By Lee Hyo-sik
China has suspended the operations of Lotte's chocolate plant there, the latest in a series of retaliations against Lotte Group for offering a golf resort as the site for a U.S. anti-missile defense system, company officials said Wednesday.
More than one-third of Lotte Mart's 99 stores in China have already been forced to close by the Chinese government, with more expected to face a similar fate. The world's most populous country also ordered its tourists not to visit Lotte Duty Free stores and other tourism-related facilities operated by Korea's fifth-largest conglomerate.
Lotte Confectionary confirmed that Chinese authorities have ordered Lotte Shanghai Foods to suspend its production for a month, citing its "inappropriate" fire protection system. The Chinese government raised the same issue with Lotte Mart when it shut down the retailer's outlets.
Set up in 2007, Lotte Shanghai Foods is a 50-50 joint venture between Lotte Confectionary and U.S. confectionary giant, Hershey Chocolate. The company produces mostly chocolate and cocoa products, generating about 80 billion won ($70 million) in sales annually. Most of its products are consumed there, with some exported to Malaysia and other Southeast Asian nations.
"We were told by our colleagues in China that state inspectors there verbally ordered the plant to close for a month due to a violation of the country's rules concerning industrial fire protection systems," a Lotte Confectionary official said.
"The order was issued as soon as the inspectors finished checking the plant's safety-related facilities. We expect to get an official document from authorities soon, telling us to close the plant in Shanghai to stop operations."
The suspension of Lotte Shanghai Foods indicates that Chinese authorities are now willing to go after American companies operating in China too, as Korea and the United States have begun delivering the Terminal High Altitude Area Defense (THAAD) components.
"I think the shutdown of the Korea-U.S. joint venture clearly shows that China intends to accelerate its retaliation against both Korean and American corporate interests, as a means of expressing its displeasure," said an executive at one of Korea's major business associations.
"I am afraid Lotte and other Korean businesses operating in China will be affected even more because China's THAAD backlash will likely continue to accelerate."
Meanwhile, Lotte Mart has decided to use China's hostile stance against its business as an opportunity to close some of its unprofitable stores there. Chairman Shin Dong-bin ordered the discount store chain to review a list of unprofitable outlets in Shanghai for possible closure.
In 2016, the company lost 124 billion won abroad. About 90 percent of the losses were incurred in the world's second-largest economy.
China has suspended the operations of Lotte's chocolate plant there, the latest in a series of retaliations against Lotte Group for offering a golf resort as the site for a U.S. anti-missile defense system, company officials said Wednesday.
More than one-third of Lotte Mart's 99 stores in China have already been forced to close by the Chinese government, with more expected to face a similar fate. The world's most populous country also ordered its tourists not to visit Lotte Duty Free stores and other tourism-related facilities operated by Korea's fifth-largest conglomerate.
Lotte Confectionary confirmed that Chinese authorities have ordered Lotte Shanghai Foods to suspend its production for a month, citing its "inappropriate" fire protection system. The Chinese government raised the same issue with Lotte Mart when it shut down the retailer's outlets.
Set up in 2007, Lotte Shanghai Foods is a 50-50 joint venture between Lotte Confectionary and U.S. confectionary giant, Hershey Chocolate. The company produces mostly chocolate and cocoa products, generating about 80 billion won ($70 million) in sales annually. Most of its products are consumed there, with some exported to Malaysia and other Southeast Asian nations.
"We were told by our colleagues in China that state inspectors there verbally ordered the plant to close for a month due to a violation of the country's rules concerning industrial fire protection systems," a Lotte Confectionary official said.
"The order was issued as soon as the inspectors finished checking the plant's safety-related facilities. We expect to get an official document from authorities soon, telling us to close the plant in Shanghai to stop operations."
The suspension of Lotte Shanghai Foods indicates that Chinese authorities are now willing to go after American companies operating in China too, as Korea and the United States have begun delivering the Terminal High Altitude Area Defense (THAAD) components.
"I think the shutdown of the Korea-U.S. joint venture clearly shows that China intends to accelerate its retaliation against both Korean and American corporate interests, as a means of expressing its displeasure," said an executive at one of Korea's major business associations.
"I am afraid Lotte and other Korean businesses operating in China will be affected even more because China's THAAD backlash will likely continue to accelerate."
Meanwhile, Lotte Mart has decided to use China's hostile stance against its business as an opportunity to close some of its unprofitable stores there. Chairman Shin Dong-bin ordered the discount store chain to review a list of unprofitable outlets in Shanghai for possible closure.
In 2016, the company lost 124 billion won abroad. About 90 percent of the losses were incurred in the world's second-largest economy.
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