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Beijing raids Lotte chocolate factory

Mar 09,2017
China continued to target Korean businesses to protest the deployment of a U.S. military defense system on the Peninsula.

Lotte Confectionery’s chocolate factory in Shanghai was subjected to a fire safety inspection on Monday, the same day the first components of the U.S. Terminal High Altitude Area Defense (Thaad) landed in Seoul.

Lotte Confectionery Wednesday said the Chinese authorities have suspended the plant for a month. All production will be halted starting today.

Lotte Shanghai Food Corporation is a 50-50 joint venture with American chocolate giant Hershey’s that opened in 2007.

The joint venture has two other plants in Qingdao and Beijing. They have not been inspected.

Sister company Lotte Mart has been the biggest victim of the business retaliations by the Chinese government.

Although the Chinese government denies its actions have anything to do with the U.S. defense system being set up on golf club previously owned by Lotte Group, it has been shutting down the Korean retailers’ branches across the country. As of Wednesday, 55 Lotte Mart were forced to shut down, which is nearly half of its 112 stores in China.

The Korean retailer plans to request re-inspections of stores after making changes.

However, analysts aren’t confident the Chinese authorities will allow them to reopen.

“If the decisions were made based on political reasons, it will be hard to believe the process will run smoothly,” said an industry source, who requested anonymity.

But not all Korean companies are being cracked down on by the Chinese government. Hyundai Motor Group on Wednesday announced that Wang Rongping, mayor of Yancheng City in China’s Jiangsu province, visited its headquarters in Yangje, southern Seoul, to discuss the carmaker’s business in China.

Hyundai Motor Group affiliate Kia Motors has a production line in Jiangsu, which has an annual manufacturing capacity of 890,000 units.

According to the Korean automaker, Wang met with the Korean automaker’s executives including Yung Hsing Hsueh, the group’s adviser, and Kwon Moon-sik, the group’s vice chairman.

“They discussed China’s auto industry and shared ideas on how to further develop Dongfeng Yueda Kia [a joint venture between Kia Motors and Dongfeng Motor],” the company said in a statement.

Meanwhile Deputy Prime Minister for the Economy and Finance Minister Yoo Il-ho said the Korean government will do its best to minimize the impact of the Chinese government’s crackdown.

“[The government] is closely monitoring the situation in China and we will strengthen our diplomatic and economic efforts to minimize the damage to [Korean] companies and [the Korean] public,” Yoo said Wednesday during an economic minister meeting held in Seoul.

The Finance Minister said the government will act swiftly and decisively to counter the situation including providing support measures to related industries.

He added that the government will push with economic policies including frontloading the budget in the first quarter and creating jobs to secure sustainable growth.

Yoo tried to downplay the recent actions by the Chinese government.

“Only the Chinese foreign ministry and the defense ministry have made official complaints about Thaad,” Yoo said. “Although we use the term economic retaliation, the Chinese [government] has never made comment in connection with Thaad and because of that our government cannot act against it.”

Yoo downplayed the idea of the Korean government raising the recent crackdown with the World Trade Organizaton.

“We have not yet reached the stage to discuss the issue,” Yoo said.

On Tuesday, however, the trade ministry and the ruling party lawmakers raised the possibility of reporting China’s retaliatory actions against Korean businesses to the international trade organization and investigating whether they were violations of the bilateral trade agreement that kicked off in 2015.

Woo Tae-hee, second vice minister of trade, industry and energy, on Tuesday told reporters that China’s latest moves go against the reciprocity of the free trade agreement.

BY LEE HO-JEONG, JIN EUN-SOO AND SONG KYOUNG-SON[lee.hojeong@joongang.co.kr]