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Lotte says will inject $300 million to its China hypermarket, investor concerns remain
 
Security guards are stationed outside a Lotte Mart in Beijing on March 17. Lotte Group has taken the brunt of China's anger over the deployment of a U.S. missile system in South Korea. Photo: AP
 
South Korea’s retail giant Lotte said Thursday it will inject another $300 million into its hypermarket chain in China, which is suffering a loss amid tensions in bilateral ties over the deployment of a US missile defense system, according to Yonhap News Agency.
 
The report said Lotte Shopping Holdings (Hong Kong) Co. will borrow the money from Chinese financial institutions to cope with the losses it is suffering.
 
Among the $300 million, $210 million will be used to repay loans and the remaining $90 million will be used to spend on operating its Chinese retail unit to cover the costs of buying products and giving wages to employees, according to the report.
 
Lotte Mart has suffered great loss since mid-March this year, after its parent Lotte Group, South Korea’s fifth largest conglomerate, signed a land swap deal in February, turning its golf course in North Gyeongsang province into the deployment site of the US Terminal High Altitude Area Defense (THAAD) anti-missile system.
 
While South Korea and the US have justified the deployment of THAAD as a must in protecting South Korea from the nuclear and missile threat from North Korea, China regards it as a threat to its own national security.
 
According to Lotte Group, 87 Lotte Mart stores out of its 112 Lotte Mart outlets including 13 supermarkets operating in China have been put under suspension since mid-March. And it is estimated that Lotte Mart has suffered some 500 billion won ($444 million) in losses since March so far.
 
As Chinese labor law require companies to pay their employees even when business is suspended, costs at the South Korean company is expected to continue to mount. The Yonhap report cited industry watchers as saying the losses could reach 1 trillion won by the end of this year if the current situation continues.
 
Despite the additional financial assistance plan, investors are still worries about a possible negative impact on the company’s retail operation in future.
 
According to the Nikkei Asian Review, Lotte Shopping continued their losses for the fourth consecutive session on Friday. The stock at one point plummeted 5.64% from the previous day’s close to 242,500 won, the lowest level since August 17.
 
A Chinese media, citing an anonymous staff of Lotte, said that if the current situation continues, Lotte would adjust part of its investment structure, but would never withdraw from China. It added that Lotte Group has over 20 subsidiaries in China and if Lotte Mart withdraws from Chinese market, it would hurt those subsidiaries.

 


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