China is going after South Korea's wallet in their dispute over the THAAD missile system
The first pieces of the US-made Terminal High Altitude Area Defense missile system arrived in South Korea earlier this month, the latest step a deployment process the Chinese government had greeted with chagrin.
Beijing has inveighed against the deployment and criticized the South Korean government for undermining bilateral relations by hosting the missile system.Chinese citizens, among whom a sense of nationalism is strong, have also taken up the anti-THAAD mantle, protesting and boycotting South Korean businesses and tourism.
Several Chinese state-run media outlets have called for organized voluntary boycotts of South Korean businesses and imports. China is Seoul's largest trading partner, receiving one-quarter of South Korea's exports.
Those public protests have fallen heavily on one company: South Korean conglomerate Lotte Group.
Lotte agreed in early March to turn over a golf course to the South Korean government to host the THAAD missile system.
In the days after, the company said 23 Lotte Mart stores in China were shut down by authorities there, who claimed the outlets were in violation of fire-safety regulations. The maker of one of China's most popular snacks (among other Chinese retailers ) withdrew its goods from Lotte Marts in the country, saying it would " never cooperate " with the South Korean company.
Lotte said on March 19 that 79 of its 99 stores in China were facing business suspensions and had been forced to shut down temporarily.
Lotte is heavily invested in the Chinese domestic market, spending nearly $9 billion on its operations there since 1994. The Chinese market makes up nearly 30% of Lotte's sales outside of South Korea.
At present, it has 22 subsidiaries in China , with 26,000 employees and annual sales of about $2.6 billion. Lotte's duty-free business in South Korea pulls 70% of its sales from visiting Chinese tourists.
"Lotte's decision has lit a fuse. When foreign firms touch Chinese consumers' nationalistic feelings, it can spark a boycott," Fu Guoqun, a Peking University business professor, told AFP early this month . "This will have quite a huge impact on the company."
China has also reportedly targeted tourism, pressuring travel agencies there to stop selling group-trip packages to South Korea. Businesses in South Korea's tourism and other industries catering to Chinese visitors also took hits in the days around the THAAD deployment.
Chinese companies have blocked South Korean music videos and TV dramas on streaming services in the country. Chinese broadcasters also reportedly canceled appearances by South Korean bands - moves that garnered support on Chinese social media.At least one K-pop band, MIXX, has reportedly broken up over the THAAD dispute. A Chinese agency managing the band (it had two agencies representing it; the other was Korean) withdrew its investment, making the band unable to continue its promotions. Three of the group's members, all Chinese, returned to China.
"Money spent on K-pop stars will turn into bullets that point towards you and your family in the future," a posting on China's Twitter-like Weibo service said, according to AFP .
In response, Seoul has gone to the World Trade Organization. A South Korean official, stressing that it was not a legal action, told Reuters that it was a request for the trade bloc to examine if Beijing was upholding trade agreements fairly.
Beijing, which has not directly linked trade and commerce restrictions on THAAD's deployment, did not respond specifically to South Korea's complaint, instead invoking the role of the public in such trade dealings. (The Chinese public has targeted goods from other countries amid international disputes in the past.)
"We support normal business and other exchanges between China and South Korea," a Chinese Foreign Ministry spokeswoman told a news briefing this week. "But everyone knows this needs a corresponding basis in public opinion."
South Korean lawmakers have stepped up criticism over what they see as a lack of response from Seoul, but direct discussions between the two governments have not been forthcoming, with Beijing declining a request from Seoul to meet at a Group of 20 meeting in Germany this weekend.Twisting the screws on South Korea's business interests may be a prelude to future deployment of such measures against others.
"What's happening to Korean companies now is a pretty good playbook for what might happen to US firms over the next year," Andrew Gilholm, director of analysis for China and North Asia at risk consultancy Control Risks, told Reuters in early March.
"Rather than the big dramatic trade war, everything goes to hell scenario under Trump," he said, "it's probably more likely to be manifested as regulatory harassment of companies - one of the lower intensity tools for China."