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(LEAD) Lotte to face drawn-out biz suspension in China over THAAD row

All News 16:06 April 02, 2017

(ATTN: CORRECTS figure in paras 2-3; ADDS more details in last para)

SEOUL, April 2 (Yonhap) -- South Korean retail giant Lotte Group's Chinese retail operations may face protracted business suspension as Chinese authorities are set to extend such a measure by one month in an apparent retaliation against Seoul's decision to deploy a U.S. missile defense system, industry sources said Sunday.

According to Lotte, 87 Lotte Mart stores operating in China, Lotte's hypermarket chain, have been placed under suspension due to their failure to meet fire or other regulations or on voluntary suspension since February, as some Chinese consumers continued to stage anti-Korea protests near the stores.

That represents nearly 88 percent of the 99 Lotte Mart outlets in China that have been forced to close temporarily.

The sources said a Lotte Mart outlet in China's Zhejiang province was confirmed to have failed to win an approval to resume its operations from Chinese authorities, and another outlet in China's northeastern city of Dandong was notified by Chinese officials that its business suspension will be extended by one month.

The China-based retail outlet unit has been teetering on the brink of collapse as a protracted business suspension by Chinese authorities is leaving the firm with snowballing losses.

China has ratcheted up pressure against Lotte, South Korea's fifth-largest family-controlled firm, since it handed over one of its properties to the Korean military so it can be used as a site for a U.S. Terminal High Altitude Area Defense (THAAD) battery.

Seoul's deployment of THAAD on its soil has angered Beijing, which claims that it will be used to monitor its own military.

Lotte could suffer some 200 billion won (US$179 million) in losses in its Lotte Mart revenue if the shutdown continues for another month. Last year, sales from the China-based Lotte Marts reached 1.13 trillion won, or 94 billion won on a monthly basis, according to the firm.

The suspension deals a serious blow to Lotte, since its China-based business has long been running a deficit even though it has been in the world's second-largest economy for some 10 years.

In 2016, Lotte recorded a combined 207 billion-won deficit in its department store and outlet divisions, of which about 80-90 percent came from its Chinese units.

Each Lotte Mart outlets in China hires some 120 locals on average, which means some 10,800 Chinese workers' job security could be undermined.

(LEAD) Lotte to face drawn-out biz suspension in China over THAAD row - 1


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