The Korea Herald


S. Korea, China to be affected by THAAD fallout: think tank

By Park Ju-young

Published : May 3, 2017 - 13:38

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South Korea and China will both be hurt economically by the fallout caused by the deployment of the advanced US missile defense system on the Korean Peninsula, a local think tank said Wednesday.

According to the Hyundai Research Institute (HRI), Beijing's retaliation against Seoul's decision to station a Terminal High Altitude Area Defense (THAAD) battery here could cost Asia's fourth-largest economy 8.5 trillion won ($7.5 billion) in losses in 2017. This translates into the country's gross domestic product taking a 0.5 percent hit.

The findings also showed Chinese losses at 1.1 trillion won, and its impact on the GDP at 0.01 percent.

(Yonhap) (Yonhap)
China has stringently opposed the stationing of the THAAD battery, claiming it compromises its national security. South Korea has countered that the defensive system is needed to counter growth missile threats from North Korea.

The private think tank said because of its bigger size, negative fallouts for China will be smaller than for South Korea.

Broken down by sector, the largest repercussions are on tourism. Starting on March 15, Chinese travel agencies have halted all tour packages to South Korea, which is already taking a toll on inbound traffic.

"If visitor numbers drop by 40 percent from April through December, this is a loss of 7.1 trillion won for the local tourist industry," HRI said. It said for China, if South Korean travelers backtrack 20 percent vis-a-vis 2015, it will mean a loss of 1.04 trillion won for Chinese businesses.

In product trade, the research institute said China's retaliation has generally been in cosmetics and food, which can cause losses of around 1.4 trillion won for South Korean companies.

Initially, China used anti-dumping and safeguard rules to check imports, but more recently it has resorted to non-tariff barriers like sanitary and phytosanitary measures.

In regards to investment, many companies are running into administrative red tape, and being subject to tax audits, while South Korea's cultural and popular content sectors are being affected as well.

The think tank, however, said the losses in cultural areas are small and should not exceed 10 billion won.

"The damage caused by China's actions is on the rise, but there is no need to react emotionally to the development and instead the country needs to think of long-term ways to reforge close ties with its main trading partner," Han Jae-jin, a HRI analyst, said. (Yonhap)