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By Kim Yoo-chul, Park Si-soo, Park Jin-hai
The moves by the United States and Korea to deploy an advanced missile defense system on the Korean Peninsula as a response to "provocative" moves by North Korea may have a negative impact on business ties between Korea and China.
Officials in the tourism, technology, retail and automotive industries said Wednesday that the companies are closely monitoring on how the escalating political tension in Northeast Asia will affect their businesses China ― the most crucial market for all of them.
They said that it seems unlikely that the moves to deploy Lockheed Martin's terminal high altitude area defense (THAAD) system, which is designed to intercept ballistic missiles in their terminal stages, in Korea will have any imminent impact on Korean firms operating in China.
"But it does make sense that the Chinese government may introduce new punitive measures against Korean firms in retaliation," an official at one of LG's technology affiliates said by telephone.
Foreign Minister Yun Byung-se told a group of lawmakers in a hurriedly-arranged meeting during the Lunar New Year holiday that he has no solid knowledge about any counter moves by China against Korean companies. But Yun said Seoul is acknowledging worries about whether the political tension will possibly hit Korean firms.
"Things will be complicated. North Korea relies hugely on China for economic assistance and exports. But the situation is not different for South Korea, as China is its biggest single business market. If political turmoil deepens, then this will cost a lot," Hong Soon-jick, senior researcher at Hyundai Economic Research Institute.
"After the fourth nuclear test by the North, South Korea filed an official complaint to China. Still, maintaining a solid partnership between South Korea and China is crucial in addressing key North Korea-related issues; however, the current situation asks Korean firms in China to prepare a Plan B," said Sejong Institute researcher Chung Jae-hong.
Another ‘garlic dispute?'
Samsung Electronics, the biggest foreign investor in China in terms of investment, said it has no official comment on the issue.
But sources within Samsung told The Korea Times that top company management is regularly being briefed on the situation at its Chinese operations before taking "any new steps" to keep its businesses running.
Trade experts in Seoul said if the situation deteriorates, then Beijing may ask Korean companies to pay more tax, and will reduce subsidies to business projects that Korean companies are heavily involved in such electric vehicles (EVs).
"There are worries that a new garlic dispute could occur depending on the situation. Although it seems too far that the free trade agreement (FTA) between the South and China will be affected, China may introduce invisible sanctions such as toughened quarantine processes for agricultural products and quality-checks," said an official at the local trade ministry.
By comparison, Seoul introduced a safeguard measure in 2000 against the massive influx of cheap Chinese garlic. To protect local farms, the Korean government hiked the tariff rates to 315 percent from 30 percent. As a retaliatory action, China blocked the imports of high-tech gadgets such as mobile phones from Korean companies.
An official at LG, one of the biggest foreign investors in China with LG Display having invested more than billions of dollars to operate a huge display complex in Guangzhou, said the company will team up with Korea's trade ministry to address growing "China risks."
The automotive industry is already initiating plans to prepare for the worst case scenario.
"Electric buses using Samsung and LG-manufactured batteries were not given Chinese government subsidies. I think this is a part of a retaliatory action against the possible THAAD deployment," said an official wishing to remain unidentified.
But the retail and tourism industries remained cautious about whether the political tension will have an impact on their businesses.
"It's still too early to say the planned Korea-U.S. talks on THAAD will have a negative impact on Korean companies. But it could happen if Seoul and Washington come up with a concrete action plan that China objects to," said an executive at a retail firm on the condition of anonymity.
"Even if the Chinese government adopts any kind of retaliation against Korea, I think it will do little to curb the influx of Chinese travelers to Korea," said a local travel agency executive.
"There were several political conflicts that frayed Korea-China ties, but none of them had a negative impact on the tourism industry. The MERS outbreak last year was the only event that actually hit the industry," he added.
According to data from the trade ministry, China received 26 percent of the total national exports last year.
However, in January this year, exports to China decreased to 21.5 percent from a year earlier.
"Korea's four backbone industries ― technology, steel, automobiles and shipbuilding ― were already in trouble. This is why the THAAD issue is worth being reviewed," said a trade ministry official.
