Korean travel retailers fear Chinese backlash from Thaad missile defence decision

SOUTH KOREA. Tourism and travel retail executives fear a potential backlash from China, following the South Korean government’s announcement yesterday that it has chosen the southeastern county of Seonju as the location for an advanced US missile defence programme.

South Korea and the US expect to deploy the Terminal High-Altitude Area Defense (Thaad) system in the rural area around 220k southeast of Seoul by late 2017.

China and Russia have both reacted angrily to the decision. China’s Foreign Ministry said it would take “necessary measures to safeguard” its regional interests. Chinese state-run media yesterday published an opinion piece calling for harsh economic sanctions on the South Korean county. “We call on the Chinese authorities to proceed immediately with measures of sanctions against Seongju County,” it said.

South Korea’s tourism and travel retail sectors are overwhelmingly dependent on Chinese visitors. Chinese arrivals accounted for 46.7% of visitors in the first five months of 2016, according to new Korea Tourism Organization figures, and their share of total duty free shopping spend is significantly higher.

A Bloomberg report (pictured) said that Lotte Duty Free generated 70% of its sales from Chinese shoppers in the first half, compared with 59% in 2014. For The Shilla Duty Free, the share was around 65%. With the once vital Japanese market now paling in comparison, the exposure to any downtown in Chinese visitors – as witnessed by the 2015 MERS health crisis – is acute.

South Korean travel retailers will be hoping that mass public protests in Seonju will sway Chinese government opinion favourably.

Asia is in a high state of political unease following the Thaad announcement and this week’s controversial ruling against China and in favour of the Philippines by the Permanent Court of Arbitration in The Hague over contested waters in the South China Sea.

bloomberg screengrab July 2016
How Bloomberg picked up on the possible implications for South Korea’s tourism sector
nk news screengrab July 2016
Fighting talk (sometimes literally) from the Chinese media as outrage over the Thaad decision mounts
Strength or weakness? Accumulative visitor figures for the first five months of 2016 underline the country’s overwhelming reliance on Chinese visitors. Source: Korea Tourism Organization
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