The Chinese government appears to be embarking on economic retaliation against South Korea over the decision by Seoul and Washington to station the Terminal High Altitude Area Defense system on the peninsula.
Beijing’s action targets the tourism industry here, as it has instructed its private travel agents to cut the number of tourists to Korea by 20 percent on-year. The state-led regulations will also reportedly include curbing low-price package tours and discouraging shopping in Korea.
The travel agents have no choice but to follow the regulations as their government is considering imposing fines of about 300,000 yuan ($44,200) on those who violate the rules.
In September, the number of Chinese visitors to Korea came to about 730,000, up 23 percent from a year ago. As the number reached 250,000 for the first week of this month, Korea’s tourism sector was predicting record-breaking growth.
After the news jolted stocks of local industries including tourism, air carriers, lodging, cosmetics and duty-free retailers earlier this week, some analysts downplayed the Chinese move, claiming it is aimed at slashing side effects from rampant down-market package tours to Seoul and Jeju Island.
Chances are slim that such a detailed policy like a 20 percent slash in the number of visitors allowed will really be implemented, one analyst said.
However, there is an urgent need to review past cases in which China really reduced the number of tourists to Japan and Taiwan when there was diplomatic friction with them.
So this move could certainly be interpreted as retaliation to South Korea and the US’ THAAD deployment plan, which has been identified by the Chinese Foreign Ministry as a threat to the national security of Beijing as well as Pyongyang.
Alongside the government’s political efforts to placate China by convincing it of the need to station the missile defense system, economy-related ministries should hasten countermeasures against a possible severe blow to the tourism sector.
Chinese visitors, despite some unsavory happenings here, are helpful in building closer bilateral ties in culture and other exchanges. Consumption by Chinese tourists, needless to say, is contributing to the gross domestic product with a variety of value-added effects.
They also take up a dominant portion of service industry customers in some areas, including Myeong-dong in Seoul, Jeju Island and other popular tourist destinations. It is hard to deny that the flow of Chinese visitors has somewhat offset the slower-than-expected recovery of domestic demand and lackluster exports.
It is time for the Tourism Ministry to carry out profound consultations with tourism businesses and map out measures to minimize the damage. The ministry also needs to push for dialogues with its Chinese counterpart.
Given that the tourism-related industries and the overall economy have just started to bounce back after the Middle East respiratory syndrome hit the country last year, another setback arising from lax countermeasures could easily dent business sentiment again. The pace of economic growth is still mild.
Simultaneously, the tourism industry needs to develop high-quality travel products, shifting from its offering of the habitual course linking the Gimpo-Jeju flight route.
The Korean government should also be alert to the possible scenario that China’s retaliatory move could become tougher according to the coming development of the anti-missile defense scheme. So clever use of leverage between the US and China is essential for the government.
By securing various dialogue channels, Seoul should make full-fledged efforts to avert anti-dumping or countervailing measures from China on local manufacturers. It is our largest export destination. Diversification of export destinations is the next issue.
For economic policymakers and conglomerates, a way to avert trade conflicts could be maximizing the synergy effect of the two sides’ businesses through their bilateral Free Trade Agreement, which took effect in late 2015.
