IT’S been an eventful start to the week for South Korea and China with both countries at loggerheads about a controversial missile defense system in South Korea.
The U.S. military-deployed Terminal High-Altitude Area Defense system (THAAD) is designed to protect against threats from North Korea.
The Chinese are against the deployment of the system amid fears it might be able to see deep into Chinese territory, potentially shifting the balance of power in the region.
The strain between the two nations is expected to affect tourism revenues as Chinese tourists are deterred from visiting South Korea.
A Chinese news agency reported China is ordering travel agents to halt sales of holiday packages to South Korea.
Calls from Bloomberg to China’s tourism administration for comment on the travel restrictions were not answered.
However, Bloomberg reported China’s foreign ministry spokesman Geng Shuang said last Friday he wasn’t aware of any measures taken by the tourism body at press time.
South Korea depends heavily on tourism revenues from China, which make up nearly 50 percent of its tourist market, according to statistics by the Korea Tourism Organization (KTO).
Various industries take a hit
In Jeju Island, about 85 percent of foreign visitors last year were from China, accounting for 3.1 million tourists.
Jeju Special Self-Governing Province governor Won Hee-ryong told Bloomberg, “This will strike a fatal blow.”
He said bus rental companies, hotels, and travel agencies would also take a hit.
The situation worsened when Chinese consumers expressed anger at South Korean retailer Lotte for allowing THAAD to be installed on one of its sites.
A Reuters report said nearly two dozen Lotte retail stores had been closed following inspections, escalating tension between the two nations.
Lotte said on Monday, 23 of its China supermarket stores had been shut, marking a wide clampdown on the group in its biggest overseas market. The closures are the latest in a series of incidents affecting South Korean companies in China after cyber-attacks and a ban on sales of travel tours to South Korea.
The closures are the latest in a series of incidents affecting South Korean companies in China after cyber-attacks and a ban on sales of travel tours to South Korea.
The Lotte “ban” has prompted a backlash from South Korea, whose Trade Minister Joo Hyung-hwan said on Sunday he had “deep concerns over a series of actions in China”.
Skift reported Hotel Lotte, the world’s third-largest operator of duty-free stores and the biggest in South Korea, said visitors from China accounted for 70 percent of sales at its duty-free stores in the first six months of the year.
Several other major hotels in South Korea depend on Chinese tourists, with as much as a quarter of occupants from China.
It’s not just hotels that could potentially feel the pinch. China has reportedly denied the applications of K-Pop stars into the country and cancelled an exhibition to signify 25 years of diplomatic ties.
It has also been predicted amidst South Korea’s fall in inbound tourists, other countries in the region could reap the benefits.
K. Ajith, an analyst at UOB Kay Hian Pte in Singapore, told Bloomberg Thailand and Japan would be the immediate beneficiaries of a redirection of China tourists.
Despite uncertainty in how the greatly the tourism industry will be affected, South Korea best be prepared for declining numbers. Because what China wants, China gets.