Economic Loss

South Korea’s economic loss due to China’s retaliation against THADD system deployment is estimated to reach US$14.76 billion (about 16.9 trillion won) in a worst-case scenario.
South Korea’s economic loss due to China’s retaliation against THADD system deployment is estimated to reach US$14.76 billion (about 16.9 trillion won) in a worst-case scenario.

 

There is concern that the damage caused by China’s growing economic retaliations over South Korea’s deployment of the Terminal High Altitude Area Defense (THAAD) system may impact not only some Korean companies but also the entire Korean economy.

According to a report on March 8 titled “The Diffusion and Effects of Anti-South Korean Sentiments in China” compiled on March by Jang Woo-ae, a researcher at the IBK Economic Research Institute, South Korea’s economic loss will reach US$14.76 billion (about 16.9 trillion won) in a worst-case scenario with a decline of 10% in product exports to China, a 30% cut in tourists from China and a 20% reduction in value added in the South Korean contents industry. In that case, South Korea’s GDP growth rate will fall by 1.07 percentage points.

Credit Suisse, a global investment bank, also predicted that if China's ban on Chinese tourists to South Korea lasts for a year, Korea's GDP growth may fall by 0.5 percentage points." This is based on the calculation that South Korea’s total loss due to the tourism ban is close to US$7.3 billion (about $ 8.4 trillion), which is 0.53% of Korea's GDP. South Korea, attracts 3.5 million Chinese tourists a year via packages or Airtel programs which, offer airline tickets and accommodation, and they spend US$2,080 per person in Korea on average.

Korea's GDP will slid 0.25% on the assumption that Korea's consumer goods exports fall 20%, and Chinese tourists to South Korea drop by 20%, Ahn Ki-tae, a researcher at NH Investment & Securities also said in his worst case scenario on the previous day.

The South Korean government is in a position to keep an eye on the current situation. "We are closely watching a series of situations that have been taking place in China lately,” said deputy prime minister and minister of strategy and finance Yoo Il-ho said in the 4th meeting of the ministers related to economic affairs on March 8. "We will step up economic and diplomatic efforts to minimize damages to Korean companies and people in China.”

“We will closely monitor the effects of trade problems and financial market trends and make measures, if necessary, to support the related industries. By doing so, we will quickly respond to this matter such as taking market stabilization measures promptly and firmly," Yoo added. When asked about whether or not South Korea will file a lawsuit against China in connection with the matter in the World Trade Organization (WTO), "We are not in such a stage yet," Yoo said. 

Voices to demand more practical measures are also being raised by South Korean politicians and experts. In particular, Woo Sang-ho, the floor leader of South Korea’s Minjoo Party insisted that South Korea launch a temporary visa exemption program for Chinese people."


 

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