By Lee Min-hyung
The government’s decision to deploy a Terminal High Altitude Area Defense (THAAD) system here is feared to hurt another Korean firm as SK Planet will apparently not receive a 1.3 trillion won ($1.14 billion) investment from a Chinese company it was negotiating.
Analysts said Thursday that the delay is a possible retaliatory action by the Chinese government, as Beijing has stepped up its criticism of the THAAD deployment over concerns it could monitor airborne objects not only in North Korea but also in China.
Early last year, the online-to-offline marketing platform operator affiliated with SK Group was in advanced talks with China Minsheng Investment (CMI), China’s largest private investor, over the investment partnership.
But with political relations between Seoul and Beijing turning icy after Seoul’s decision to deploy THAAD in July, both companies are at a standstill over signing a contract.
“Nothing has been confirmed over the deal yet,” an SK Planet spokesman said. “If the deal is withdrawn, we are looking for other investors here and abroad.”
The Seoul-based company is also leaving open the possibility of using its own cash reserves, according to the official.
The invested capital will be used to strengthen the infrastructure of the firm’s various services ― including its Syrup mileage service and the 11st e-commerce site ― and expand overseas.
To reduce its heavy reliance on the local market, the firm has in recent years exported its business to Asian markets, such as Turkey, Indonesia and Malaysia. Last week, the company also launched its 11st shopping platform in Thailand.
To secure funds to tap into offshore markets, SK Planet focused on negotiations with CMI last year after getting a letter of intent from the Chinese outfit for acquiring stakes in SK Group.
But a news report this week claimed the latter notified the former of the withdrawal from the investment plan late last year.
SK Planet counters that there has been no official notification but the firm also seems to be pessimistic about the contract.
“CMI is one option for our business expansion,” the official said. “We do not view the THAAD deployment as a critical reason to determine whether we could finalize the deal with CMI, as nothing official was decided between both sides.”
CMI was established in Shanghai in 2014 as China’s first national-level private investment firm with capital of 50 billion Chinese yuan (8.29 trillion won). The company is funded by 59 private Chinese firms.
Korean companies will continue to remain vulnerable to the ongoing political dispute between the two countries unless the nation actually deploys the U.S. missile system, according to a Chinese market expert at Korea University.
Lotte Group, the country’s No. 5 conglomerate that plans to offer land for the THAAD site, has also suffered difficulties with its Chinese businesses. SK Group is the fourth-largest conglomerate.
“One thing for sure is that Beijing will not maintain its retaliatory posture once Seoul deploys THAAD,” Kim Ik-su, an international business professor at Korea University Business School, said.
“This is because the Chinese government has to take into account its relationship with its U.S. counterpart.” “The political settlement is the top priority to stop Seoul-based firms from falling victim to Beijing’s retaliatory postures. Korean firms, for their part, should also diversify their revenue sources, reducing their reliance on the Chinese market, which is too risky.”
He said it is high time that conglomerates need to conduct restructurings on unprofitable businesses in China. This is necessary because a revenue diversification strategy is one of the best ways to reduce potential risks for companies operating businesses across the world, according to him.