Sino-South Korean bilateral economic ties show warming-up signs after THAAD dispute

By Xie Jun and Zhang Hongpei Source:Global Times Published: 2017/11/21 19:38:39

The Busan Nam Port is seen in the port city of Busan, about 420 kilometers southeast of Seoul, South Korea. Busan is South Korea’s second largest city. Photo: IC


According to foreign reports, the long-stagnant economic relationship between South Korea and China, prompted by tensions over the controversial missile defense system that was deployed in the former, is showing early signs of a revival, especially in sectors such as investment, tourism and retail. But one expert noted that those signs are "fragmented and blurry," with improvements set to take place only in the long term. Companies in China with South Korea-related businesses also told the Global Times that they are not seeing any significant improvements yet.

China's frosty economic relationship with South Korea started to show early signs of a turnaround in recent days.

Li Qinghua, a native of Northeast China's Heilongjiang Province who now lives and works in Seoul, told the Global Times on Monday that from her observations, the economic relations between South Korea and China "seem to have warmed up" a little bit.

"In the past, Myeongdong [a well-renowned shopping street in Seoul] was often packed with Chinese tourists, but after the two countries' relationship froze, Myeongdong became a little bit deserted. Recently, I saw that there has been a slight increase of Chinese tourists at Myeongdong," she told the Global Times, but stressed the situation is incomparable to a few years ago when the Sino-South Korean bilateral relationship was at its zenith.

A report by the Seoul-based Aju Business Daily published on Monday noted that a 25-people tour group from Shanghai will arrive at Jeju Island in South Korea around November 28, the first tour group from China to South Korea since political disputes cut off organized commercial tourism between the two countries. It did not give details about the organizers and participants of the tour.

There has also been some progress in the investment sector. According to another report published by the Aju Business Daily on Monday, Korean automotive component maker Erae Automotive established a joint venture with China Aerospace Science & Technology Corp on Thursday, the first Sino-South Korean joint venture after the political frictions broke out between the two countries over the Terminal High Altitude Area Defense (THAAD) issue.

China's trade with South Korea also rose by 11.4 percent year-on-year in the first ten months of this year, customs data showed on November 8. 

However, Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, had a different view, saying that these early repairing signs "cannot reflect an overall trend that economic relations between China and South Korea are fully recovering, as those signs tend to be fragmented and blurry."

Connection still there

Icebreaking signs emerged as both countries worked to find a solution to their disputes over THAAD.

According to a statement published on the official website of China's Ministry of Foreign Affairs on October 31, the governments of the two countries share the view that strengthening exchanges and cooperation serves their common interests, and they agreed to bring exchanges and cooperation in all areas "back on a normal development track." 

South Korea announced in July 2016 that it would deploy the THAAD system to defend itself from North Korean missile threats, Reuters reported in July 2016. After that, China and South Korea were stuck in months of tension and economic slowdown.

But the chilling relationship has caused quite a blow to South Korea's economy in particular, especially the retail sector, as a big portion of its income depends on big-spending Chinese customers who would clean out store shelves for popular South Korean goods including skincare products and cosmetics. 

According to an Aju Business Daily report published on October 26, in the first nine months of this year, South Korea received about 3.19 million visitors from China, down almost 50 percent compared to a year ago.

As revival signs emerged over recent days, South Korean retailers rolled up their sleeves to cater to Chinese consumers. For example, in mid-November, the Seoul-based Shinsegae duty-free store welcomed some Chinese Internet celebrities to help advertise some of their products, with the aim of attracting more Chinese customers to the country, according to overseas media reports.

Furthermore, the Seoul-based Shilla duty-free store has also designed a special app for Chinese tourists where they can exchange their tax bills for shopping coupons.

But Li said such sales promotion activities for Chinese consumers have always existed, even after the two countries' relationship slumped over the THAAD issue. "The strength of sales promotions might have been weaker because of the political situation, but it seems to be slowly recovering now," she noted.

She also noted that the daigou army, a group of informal traveling shopping agents who buy and ship goods from South Korea to China, was still quite active. "Their business was affected but only for a very short period of time. Besides, they have multiple-entry visas, so it's not difficult for them to travel frequently between the two countries," she said.

Early days

The Global Times consulted some companies in China with South Korea-related businesses, and all of them said that it's too early to say that things are back on track.

A customer service staff member from Utourworld.com Inc, a Shanghai-based travel agency specializing in overseas tourism, said that the company canceled all its tours to South Korea around May and has not yet restarted them. She also said she is not sure whether those tours will be re-launched in the future.

Another customer service representative from China CYTS Tours Holding Co, also a travel agency, made similar comments.

Zhang Wuan, spokesman for Shanghai-based Spring Airlines, said that his company is running 32 flights to South Korea in the 2017 winter/spring season, compared with 46 flights in the same period in 2016.

"Recently, we have not made any changes [like adding new routes] for South Korea flights compared with the beginning of this year," he told the Global Times Monday.

A representative from Lotte China, whose business has slumped a lot due to the company's deep involvement with the THAAD issue, said that so far, the company's business in China has not seen any significant improvements. She also said that the company is formulating new plans concerning the Chinese market, but has not confirmed the plans yet.

According to Bai, if the THAAD dispute cannot be properly resolved, uncertainty and shadows will continue lingering over the bilateral relations between China and South Korea, which will result in the limitation of mutual investment and cooperation on a large scale.

"The performance of South Korean companies in China has shown weakness this year. For example, the market shares of Samsung's smartphones and of the nation's carmakers Hyundai and Kia both dropped in China," Bai said.

Besides the THAAD issue, the rising competitiveness in the world's second-largest economy has also intensified the pressure for South Korean players, experts noted.

Jin Qiangyi, director of Yanbian University's Asia Research Center, said that China's intermediate imported goods from South Korea have taken up a huge proportion over the past few years, up to 60 percent, yet that figure is currently dwindling due to the Chinese government's encouragement of domestic makers to ramp up technology advancement efforts.

South Korea has made inroads in the Chinese export market by relying on its high-tech products such as semiconductors and liquid crystal display devices as well as cosmetics since 2010.

According to Jin, the current situation of Sino-South Korean bilateral economic and trade relations is not wholly due to the THAAD issue, but also in part due to the challenges posed by the fierce competition from China's domestic firms, as well as other international players.

"South Korea is reliant on China not only in terms of economic benefits, but also in terms of stabilization in Northeast Asia, where China plays a crucial role," Jin said.

Jin said that with the unfreezing of bilateral politics, business will improve, "yet not in the near future."


Newspaper headline: China-South Korea economic relations on the mend as THAAD dispute calms


Posted in: ECONOMY,INSIGHT,NORTHEAST ASIA,BIZ FOCUS

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