Ill will between China and Korea is deepening over Seoul's decision to let the U.S. station a Terminal High-Altitude Area Defense battery here. Many Chinese package tours to Korea are being canceled. Korean Air saw reservations on flights between the two countries from earlier this week until April 30 plunge 10 percent compared to the same period a year ago. "We need to monitor the situation further, but we're considering using smaller planes or cutting the number of flights," a Korean Air spokesman said Wednesday. On Asiana Airlines, reservations on flights from China to Korea from Feb. 15 until late this month dropped nine percent on-year. Flights between Korea and China accounted for 21 percent of total sales at Asiana. China's National Tourism Administration set March 15 as the start of a ban on so-called zero-dollar tours to Korea so cancellations may rise further. The tours cost almost nothing but mean that the Chinese groups are herded from one shopping outlet to another and heavily leaned on to buy.



Gyeongbok Palace is sparsely visited on Wednesday. /Newsis

Meanwhile, the signs are massing that China is running a concerted campaign. Some economists forecast Korea's GDP growth to fall by more than one percentage point if the campaign persists. Beijing fears that the powerful radar of the THAAD battery, which is being deployed in southern Korea, could be used to spy on its military activities, a charge Korea and the U.S. deny. The IBK Economic Research Institute in a report said Korea's tourism and cultural contents industries -- soap operas and K-pop, which have many Chinese fans -- will take a direct hit, resulting in a GDP growth decline of 0.59 to 1.07 percentage points. That would translate into losses of up to US$15 billion. Jang Woo-ae at the institute said, "In addition to the direct impact, we may also suffer from declines in job growth, new investments and added value of related companies. Korea's exports to China account for 45.9 percent of its GDP compared to 17.9 percent for Japan, so we could suffer far more than Japan during its territorial spat" over the Japanese-controlled Senkaku islands, which China calls Diaoyu. Credit Suisse also forecast Korea's GDP will fall 0.5 percentage points should Chinese economic retaliation go on for a year. Hyundai Research Institute and NH Investment and Securities project GDP growth will fall between 0.25 and 0.5 percentage points.

A street in the Myeong-dong shopping district in Seoul is deserted on Monday. /Newsis

China is also continuing a Draconian health-and-safety crackdown on Lotte Marts in China. Closures over one safety violation or another rose from 16 to 55 on Wednesday alone, halting business at more than half of the conglomerate's 99 outlets there. Lotte provided the land where the THAAD battery will be stationed. And now retaliatory measures are also impacting a chocolate factory Lotte built in China as a joint venture with Hershey's. A Lotte staffer said a surprise safety check on Monday found fire hazard problems and the factory is afraid of an imminent order to halt production. Lotte expects to be slapped with a minimum one-month production halt. The factory was established in 2007 with Lotte owning a 51-percent stake. It generates around W80 billion in annual revenues (US$1=W1,150).