Jeju used to bristle with Chinese tourists who flocked to the South Korean island to enjoy its beach resorts and rugged landscape. But an industry set up to serve Chinese consumers shrivelled up almost overnight in March after Beijing stopp......Jeju used to bristle with Chinese tourists who flocked to the South Korean island to enjoy its beach resorts and rugged landscape. But an industry set up to serve Chinese consumers shrivelled up almost overnight in March after Beijing stopped travel agencies from sending groups to South Korea in retaliation at Seoul’s decision to deploy a US missile defence system to protect itself against unpredictable North Korea.
The number of daily visitors from China dropped to 1,000 from more than 7,500 days earlier, according to official figures. The situation is similar in Seoul, where shopping areas once popular with Chinese tourists are deserted.
“Since March 15, I haven’t seen a single Chinese person come to our shop,” says one salesperson. Another adds: “The company is forcing us to take unpaid leave simply because of the declining number of Chinese tourists.”
The impact has not just been felt by retailers and hotels. Korean carmakers have also been badly hit.
China has been implementing such boycotts against its foes for more than 100 years and it knows how to make them hurt economically and politically.
Controlling access to China’s vast market gives President Xi Jinping and the ruling Communist party tremendous leverage over trading partners and allows them to signal their nationalist credentials to the domestic audience.
Foreign diplomats and executives dread the accusation of having “upset the feelings of the Chinese people”, the rhetoric often used to trigger an embargo. Their fears are heightened by China’s growing economic might, the nationalist tone and the fact that consumers are easily marshalled on social media sites such as Weibo and WeChat.
The history of the Chinese boycott predates the word itself, which came from 1880s Ireland, and it is a story that encompasses patriotism, anti-colonialism, economic rivalry and occasional outbreaks of violence.
In 1905, US President Theodore Roosevelt called for reform of a discriminatory law restricting Chinese immigration after an “especially injurious” boycott of US cotton. “It is short-sighted indeed for us to permit foreign competitors to drive us from the great markets of China,” he warned.
China’s role in the global economy as a manufacturer and end-market is now far more significant. And Beijing’s grip on the economy, through state-owned enterprises and leverage over private sector businesses, is powerful. So for many countries and companies, Roosevelt’s warning about the risk of upsetting China resonates more than ever.
While Japan earned Chinese ire in recent years for opposing Beijing over disputed islands in the East China Sea, South Korea seemed to have pulled off a delicate balancing act by deepening its investments in China even while hosting a large contingent of US troops. But that all changed with the decision last year to deploy the Terminal High Altitude Area Defence platform, a US missile defence system, to shoot down North Korean missiles.
Beijing was deeply angered by the move, which it fears could enhance US security architecture in the region and lead to greater surveillance of its own activities.
China’s response to Thaad evolved gradually. Initially Beijing targeted specific South Korean companies over health and safety issues. But its position hardened as it became clear that Seoul would push ahead with the deployment.
Goods were held up at customs. Lotte, the South Korean retail group, was particularly hard hit, with 87 of its 99 Chinese stores closed because it had handed over a golf course to Seoul to assist the Thaad deployment.
The retaliation became blatant only when the US began installing the first parts of the missile battery in March. Wang Yi, China’s foreign minister, warned that South Koreans “will only end up hurting themselves”.
But, as with previous boycotts, local authorities fear protests may get out of hand. After demonstrators outside a Lotte store in the southern province of Hunan smashed up a South Korean car in March, local police told residents that vandalism was illegal and called for “rational patriotism”.
Economists and investors have long debated the effectiveness of boycotts. In his 1933 Study of Chinese Boycotts, CF Remer, a professor of economics at the University of Michigan, argued they had a strong “psychological” impact on the target nation, even if China also suffered economic blowback.
Andreas Fuchs, an economics researcher at Heidelberg University, has found that countries tend to experience a temporary drop in exports to China if their governments meet the Dalai Lama, the Tibetan Buddhist leader seen by Beijing as a dangerous separatist.
Yet China’s economic integration also acts as a restraint. South Korea is the biggest supplier of imports to China and its fourth-biggest export market. Like Japan, which has often suffered from Beijing’s embargoes, South Korea provides many high-technology components and machines to drive the Chinese manufacturing industry.
While different countries have varying degrees of exposure to Chinese economic pressure, the influencefor all will continue to grow in line with Beijing’s increasing projection of its political and military might .