitors a year are Chinese.
Lotte Chemical is on high alert for possible retaliatory measures by Beijing. The company is running four plants in Jiaxing, Sanjiang and Hefei and has a sales branch in Shanghai.
Lotte stressed that it will not withdraw from the Chinese market despite the retaliation against its businesses.
"The proportion of our business in China is not significant in our total portfolio," a source from Lotte said. "We will secure the knowhow and infrastructure that we have accumulated while sustaining losses in China. There will be no withdrawing from the Chinese market for the moment."
Besides Lotte, other Korean companies are also being unfavorably affected by China's actions.
Kanghui, one of China's largest state-run tourism companies, said Wednesday it will suspend business with Korea's budget airlines. Consequently, Eastar Jet will no longer operate a daily flight connecting Cheongju, North Chungcheong Province, and Shenyang in China's Liaoning Province.
Chinese subsidiaries of global retail chains such as Carrefour and Lotus are cancelling promotional events for Korean food products. Lotus indefinitely postponed an event for a Korea food promotion that it had scheduled to hold for two weeks later this month at its 33 stores in Guangdong. More than 10 such promotional events in Beijing and Shanghai have allegedly been canceled, according to the industry.
Another allegation has been that the China Banking Regulatory Commission (CBRC) refused to allow the Samsung China Investment Company (SCIC) to establish a local financial corporation for the conglomerate's businesses in China last year.
The SCIC has pushed for the approval since July 2015 under local rules. But China allegedly rejected the plan after delaying handling Samsung's application without any explanation, according to industry sources.
Samsung Electronics could have facilitated the financial flow between its 29 subsidiaries in China with the corporation as it would have been able to provide loans, savings accounts, the drawing of bills and guarantees for local subsidiaries.
Samsung Electronics, however, denied the allegation and said the company voluntary withdrew the plan.
"It is true that we had such a plan," a company official said. "But we withdrew the plan last year because we discovered that it would not have been as profitable as we expected."
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