South Korean companies’ high hopes were struck down following President Moon Jae-in’s Thursday meeting with Chinese President Xi Jinping, as the two countries failed to strike an accord to cease China’s unofficial economic retaliation against South Korean companies regarding the controversial deployment of the Terminal High Altitude Area Defense.
Korea’s relationship with China has hit its lowest point in years due to political and economic tension over the installation of THAAD, with China arguing that the US defense system would compromise its security interests. As a result, China has reportedly blacklisted Korean businesses related to automobiles, cosmetics and tourism.
A number of major Korean companies operating business with the country’s largest trading partner raised their voices Friday that such retaliatory actions by China contradicts its official stance of supporting free trade.
“China is striking at Korea’s economy to solve a political matter,” said an industry source on the condition of anonymity. “China should separate matters related to politics and business and should stop viewing the issues as linked.”
Moon and Xi’s meeting during the G-20 Summit in Germany exceeded its originally allotted 40-minute schedule. They spoke for more than an hour, according to news reports.
Following the meeting, Moon announced that the issues involving THAAD and China’s economic retaliation had not been resolved and that the two leaders would once again re-address the matter in future talks.
During the meeting, Moon reportedly asked Xi to “remove obstacles to the improvement and development of bilateral relations,” referring to China’s economic retaliation against Korea, according to Xinhua News.
However, according to news reports, President Xi once again pushed Moon to remove the THAAD system.
“China-South Korea relations have been facing difficulties, and we do not want to see that,” Xi said to Moon, adding that South Korea needs to seriously consider “China’s reasonable concerns and appropriately handle the relevant issue.”
Xi was also reported as saying he has no choice but to consider the interest and concerns of the Chinese people.
Since last year, many Korean businesses have been hit hard in China.
According to market research firm FnGuide, second-quarter operating profits of automakers Hyundai and Kia and cosmetics maker Amorepacific are expected to plunge due to woes in the Chinese market.
Hyundai’s second-quarter profits are expected to fall 10.27 percent, while operating profits for Kia and Amorepacific are expected to drop 13.16 and 11.28 percent, respectively.
This week, Hyundai announced the company’s sales fell 16 percent last month compared to last year. From January to May this year, the country’s largest automaker saw its sales plummet by 37 percent.
Meanwhile, Amorepacific announced in April that its first-quarter net profit this year dropped 15 percent compared to last year, citing losses due to the slump in the number of Chinese tourists.
According to Samsung Securities earlier this year, the number of Chinese travelers to Korea is also expected to drop 20 percent on-year in the second quarter and 7 percent overall this year. The company added, however, there is still the possibility of the number of Chinese tourists rising upward of 70 percent in the near future.
Meanwhile, what worries South Korean retailers is that they will face tighter regulations on environmental and safety conditions.
Retailers said customs and tariff rules were stricter than before, according to a recent study conducted by the Korea Institute of Industrial Economics and Trade. More than 80 percent of the retail businesses said they are feeling the impact of bilateral relations over the THAAD deployment.
“There were increased regulations and crackdowns on Korean companies since the relations got worse,” said one of the respondents.
By Julie Jackson (email@example.com)