S. Korean companies hit by China’s THAAD retaliation disappointed at lack of solution from Moon-Xi summit

Posted on : 2017-07-08 15:52 KST Modified on : 2017-07-08 15:52 KST
China claims to support free trade, but is cracking down on South Korean businesses, causing massive losses

Businesses are showing deep disappointment that, in their summit in Berlin, President Moon Jae-in and Chinese President Xi Jinping made no progress toward a solution to the issue of China's retaliation over the deployment of the THAAD missile defense system. Some have raised their voices in anger about China's two-faced stance, presenting itself to the world as promoting globalization and free trade while at the same time using economic means to lash out against South Korea. South Korean corporations, which have refrained from direct countermeasures so far, are now expressing their disappointment and anger for the first time as their losses from THAAD retaliation snowball.

A high-ranking executive of Hyundai Motor, which has suffered a five trillion won (US$4.3 billion) drop in sales in the Chinese market during the first half of this year, spoke out critically on July 7, "We are greatly disappointed and frustrated over the outcome of the summit between President Moon and President Xi. We had hoped that, even if they didn't come up with a complete solution to the issue of THAAD retaliation, they would at the very least show some sign of improving the situation. At the World Economic Forum in Davos in January this year, President Xi strongly criticized US President Trump's protectionism, and promised that China would open its doors to globalization. This THAAD retaliation is inconsistent with that promise."

Apart from Chinese government subsidy payments for electric cars with South Korean batteries, companies in the battery industry, including Samsung, LG, and SK, are also suffering fallout, including the halting of factory activities.

“They should have at least come up with some starting point for resolving the situation at the summit,” said one senior industry source. “The fact that there was nothing like that shows that we can’t expect a resolution any time soon.”

“It isn’t appropriate for China to talk about creating a ‘healthy international order’ as a global power on one hand, and then turn around and retaliate over THAAD,” the source complained.

Some domestic battery industry analysis interpreted the THAAD retaliation measures as being aimed at a “two birds with one stone” effect of hampering South Korean companies in future growth industries while buying time to allow Chinese companies to establish themselves as technologically competitive.

Distribution and retail businesses like Lotte, which has experienced 500 billion won (US$433.4 million) in losses from its business suspension, stressed that while they have struggled under the mounting losses over the past four months, they have also strived to hold on to customers and ensure they do not lose trust. They also said some restructuring of local business operations would be inevitable if the current situation continues.

As the damage grows, the Korea Chamber of Commerce and Industry (KCCI) has been looking for response measures.

“It’s a real bind,” a KCCI source said, adding that the organization “plans to hear industry opinions on possible future response methods.”

President Moon Jae-in made an indirect plea for Chinese President Xi Jinping to withdraw the THAAD retaliation measures during a July 6 meeting in Germany, where the two are attending the G-20 Summit.

“Economic, cultural and human interchange between our two countries are being curtailed due to various constraints,” Moon stressed to Xi.

But Xi stood by Beijing’s line that the THAAD deployment has to be reversed before any action.

“Hopefully, South Korea will take China’s legitimate concerns seriously and handle the relevant issue appropriately,” he told Moon.

By Kwack Jung-soo, business correspondent

Please direct questions or comments to [english@hani.co.kr]

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