By Casey Hall and Crystal Tai
with contributions from Amanda Kaiser
 on November 22, 2016

The Korean Wave is hitting a breakwater, a massive one of Chinese construction.

Rumors have been swirling since August about a Chinese government directive to ban Korean celebrity endorsements, Korean television programs and K-pop concerts. But the chatter picked up new momentum this week as government representatives from both China and Korea addressed the issue — although China has yet to confirm the ban really exists. Meanwhile, observers are divided over just how much the development could influence Chinese consumers’ tendency to buy Korean beauty and fashion products.

China’s Foreign Ministry spokesman Geng Shuang denied any knowledge of the ban at a press briefing in Beijing on Nov. 21. But he also went on to slam South Korea’s recent decision to deploy the Terminal High Altitude Area Defense missile defense system — the very issue that supposedly prompted the ban.

“First of all, I have not heard of the so-called ‘Limit Korean Order.’ Secondly, China has a positive attitude toward cultural exchanges between China and South Korea,” Geng said. “Third, China is firmly opposed to the U.S. deployment of THAAD anti-missile system in South Korea, this position is well known. Chinese people also have expressed dissatisfaction with it; I believe that the parties concerned should note that this is the prevailing mood.”

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Extending something of an olive branch, the South Korean government issued a response.

“The government believes that exchanges and cultural collaborations should continue to develop in spite of extenuating circumstances. [Such] bilateral relationships foster friendship and understanding,” said Cho Joon-hyuk, spokesman for the South Korean Ministry of Foreign Affairs.

Sunny Um, a research analyst with Euromonitor, said the negative political sentiment between China and South Korea will influence Chinese media companies’ business decisions and Chinese consumers’ inclination to buy Korean products. Citing figures from the Korea Customs Service, she said South Korea’s beauty exports to China came to about $1 billion last year, accounting for 40 percent of the country’s total beauty exports. She said the implications for the Korean beauty industry could be significant and Korean companies could lose market share to their Chinese competitors.

“Global luxury giants’ investments in Korean beauty [companies] will also be discouraged, as their objective to capture the China market through the Korean companies won’t be fulfilled,” she said. “China has already started a stricter inspection process for South Korean beauty products, causing delays in product launches and supplies.”

A chief executive officer of a China-based Korean fashion retailer voiced concern on the issue but said he’s getting conflicting information so it’s difficult for him to understand the situation.

“Some say that the ban is just a short-term political measure, others say it will last for a long time,” he said, adding that can tap into other ways to promote business. “We style Chinese actors and actresses in Korean fashion brands, so that’s another way Korean designers can still reach their audience in China,” he said.

Kim Tae-hyun, an analyst with LIG Investments and Securities, warned of the implications for retail but only if the ban drags on for a long time.

“Tourism, duty-free sales, department stores and the fashion industries will see a negative impact if the ban lasts for more than two years,” he said, adding that South Korea President Park Geun-hye will leave office at the end of 2017 so a new president will likely change the country’s missile policy.

Benjamin Cavender, a senior analyst at China Market Research Group, said he sees limited impact on Chinese consumers.

“Probably this will have the biggest effect on talent that previously had endorsement deals in China, but I’m not sure that it’s going to stop anyone from finding ways to watch Korean dramas online or from buying cosmetics products or electronics that they like,” Cavender said.

According to local Chinese state media, no Korean singer has been approved to perform in mainland China since October and the State Administration of Press, Publication, Radio, Film and Television instructed one station in Guangzhou to not to air Korean entertainment programs.

Meanwhile, Chinese smartphone manufacturer Vivo reportedly dropped Korean celebrity spokesman Song Joong-ki and replaced him with Chinese actor Eddie Yuyan Peng. Vivo declined to comment on whether the switch was politically motivated and justified hiring Peng due to his popularity with consumers in the 20 to 39-year-old bracket.

Chinese citizens aired their views on the Sina Weibo micro-blogging platform on Nov. 22, with 280,000 people circulating the transcript of Geng’s remarks. Many Weibo users voiced support for banning Korean content and celebrities in China.

Sina Weibo user Xiangxi Wang Yuting wrote: “I do not particularly like watching Korean idols. Originally I did not mind but saw THAAD events and understand China is insulted.”

Tintin Cat Come Home voiced a similar view: “Whenever I see some Korean star in China fishing for big money on a variety show, I think about South Korea thoroughly destroying the basis of our bilateral relationship. We do not lack our own national stars, by supporting this stance on radio and television, we are supporting the voice of the masses.”

According to a research note penned by Nomura analysts Stella Xing and Richard Huang, the tightening of regulations regarding Korean celebrities and entertainment in China will have a significant impact on companies charged with exporting Korea’s formidable “Hallyu” or “K-Wave” culture.

“Korean artists and entertainment companies involved in China projects are likely to be hardest hit by the ban,” they wrote. “Their commercial value could be very hard hit as they can no longer participate in any Chinese drama/variety show or sign any Chinese advertising contracts. Effectively, their art life in China is more or less at an end.”

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