SEOUL — South Korea stands to lose out on a total of $20 billion, or 22.4 trillion won, in trade this year over the nation’s souring diplomatic relations with China, according to local reports.
South Korea has been embroiled in political tensions with China, since the nation revealed its decision to install the Terminal High Altitude Area Defense, or THAAD, anti-ballistic missile system to preempt the threat of North Korea. China has been vocal in its disapproval of THAAD deployment, citing regional security concerns, and has repeatedly asked South Korea to suspend the missile system before its completion by the end of 2017.
A report by the Korea Development Bank said the nation’s tourism and duty-free shopping industries stand to suffer major loss if China’s tourism ban on South Korea worsens. The industries will see combined losses of up to $11.7 billion, or 13 trillion won.
South Korean exports to China, including cultural exports such as South Korean dramas and K-pop and South Korean cosmetics, will experience losses of $8.3 billion, or 9.28 trillion won.
Experts said South Korea’s entertainment industry has possibly been hit the worst since the start of China’s economic embargo against THAAD. Since late last summer, South Korean films, dramas and cultural content have no longer been broadcast across Chinese media. A number of K-pop groups and celebrities have been barred entry to China to hold concerts, fan meet and greets, and to attend promotional events.
A spokesman for a retailer in China, who asked to remain anonymous, said local malls and shopping establishments have begun asking tenants and retailers to remove ads and posters of South Korean celebrities, as well as marketing campaigns with such content from inside shops and store-front
Experts said this spells the end to formerly lucrative collaborations between retail brands and South Korean celebrity ambassadors, even for South Korean brands.
“I heard that big companies like AmorePacific and LG Household and Health Care are refraining from using [South] Korean stars in their marketing, and they’re focusing more on marketing the product itself rather than relying on [star power],” said Kang Soomin, an analyst at Cape Investment & Securities.
Kang said South Korean cosmetics firms including AmorePacific rely on China for between 10 to 20 percent of their sales.
“China has the institutional and governmental power to do this [cultural ban],” said Michael Hurt, a business professor at Hankuk University of Foreign Studies. “China pushes back on [South] Korea’s soft power to get its hard power met.”
In addition to THAAD, Hurt said China’s own entertainment industry poses a growing threat to South Korean entertainment. “The thing about K-pop is that it doesn’t have to be housed off of a site in [South] Korea.”
Hurt added that K-pop could become obsolete in its neighboring nation, as China has begun to produce its own catchy pop music through groups like the TFBoys, a boy band whose three members have more than 20 million followers each on Chinese social media.