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International relations

Lotte gets cold feet over South Korean missile defense

Conglomerate fears backlash from Beijing if it swaps land for US system

SEOUL -- Lotte Group is hesitant to let the South Korean government deploy a U.S. missile defense system at a golf course owned by the retail conglomerate, worrying its involvement may upset China.

Lotte has said it is taking a careful approach to the politically sensitive land exchange arrangement, which could threaten its business in the world's second-largest economy. Beijing strongly opposes the plan to install the American system on South Korean soil.

South Korea's Defense Ministry and the group agreed on the land swap, in principle, in November. Lotte International's country club in Seongju, a southeastern rural town, would be exchanged for a piece of land owned by the army's logistics command in Namyangju, east of Seoul.

"The board directors of Lotte International are carefully reviewing this matter because it is a historic decision," a Lotte executive said, asking not to be named. "They're considering the side effects on our business in China."

The executive said the decision may not come this month, as the board members need time to assess the value of the military camp as well as to gauge the diplomatic impact of the deal. The company said it is unclear when the board will meet on the matter.

Lotte may have good reason to worry. In November, the Chinese authorities launched abrupt tax audits on Lotte affiliates in the country, raising suspicions that Beijing was retaliating for the company's role in the Terminal High Altitude Area Defense, or THAAD, project.

Lotte runs a wide range of businesses in China, from real estate leasing to discount chains and department stores. Lotte Shopping's sales in China and Hong Kong reached 798.6 billion won ($683 million) in the third quarter last year, down 13.5% from a year earlier.

At the government level, meanwhile, Seoul-Beijing tensions are running high due to the missile defense plan. The South Korean government says it wants the THAAD system to defend itself from North Korean attacks, while Beijing argues the move is part of Washington's China containment strategy. 

The THAAD system remains a hot potato for South Korea, as the country has political and economic interests aligned with both the U.S. and China. In moving to install the system, President Park Geun-hye opted to lean on the U.S., but things could change quickly in light of Park's impeachment over an influence-peddling scandal. 

Presidential candidates from opposition parties argue the matter should be left to the next government.

Shares of Lotte Shopping, the group's biggest retail unit, dropped 0.23% on Tuesday to 213,500 won. But Lotte Chemical, a petrochemical affiliate, saw its shares climb 1.94% to 393,500 won, nearing to a one-year high of 395,500 won.

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