S.korea to of­fer tax, loan con­ces­sions to firms hit by China trade curbs

The Gulf Today - Business - - 4international -

SEOUL: South Korea said it will of­fer tax and loan con­ces­sions to firms hit by trade sanc­tions China im­posed in re­tal­i­a­tion against Seoul’s de­ploy­ment of a pow­er­ful de­fence sys­tem, high­light­ing the broader im­pact of in­ten­si­fy­ing ten­sions on the Korean penin­sula.

The gov­ern­ment plans to al­low duty free firms and other re­tail­ers op­er­at­ing in China to de­fer all or part of their cor­po­rate in­come and value-added taxes for up to nine months, the fi­nance min­istry said on Thurs­day.

The min­istry will also of­fer cheap loans to auto-com­po­nent mak­ers hit by de­clin­ing sales of South Korean cars in China.

The United States de­ployed mis­sile shield, known as the Ter­mi­nal High Al­ti­tude Area De­fense (THAAD), to South Korea this year to guard against North Korea’s shorter-range mis­siles. That has drawn fierce crit­i­cism from China, which says the sys­tem’s pow­er­ful radar can probe deep into its ter­ri­tory.

In re­tal­i­a­tion, Bei­jing has im­posed boy­cotts on South Korean goods traded in the main­land, rais­ing pres­sure on the Moon Jaein ad­min­is­tra­tion to help firms hit by China’s curbs.

Thurs­day’s mea­sures, aimed at mak­ing up the losses suf­fered by the tourism and auto sec­tors, show the gov­ern­ment has lim­ited op­tions to counter Bei­jing’s sanc­tions, said Stephen Lee, an econ­o­mist at Meritz Se­cu­ri­ties.

“There isn’t much Seoul can do as these is­sues have been orig­i­nat­ing from China. There’s lit­tle the gov­ern­ment can do in terms of mak­ing up for the loss in­curred (by South Korean busi­nesses),” Lee said.

“Seoul can con­tinue to an­nounce mi­cro-mea­sures to buf­fer any shocks (from the Thaad is­sue), but it’s too dif­fi­cult to re­solve the prob­lem by re­mov­ing the Thaad now,” Lee added.

The fi­nance min­istry said it plans to boost do­mes­tic tourism to com­pen­sate for de­clin­ing in­bound Chi­nese tourists.

The num­ber of Chi­nese tourists, which used to ac­count for about half of all vis­i­tors to South Korea, halved in the first seven months of 2017 com­pared to a year ago. That trans­lates to $5.1 bil­lion in lost busi­ness for South Korea, based on the av­er­age spend­ing of Chi­nese vis­i­tors in 2015, data from the Korea Tourism Or­ga­ni­za­tion shows.

Partly due to the THAAD back­lash, Hyundai Mo­tor’s re­tail sales in China, the world’s big­gest auto mar­ket, slumped 29 per cent in the first half of 2017.

Seoul has said it plans to boost funds at pol­icy banks by up to 500 bil­lion won ($437.14 mil­lion) to help car com­po­nent mak­ers and other sup­pli­ers heav­ily re­liant on sales to Hyundai Mo­tor and Kia Mo­tors.

IN­FLA­TION SLOWS

Con­sumer in­fla­tion in South Korea eased to near the cen­tral bank’s 2 per cent tar­get in Septem­ber as fresh food prices rose more slowly, but broader price pres­sures pointed to a steady im­prove­ment in do­mes­tic de­mand.

The con­sumer price in­dex rose 2.1 per cent in Septem­ber from a year ear­lier, Statis­tics Korea said, de­cel­er­at­ing from a five-year high of 2.6 per cent in Au­gust, fall­ing just short of the 2.2 per cent rise seen in a Reuters poll of econ­o­mists.

Prices gained 0.1 per cent from a month ear­lier ver­sus the 0.2 per cent tipped in the poll.

“Sea­sonal fac­tors are still play­ing a big role here, as heavy rain in Au­gust and Septem­ber as well as the shop­ping sea­son ahead of the Chuseok hol­i­day sup­ported over­all price gains,” said Lee Sang-jae, an econ­o­mist at Eu­gene In­vest­ment & Se­cu­ri­ties.

This year’s Chuseok hol­i­day, a har­vest fes­ti­val, will run from Oct 2 through Oct. 9, an un­usu­ally long break to take in other pub­lic hol­i­days fall­ing in the same month.

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