Chinese authorities seize equipment from South Korean retail giant Lotte as tensions over missile defence shield continue

Beijing authorities claim latest incident targeting the supermarket chain was motivated purely by concerns about power conservation

PUBLISHED : Tuesday, 22 August, 2017, 5:56pm
UPDATED : Tuesday, 22 August, 2017, 10:06pm

Chinese authorities have confiscated dozens of items of machinery from two supermarkets owned by South Korea’s retail giant Lotte Group – the latest move that threatens business links between the two nations, which are currently locked in a diplomatic stand-off.

Inspectors from the Beijing Development and Reform Commission have seized 23 pump motors and four power transformers from two Lotte Mart stores in the capital city in the wake of a special crackdown on energy consumption, Beij ing Evening News reported.

The equipment, which the authorities said failed to meet the city’s power conservation standards, will be dismantled and all the components will go under the hammer, the report added.

The proceeds from the auction are expected to be remitted to the state treasury.

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The Chinese authorities said the inspection was part of citywide efforts to force companies to improve energy efficiency.

However, it is the latest in a series of incidents in which Lotte Group has found its business subject to sudden tax and safety inspections in China since it allowed a US-backed anti-missile system to be deployed on land it owns in South Korea in a response to the threat from the North.

Beijing has strongly opposed the deployment of the Terminal High Altitude Area Defense (THAAD) system, which it fears could by used to spy on China’s military capacity.

China is the largest overseas market for Lotte Mart, but operations in 87 out of its 99 mainland stores have been suspended by the Chinese authorities for alleged violations of its fire-safety codes, resulting in a record US$365 million in the first half in China.

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Lotte has said it was considering raising funds via a dollar bond sale by a Hong Kong unit to support its business in China.

Bloomberg cited a Lotte executive as saying that the issuance amount would be about US$300 million.

The company has previously poured US$315 million into its Chinese business in March.

Lotte Shopping said the 12 stores in China that remain open have also virtually stopped operations, as locals stay away amid the THAAD rows.

About 10 per cent of its employees in the country have left their jobs because of the prolonged suspension, as the firm reduces monthly salaries, a company spokesperson told Bloomberg.

Lotte has said it has fixed the fire safety problems identified by the Chinese government.

“Lotte’s China exposure is relatively high compared with other retailers, so it’s affected more,” Wan Hee Yoo, a senior credit officer at Moody’s Investors Service told Bloomberg. “No one can tell when the China issue will end. It’s hard to predict what will happen to its China business.”