Lotte and Hyundai Motor Group have been jittery over the growing uncertainties surrounding their businesses in China, ahead of the 19th National Congress of the Chinese Communist Party next Wednesday.
Lotte and Hyundai Motor Group have been jittery over the growing uncertainties surrounding their businesses in China, ahead of the 19th National Congress of the Chinese Communist Party next Wednesday.
At the congress, the party delegates will elect the top officials for the Xi Jinping administration and decide on the policies of the world’s most populous country.
The two conglomerates are hoping China will let up on its retaliatory measures against Korean companies.
The Chinese government has pushed ahead with economic retaliation against Korea in response to Seoul’s decision to deploy a U.S. anti-missile Terminal High Altitude Area Defense (THAAD) battery here.
But observers point out both Lotte and Hyundai can only wait for the results of the congress for now.
“They have no choice but to wait for positive results because they cannot affect the meeting at all. They can only anxiously cross their fingers now,” said an industry source who asked not to be named.
The former has been enduring difficulties in selling its Lotte Mart outlets in China.
Lotte said it has yet to sign a contract with any investors, due to different opinions about prices and other conditions. More than five foreign investors, including the Thai-based Charoen Pokphand Group, have reportedly met Goldman Sachs, the lead manager for the disposal.
The retail giant decided recently to withdraw Lotte Mart from the Chinese market because it has been unable to operate the discount chain over the past seven months. After offering its golf resort as a deployment site for THAAD, Lotte has faced suspension orders and a consumer boycott in China.
Analysts expect investors will not take active measures until the end of the congress.
They say Lotte will likely sign a deal after the congress, in case the Chinese government addresses the market uncertainties.
“Lotte is expected to successfully sell Lotte Mart, because the Sino-Korean relationship will likely change after the leadership transi- tion at the congress,” HI Investment & Securities analyst Lee Sang-hun said.
Hyundai has been wary of stricter environmental regulations. Chinese authorities are controlling emissions in an attempt to show a clear sky over Beijing during the congress. One of Hyundai’s subcontractors was ordered to suspend its business last month over its excessive emissions.
On top of the environmental issue, Hyundai has suffered declining sales in China and local suppliers refuse to provide it products for vehicles.
Some Chinese news outlets even reported BAIC Motor may discontinue its partnership with Hyundai. The two carmakers have run the Beijing Hyundai joint venture for 15 years.
If the Chinese government eases its retaliatory measures after the congress, Hyundai’s performance is expected to recover this year.
It sold 85,000 vehicles in China last month, a record high for this year, following the opening of its plant in Chongqing. It also proved its firm relationship with BAIC, holding an executives’ meeting last month.