China bans imports of 19 Korean cosmetics
Though China has made a move to block Korean cosmetics imports, analysts are not worried that this would fundamentally affect the demand
By Yoon Ja-young
China banned imports of 19 Korean cosmetics products amid rising tensions over Korea’s decision to allow the deployment of a U.S. Terminal High Altitude Area Defense (THAAD) battery here.
According to Yonhap News Agency, Chinese authorities have recently refused to approve imports of 11 tonnes of cosmetics. Beijing announced that 28 cosmetics products failed to win approval for import, and among them 19 were Korean. It includes shampoo by CJ Lion, body wash products by Aekyung, lotion and other cosmetics by Iaso, and mask packs from by some mid-sized producers. The authorities cited diverse reasons such as changes in ingredients.
The rejection is regarded as part of economic retaliation by China, which includes bans on K-pop and K-drama stars and airliners’ chartered flights between the two countries ahead of the Lunar New Year holiday.
Korea and the United States chose to install THAAD in South Korea amid increasing threats from North Korea, but China has been claiming that the system would threaten its security.
Korean cosmetics, which are popular among Chinese consumers, were feared to be the next target.
China’s state-run Global Times also issued threats over THAAD. “Department stores in Seoul may be popular among Chinese tourists, however, these tourists haven’t forgotten their identity. Chinese people have a clear mind about the situation on the Korean Peninsula and will not sacrifice the national interest for Korean cosmetics if Seoul chooses to side with the U.S,” it said in its Jan. 7 edition.
Cosmetics shares have been falling amid the increasing tension. AmorePacific, the country’s top cosmetics manufacturer, closed at 293,500 won (US$246), Tuesday, down 1.68 per cent.
The stock has lost around 60 per cent in value since last July when Korea and the United States announced plans to install the U.S. missile system.
Kolmar Korea also fell to its lowest level in a year closing at 59,200 won (US$50), compared to 110,000 won (US$92) in July.
Other cosmetics stocks also remained weak on the bourse recently.
Reflecting the concern, NH Investment Securities recently slashed the operating income growth estimate for five major cosmetics firms to 12 per cent from the previous 16 per cent.
However, some analysts say that the stocks are likely to rebound.
“The issue of THAAD is likely to be overcome within a year. It isn’t very likely that Korean brands’ market share will fall in China’s cosmetics market due to it,” said Park Jong-dae, an analyst at Hana Financial Investment.
“China’s import market is expanding rapidly as Chinese seek premium products, and Korean brands make up over 30 per cent. The retaliation is focusing on curtailing supply, and it isn’t likely to fundamentally affect demand,” he noted.