In Markets

Chinese ‘retaliation’ measures could cost Korea $14.76bn

The Economic Research Institute of Industrial Bank of Korea (ERIIBK) estimates that the Chinese Government’s ‘retaliation’ measures against South Korea and the Lotte Group could amount to losses of between $7.6bn to $14.7bn in lost Korean gross domestic product sales, while seriously damaging tourism revenues.

These are the study findings of ERIIBK Senior Researcher Jang Woo-ae, who is projecting two potential financial scenario models, following China’s protests at the siting of a US-supplied THAAD anti-missile system on a former golf course, which Lotte sold to the Korean government last month.

The Institute’s first financial model is predicting a $7.6bn loss based on a 5% fall in exports to China, plus a 20% decline in Chinese tourists to South Korea – alongside a 10% fall in revenues from lucrative entertainment/television packages to China (which are currently mostly halted).

SEE ALSO: Japanese duty free sales victim of Chinese traffic slowdown

The second scenario presumes a doubling of these first financial indicator levels with the exception of the Chinese visitor fall, which ERIIBK estimates could rise to a higher worst-case scenario level of 30% [which seems more likely, if not much higher-Ed].

This report also comes at a very difficult time for the country as a whole and its duty free industry – the world’s largest with sales worth $10.6bn in 2016. Last year there were 8m Chinese visitors to South Korea – mostly on shopping trips.

Any major decline – as is expected – could deal a huge blow to the country’s existing duty free business and have huge implications for the country’s tourism revenues and infrastructure – both downtown and at Incheon Airport in particular.

This is likely to heighten following Park’s forced departure from her presidential residence last Friday and the subsequent automatic loss of immunity from prosecution, which is only afforded to Korean presidents while in office.


(Source: TR Business)

Follow Retail in Asia on Facebook, Twitter and LinkedIn.

Get our top stories delivered to your inbox: