Click image for details News Flash: While profiting from Chinese consumers, it is actively undermining China's security interests. According to Xinhua News Agency on February 21, South Korea's Lotte Group plans to hold a board meeting at the end of February to sign an agreement with the South Korean government to exchange land for the deployment of the THAAD anti-missile system. The deal involves swapping a golf course in Seongju County for a piece of state-owned land in Namyangju, Gyeonggi Province, near Seoul, to serve as the THAAD camp. Prior to this, both parties had completed land valuation. Since entering the Chinese market in 1994, Lotte's business scope has covered many sectors including food, retail, tourism, petrochemicals, construction, manufacturing, finance, and services. In April 2012, the group established Lotte (China) Enterprise Management Co., Ltd. in Shanghai. As of December 2015, Lotte Group's various departments had conducted business in 24 provinces and municipalities in China. It is understood that Lotte currently operates over 100 supermarkets and 5 department stores in China, and is currently building factories and the Lotte World大型购物中心. The group's Lotte Duty Free in Seoul is primarily oriented towards Chinese tourists, with 70% of its sales coming from them. Due to strong opposition from the Chinese government to the THAAD deployment plan, some Lotte Group employees have previously expressed concerns to the media that its China-related business might be affected by the THAAD land issue, potentially triggering boycotts by Chinese consumers. Although many within Lotte Department Store are worried about obstacles to their business in China after transferring the THAAD site to the Ministry of National Defense, on February 20, Lotte Group still stated, "As a Korean company, we should cooperate with the government on issues involving national security." The group's stance on transferring the Seongju golf course to the Ministry of National Defense for THAAD deployment remains unchanged. ▲ Lotte Seongju Golf Course (Image source: Xinhua Net) In response, Lü Chao, director of the North Korea Research Center at the Liaoning Academy of Social Sciences, said: In Lotte's global business, its operations in China hold an extremely important position, and Lotte has always had plans to continue expanding its business in China. Taking the Northeast as an example, Lotte currently has many large investment projects in Shenyang, covering real estate, supermarkets, entertainment, cinemas, and other fields. Its largest investment in China is Shenyang Lotte World, a building over 60 stories high. It can be said that Lotte is the most influential Korean-invested enterprise in Northeast China. Especially because its business philosophy is relatively close to the social conditions of the Northeast, it is quite popular among local consumers. Moreover, due to the friendly and cooperative relationship between China and South Korea, the Chinese government has provided many conveniences for Lotte's development in the Northeast in recent years. In addition, besides first-tier cities like Beijing and Shanghai, Lotte also has a presence in Sichuan, Shandong, and other regions, as they believe these areas have good technological conditions and potential for business expansion. "Now it seems that Lotte's desire to expand its business in China is likely to be dashed," Lü Chao said. Lotte is one of the most influential large conglomerates in South Korea. On the THAAD issue, it had the option not to provide convenience to the South Korean government, because the ownership of the Seongju golf course being exchanged currently belongs to Lotte, and it can naturally decide the use of its own land. But now it has chosen to stand on the opposite side of China on this issue. "Lotte, while profiting from Chinese consumers, is actively undermining China's security interests. This naturally gives the Chinese public an unfriendly or even hostile impression, and it is reasonable that it will trigger aversion among some consumers, affecting its economic activities in China," Lü Chao said. A while ago, due to Lotte's stance on the THAAD issue, many people in the Northeast had already shown dissatisfaction towards it. This is also justified; Chinese people have the right to choose what they like and also have the right to reject what they dislike. Analysts suggest that once the land swap agreement between Lotte and the government is signed and implemented, the pace of South Korea's THAAD deployment will inevitably accelerate. THAAD might be deployed earlier, and the geopolitical situation on the Korean Peninsula will change significantly, while China's strategic security interests will be greatly damaged. This incident had already begun to ferment before the New Year. Possibly affected by this, Lotte Group's official Tmall flagship store has completely ceased operations; the under-construction Shenyang Lotte World has been completely halted. ▲ Lotte (LOTTE) Tmall official flagship store has been fully closed since January 12 China Market Turnover Increased 6 Times in 8 Years Lotte Group was founded in Japan in 1948 by Shin Kyuk-ho, a Korean resident in Japan, initially as a food manufacturer. In 1967, Shin Kyuk-ho established Lotte Confectionery in South Korea, which gradually grew into the fifth-largest enterprise in South Korea. In 1992, China and South Korea established diplomatic relations, and in 1994, Lotte Group entered the Chinese market. Lotte's business in China has developed for 23 years, with cumulative investment of nearly 10 trillion Korean won (approximately 60 billion RMB). Since entering the Chinese market, its business scope has covered many sectors including food, retail, tourism, petrochemicals, construction, manufacturing, finance, and services, involving more than 24 provinces and cities in China, with over 120 stores. In addition, Lotte has 5 department stores in China. Although Lotte Shopping suffered a Waterloo in China in 2015, with its Lotte Department Store and Lotte Mart losing 300 billion Korean won (1 RMB is approximately 167 Korean won) in 2015 due to the downturn in the Chinese economy and other reasons, the Chinese market remains a key development area for Lotte Group. According to Lotte's financial reports, in 2016, Lotte Department Store achieved operating profit of 88,230 billion Korean won (approximately 530 billion RMB), a year-on-year increase of 19.7%. Among this, domestic Korean profits increased by 12.7%, while overseas profits increased by 20.9%. The number of supermarket stores remained at 115, a decrease of 1 compared to 2015. The 3 stores planned to close in 2017 were all closed before February. ▲ Image source: Lotte Department Store Q4 2016 financial report Although the supermarket business is contracting, Lotte's layout in China is still expanding. In April 2012, Lotte Group established Lotte (China) Enterprise Management Co., Ltd. in Shanghai. In 2016, Lotte Group invested $2 billion to start construction of Lotte Shenyang World in Shenyang, and the Chengdu Lotte World, targeting completion in 2019, is also under construction. ▲ Rendering of Lotte Shenyang New World, currently temporarily suspended In fact, Lotte's business in China has shown good development momentum over the years. In 2016, Lotte Group's turnover from investments in China reached 3.2 trillion Korean won, more than 7 times the 430 billion Korean won in 2009. 70% of Seoul Lotte Duty Free Sales Come from Chinese Tourists Lotte Group's dependence on China is not only reflected in China but also in South Korea. According to statistics released by the Korea Tourism Organization, in 2016 (as of November 21), the number of foreign tourists visiting South Korea exceeded 15 million, of which Chinese tourists exceeded 7 million. And at Lotte Duty Free in Seoul, 70% of sales come from Chinese tourists. ▲ Lotte Department Store Main Store in Myeong-dong, Seoul It is reported that Lotte Duty Free sales have exceeded 4 trillion Korean won (approximately 240 billion RMB) for three consecutive years from 2014 to 2016. In Q1 2016, Chinese tourists accounted for 70.8% of Lotte Duty Free's total sales, spending 942 billion Korean won (approximately 5.6 billion RMB), far higher than Koreans' 283.4 billion Korean won and Japanese' 39.9 billion Korean won. In addition, Hwang Gyu-wan, the store manager of Lotte Department Store's main store in Myeong-dong, Seoul, also said that sales from Chinese tourists account for 20% to 30% of Lotte Department Store's total sales. Among international tourists, up to 90% to 95% come from China, with the remaining 5% from Japan and other countries. But perhaps affected by the THAAD incident, data from the Bank of Korea in February showed that during this year's Spring Festival, the number of Chinese tourists visiting Jeju Island decreased by 6.7% year-on-year. Chinese investment and tourism to Jeju have also plummeted, and Jeju's economy is being enveloped by a huge sense of crisis. The impact of this incident goes far beyond the number of outbound tourists from South Korea. Reports show that due to the THAAD incident, the high-end apartment sales under the Lotte World Tower project, originally targeting Chinese billionaires, have hit a red light. Lee Wang-hwi (音), a professor of political science and diplomacy at Ajou University in South Korea, said that China's economic sanctions against other countries often use methods like "internal martial arts heavy techniques." Currently, only a few industries such as entertainment, tourism, and cosmetics are affected by THAAD, but if THAAD is ultimately deployed in South Korea, it is likely that almost all industries in South Korea will be affected in the future. In response to the THAAD incident, Chinese Foreign Ministry spokesperson Geng Shuang said that the US deployment of the THAAD anti-missile system in South Korea seriously undermines regional strategic balance, seriously damages the strategic security interests of countries in the region, including China, and runs counter to efforts to maintain peace and stability on the Korean Peninsula. China has repeatedly expressed its concern and clear opposition to this issue. We urge the relevant parties to face up to China's legitimate concerns and stop the deployment process. China will resolutely take necessary measures to safeguard its own security interests. < New Distribution> compiled from Global Times and Lianshang.com -END-