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Ding Gang: Lotte sanctions require careful evaluation

2017-02-24

By Ding Gang    Source: Global Times    Published: 2017-2-22

 

Lotte Group, one of South Korea`s largest holding companies, has announced that it would trade the land that forms part of its golf course with the government to deploy the Terminal High Altitude Area Defense (THAAD), a US anti-missile system. This move has angered many Chinese people who are calling for a boycott of Lotte`s business in China.


The Chinese public has reached a consensus of opposing South Korea`s deployment of THAAD. But, few believe that it can really stop the deployment. It seems that Lotte will not adhere to China`s request. Instead, it will abide by the arrangement of the South Korean government. As a result, the tension between the people and governments of the two countries is escalating. Chinese media have given Lotte fair warning over THAAD.


China makes up 29 percent of Lotte`s global market and it is poised to respond to the South Korean enterprise, which has benefited greatly from China but harms the country`s national interests.


But China and South Korea are inextricably interconnected in trade. Economic sanctions will only serve as a double-edged sword.


If China is determined to impose sanctions on South Korea, it needs to evaluate China`s losses and decide on the details of the sanction accordingly.


Sometimes, we don`t really have to take real actions. When the news spreads, it will naturally act as some kind of deterrence.


The effectiveness of economic sanctions not only lies in their intensity, but also in how much harm it will do to the party being sanctioned. Meanwhile, the party that imposes the sanction should suffer the least amount of losses.


Currently, some netizens who call for a boycott of Lotte only thought about the profits the company has earned from China, but overlooked how many jobs it has provided, which may inflict damage on ourselves once sanctions are imposed.


Lotte has a moderately large investment in China, and its department stores, supermarkets and shopping malls have created a lot of employment opportunities. According to statistics online, there are 120 large-scale Lotte Mart supermarkets across China, each with approximately 700 employees.


Lotte is also planning to build a theme park in Shenyang, capital city of Northeast China`s Liaoning Province. Local media estimated that it would create tens of thousands of jobs.


Meanwhile, many Chinese companies, including those providing services such as goods-supply, logistics and decoration, have business deals with these supermarkets.


The employees of Lotte`s department stores are mostly working-class Chinese people. As they do not have many skills, it is difficult for them to find a new job.


It is believed that these people would sacrifice themselves in case of a boycott to safeguard the country`s interests. But, the whole of society should also sympathize with their dilemma and the government should offer essential assistance, which eventually comes from taxpayers.


Once sanctions are imposed, we need to prepare for possible retaliations from South Korea. We need to make it clear whether other South Korean investments in China would be involved and whether Chinese companies, which have trade relations with South Korea, will be affected.


It is roughly estimated that there are as many as 2,000 South Korean companies in East China`s Shandong Province. It is hard to tell whether their development plans will be hindered by sanctions.


China is not pleased with the current deadlock in the North Korea nuclear issue and is compelled to take some countermeasures. What is the crux behind the sharp confrontation between China and South Korea? Maybe we should not let a third party benefit from this contention.


The author is a senior fellow of Chongyang Institute for Financial Studies at Renmin University of China.

 

Key Words: China   Korea   THAAD   Ding Gang  

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