April 19, 2024

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[THE INVESTOR] Korean companies with business interests in China anxiously awaited the World Consumer Rights Day set for March 15, as they anticipated heavy blows from the Chinese government in retaliation for Korea’s installment of a US anti-missile defense system.

March 15, or World Consumer Rights Day, is an annual event in which particular companies are called out and exposed for bad practices. Previous corporations that have been featured on the “3.15 Gala” show aired on Chinese network CCTV for practices that hurt consumers have included Apple, McDonald’s and Mercedes.

This year, there were widespread concerns that “3.15 Gala” would specifically go after Korean companies, in a political move to put pressure on the Korean government by pressing Korean businesses.

The show, the contents of which are collected in absolute secrecy until the show airs, holds immense sway over Chinese consumers’ perceptions of companies and products.

In 2011, Kumho Tire China’s market share fell sharply after it was featured on the show for allegedly shoddy production processes. In 2013, Apple was pressured into issuing a rare apology to consumers in China after it was called out for poor after-sales services.

Lotte, as the company that provided the land to the Korean Defense Ministry for the installment of the battery, is considered to be one of the most likely to be featured on the show. Lotte runs supermarkets, cinemas and department stores in China, and also sells confections and chemical products there.

“We have not seen any signs that Lotte is being targeted for this year’s ‘3.15 Gala,’ but we are monitoring the situation,” said a spokesman from Lotte.

Lotte is already suffering from targeted safety inspections at its stores and factories in China that have led to widespread closures. Lotte has closed 55 of its 99 supermarket branches in China and a chocolate factory in Shanghai, with inspections “continuously growing,” according to the Lotte spokesman.

Other companies with major interests in China, such as popular cosmetics makers, are also paying close attention.

“There is no specific brand or product that is sparking concern, but we will be closely monitoring the situation tomorrow,” said a spokesperson for cosmetics company Amorepacific.

Worries about retaliation for the anti-missile system in China are being exacerbated by the fact that Wednesday is also the date for an unofficial travel ban to Korea to take effect in China. Earlier this month, news reports said that Beijing had held a meeting with major travel agencies within China and instructed them to stop selling travel packages to Korea beginning Wednesday.

Many of the travel agencies have already voluntarily taken down products with Korean destinations, striking a blow to the Korean tourism market and to sectors such as duty-free shopping that rely heavily on Chinese tourist shoppers.

According to data from Incheon Airport, the number of passengers on flights to and from China fell sharply over the past week, dipping to a 12 percent on-year decrease in passengers on China-bound flights. In January and February, passengers on these flights had increased on-year by 3 percent.

The drop in passengers has also led Korea’s largest air carrier, Korean Air, to temporarily suspend 80 China-bound flights through the end of April due to low reservation rates.

A spokesman for Korean Air said that overall reservations on flights from China to Korea have dropped 10 percent on-year so far in March. 

By Won Ho-jung/The Korea Herald (hjwon@heraldcorp.com)