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Lotte to reportedly sell supermarkets in China as bilateral tensions over THAAD linger

A Lotte Mart is seen closed in Hangzhou, Zhejiang province, China, March 5, 2017. Photo: Reuters

Lotte Group will sell its money-losing Lotte Mart supermarkets in China, as the deployment of the remaining launchers of the Terminal High Altitude Area Defense (THAAD) system in South Korea triggered strong objection from China, the Yonhap News Agency reported on Thursday.

The South Korean retail giant changed its stance on selling its Lotte Mart stores in China due to inability to make up for the losses, as Beijing has boycotted the South Korean businesses since Seoul decided to install the controversial THAAD defense system last year in response to the missile and nuclear threats from North Korea, the report said. Lotte has been a target of the harshest attack in China since it agreed to offer a self-owned golf course as the deployment site for the THAAD defense system in a land swap agreement signed with the South Korean defense ministry in February.

Lotte Mart is considering the selection of companies which will deal with the auction of its supermarket assets in China, the report quoted a local investment bank as saying.

It is not clear how many Lotte Mart supermarkets in China will be sold, even though there are media reports speculating that all the stores would be disposed of. Over the weekend, South Korean newspaper Chosun Ilbo reported that Lotte plans to sell as many as 50 Lotte Mart stores in China and slash its Chinese workforce, citing a high-ranking official of the company. Lotte runs 112 Lotte Mart supermarkets in China, among which as many as 87 stores are reportedly almost out of business.

Previously, Lotte denied rumors that it would shut down the supermarket chain in China amid the rising tensions in the South Korea-China relationship over the deployment of the THAAD defense system, which Beijing said will pose a severe threat to its national security due to the fact that the anti-missile system's radar can detect the military activities in the northeastern and northern regions of China.

Earlier this month, Lotte was reported to borrow $300 million from several financial institutions to rejuvenate the already sluggish supermarket business in China, $210 of which would be used to repay loans and the remaining $90 million would be used for operating its Chinese retail unit to cover the costs of buying products and paying wages to employees.

The South Korean conglomerate might have placed hopes on its country's new President Moon Jae-in, considered a heavyweight statesman, to call a halt to the deployment of the THAAD defense system, which in turn could help reduce its pressure in China. However, South Korea's defense ministry said last week that the remaining launchers of the THAAD defense system would be deployed after Pyongyang carried out a test of a hydrogen bomb intended to be mounted on an intercontinental ballistic missile.

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