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China's retaliations shed light on inconsistencies with own free trade policy

China's economic retaliations against South Korea over Seoul's deployment of an advanced US missile defense system bring to light inconsistencies in the free trade and investment policy that Beijing has publicly advocated, industry and government sources said Tuesday.

South Korea's Trade Minister Joo Hyung-hwan said Monday Seoul will "seek international action against possible violations of the World Trade Organization and the Seoul-Beijing free trade agreement" in connection with the "retaliatory measures taken by China" and pledged to "deal with any discrimination or damages South Korean companies are suffering from."

An image depicting the controversy between China and South Korea over the THAAD installment.
An image depicting the controversy between China and South Korea over the THAAD installment.

Lotte Group, South Korea's retail giant, was hit hardest as it has provided the land for the installation of the Terminal Altitude Area Defense on one of its golf courses in Seongju County, North Gyeongsang Province.

Beijing has reacted angrily, insisting the THAAD will undermine China's security interests, although Seoul says it is to defend against North Korean provocations, not against China.

The Chinese government has shut down many Lotte outlets in China, citing violations of fire safety regulations.

China has also banned imports of Korean pop culture and sale of tour packages to South Korea.

Such Chinese acts of retaliation or discrimination against South Korean or any other foreign businesses have not been uncommon even before the trade row over the missile system erupted, industry sources said. This is despite Chinese President Xi Jinping having warned against protectionist measures in a speech in Davos in January apparently in recognition of US President Donald Trump advocating them.

Geng Shuang, spokesman for the Chinese Foreign Ministry, said Monday Beijing welcomes foreign businesses to invest in China as long as they abide by laws and regulations.

Laws and regulations, however, are often used in China as the means of discrimination and retaliation, the sources said.

"We cannot escape however hard we try if Chinese authorities decide to slap sanctions (on us)," an official of a South Korean retailer operating in Beijing. "We have tried repeatedly to improve our facilities in accordance with relevant Chinese regulations. But Chinese authorities continued to take issue with the too narrow corridors.'"

"We cannot rebuild the building, and sanctions are issued," the official said.

An employee of a South Korean franchise brand operating in China echoed the sentiment.

"We were always oppressed by Chinese authorities conducting checks on fire safety facilities in an excessive manner," he said.

In another case, the head of a South Korean consulting firm, who identified himself only as his family name Byon, established a pub in Shanghai in 2007 offering with a variety of foods and beverages.

"Business was brisk for about three years and several other similar South Korean pubs were also operating there to make a new Koreatown," he said. "Suddenly, Chinese security officials appeared and said all of those were unlicensed shops. We were all demolished."

Byon said the Chinese government is not proactive in protecting foreign brands against property rights violations.

"A South Korean franchise firm established an outlet in Shanghai in 2015, and within less than a couple of years, Shanghai currently has more than 300 Chinese outlets with similar interior, foods and beverages," he said.

Chinese business partners sometimes snatch South Korean brands from their South Korean partners by registering with relevant authorities unknowingly, he said.

An employee of another enterprise operating in China spoke of the "too rigid" regulations and discriminations he faced in China.

"It is almost impossible for us to meet the requirements of Chinese authorities as they tend to establish hygiene and other safety requirements that are too rigid for foreign businesses while being lenient on Chinese firms," he said. "For instance, they say we need to seal all the exports separately item by item, although many items are produced in packages."

China, meanwhile, ranked 126th out of 136 countries in terms of market accessibility, according to the Global Enabling Trade Report published in November by the World Economic Forum. (Yonhap)

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