[News Focus] China’s travel ban raises alarm on economic impact

China’s reported ban on travel agencies on selling tour programs to South Korea is expected to take a toll on South Korean tourism and retailers here who rely on Chinese tourists.

The China National Tourism Administration reportedly called in two dozen travel agencies in Beijing and instructed them to stop selling South Korean tour programs including group packages and services for individual tourists, according to news reports Thursday and Friday. Some sources said the ban was spreading to other cities and provinces including Shanghai and Jiangsu Province.

The news hit South Korea’s stock market Friday, with companies exposed to China such as duty free shop operators, hotels and cosmetics being dragged down.

The benchmark Kospi dropped 1.14 percent to close at 2,078.75 points. Cosmetics giant AmorePacific Corp. plunged 12.67 percent to 251,500 won ($217.5) and Hotel Shilla, an operator of luxury hotels and duty-free shops, plummeted 13.10 percent to 43,799 won.

The travel ban is seen as the latest move to protest South Korea’s decision to deploy an advanced US missile defense system on the peninsula despite Beijing’s protests.

It came almost immediately after the board of Lotte International passed Tuesday a land-swap deal with the South Korean Defense Ministry for the deployment of the Terminal High Altitude Area Defense system.

The company’s duty-free website was closed for a few hours due to a cyberattack launched by unidentified hackers and its Chinese website, www.lotte.cn, has remained inaccessible to visitors since Tuesday afternoon.

A Shanghai-based tour guide specializing in South Korean tours said his company cannot receive any Korea-bound tour groups after March 15 as instructed by the CNTA.

The CNTA declined to comment on the matter when reached by the Korea Herald on Friday.

Meanwhile, the website of Ctrip, China’s biggest online travel agency, was still selling South Korean tour programs beyond March. But Tuniu, another online travel company, took down all Korean package programs from its website. 

It was also reported that the CNTA instructed travel agencies to exhaust those that have already been sold by mid-March.

On Friday, a notice by CNTA banning the sales of South Korean tour programs rapidly circulated via Chinese social network services. It is not confirmed whether the notice was indeed issued by the CNTA.

A Chinese web user posted the CNTA notice with a comment that says, “When we boycotted Japanese tours (few years ago), a lot of small tour agencies in Japan collapsed.”

A South Korean running a travel agency in China told The Korea Herald that inquires had been pouring in on Friday from Chinese customers asking whether it was still possible to go to South Korea.

The ban will limit the businesses of Chinese tour agencies, the Shanghai-based tour guide said.

“We will have to find alternatives to replace Korean trips, maybe to Japan or Southeast Asian countries.”

South Korea’s tourism industry heavily depends on Chinese tourists. In 2016, a total of 17.2 million foreign nationals visited South Korea and 8.06 million, or 47 percent, were Chinese, data from the Korea Tourism Organization showed.

It is estimated that about 60 percent of Chinese tourists traveled on their own, while the rest visited through package tours. Of the individual tourists, about half were presumed to have purchased hotel and flight ticket packages through travel agencies.

The ban on selling group tours and individuals who book flights and hotels through travel agencies could cut inbound Chinese tourism by half.

In 2015, 6.11 million Chinese tourists spent 15 trillion won ($13 billion) in South Korea, or 2.74 million won per person.

Their indirect and direct economic impact was estimated to be $22 billion won, according to the Korea Tourism Organization.

If the number of Chinese tourists halves, the number would also cut in half, industry watchers say.

Duty-free shops are expected to be hit the hardest.

Last year, the total sales at South Korea’s duty-free shops amounted to 12.27 trillion won, 72 percent of which was generated by foreign customers, with a significant number of those sales generated by foreigners attributed to Chinese tourists.

It would also weigh down on the country’s service account as it would lower the travel account income. The Bank of Korea said Friday that the service balance deficit hit a record high of $3.36 billion in January, almost doubling from $1.84 billion a year ago.

Since Seoul announced the deployment of THAAD, China has unofficially taken various measures including banning South Korea’s cultural products from being broadcast on TV in the country and internet websites. In October last year, the Chinese authorities allegedly ordered tour agencies to cut the number of travelers heading to South Korea by 20 percent.

The Civil Aviation Administration of China rejected eight flights requested by three Korean airlines for January and February for unknown reasons. Requests to increase the number of regular flights between China and Korea also have been denied. 

By Park Ga-young (gypark@heraldcorp.com)