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Projection of THAAD’s effect on number of Chinese tourists to South Korea

It’s estimated that China’s ban on South Korean cultural imports will amount to between 5.6 trillion won (US$5.02 billion) and 15.2 trillion won (US$13.6 billion) in direct and indirect damage in the consumer goods distribution sector.

A report titled “How the Chinese Ban on Korean Cultural Products Is Affecting the Domestic Consumer Goods Industry” that was published on May 21 by the Korea Institute for Industrial Economics and Trade (KIET) examined the number of Chinese tourists who visited South Korea (a total of 7 million in 2016) during the month after China banned the sale of package tours to South Korea on Mar. 15 in retaliation for the deployment of the THAAD missile defense system. Analysts from the institute found that the number of tourists had decreased by about 60% compared to the same month in 2016. It’s estimated that the total travel expenditures of Chinese tourists to South Korea in 2016 amounted to 18 trillion won, of which they spent 12.8 trillion won on shopping. For comparison, the institute examined the 51% year-on-year decline in Chinese tourists during the MERS outbreak in 2015, and it also took into account the money the average Chinese tourist spent on shopping in 2015 (1.8 million won, about US$1,600). After analyzing several scenarios, the institute estimated that if China continues the ban for six months and if there‘s a 30% year-on-year decrease in the number of Chinese tourists, the damage caused by lost sales and the slowdown of consumer goods purchases in the domestic distribution sector could total 5.6 trillion won. This analysis projects that a six-month ban would cause domestic shopping expenditures by Chinese tourists to decrease by between 54% and 80%. If the ban continued for a year and the number of Chinese tourists decreased by 70%, the losses would reach 15.2 trillion won, the institute estimated.

Institute analysts also predicted that the ban on sales of package tours to South Korea would cause the added value in major domestic consumer goods industries to decline by between 38.9 billion won (over six months) and 70.7 billion won (over one year) and the value of output to decline by between 170 billion won (over six months) and 300 billion won (over one year). “In regard to specific categories of consumer goods, the greatest harm will be suffered by cosmetics and attire, and a negative impact is also expected in the foodstuffs, footwear and purse sectors,” the institute said.

By Cho Kye-wan, staff reporter

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