China Missile Spat Torpedoed South Korea Casino Sector in 2017

Posted on: July 8, 2018, 12:00h. 

Last updated on: July 6, 2018, 11:35h.

Visitors to South Korea’s foreigner-only casinos fell by 6.2 percent in 2017, according to government figures seen by local news agency Yonhap.

South Korea casinos damaged by THAAD deployment
The deployment of a Terminal High Altitude Area Defense (THAAD) battery in in response to truculent North Korea angered China, leading to the imposition of unofficial economic sanctions that have harmed South Korea casinos. (Image: Wikipedia)

The South Korean Ministry of Culture, Sports and Tourism attributed the decline to a diplomatic spat with China over the deployment of a US-backed anti-missile battery on South Korean soil.

The 2016 installation of the Terminal High Altitude Area Defense (THAAD) battery was a response to North Korean saber-rattling, but it angered China, South Korea’s largest trading partner.

Beijing claimed the deployment threatened its security and took retaliatory action. The region’s economic superpower increasingly uses its burgeoning, globetrotting middle-class, and its spending power, as an economic weapon. In March last year, it banned Chinese companies from offering package tours to South Korea, imposing quasi-economic sanctions on the country’s tourism sector.

Easing of Tensions

It’s not just casinos that have been affected, but because South Korean citizens are banned from frequenting 16 of the nation’s 17 gambling facilities, they were particularly hard hit.

And according to The Diplomat website, Beijing’s actions have had the desired psychological effect on South Koreans, who are “openly wondering whether crossing Beijing to maintain favor with an erratic Washington was wise and in the nation’s long-term interest.”

In November last year, the two countries agreed to mend relations. China now permits group tours but still sulkily limits incentive and cruise tours to South Korea. A ministry official told Yonhap that the easing of the diplomatic stand-off has improved the situation this year and that numbers to casinos have been on the rise.

“Foreigners-only casinos suffered a setback in the number of users last year due to a decrease in Chinese tourists. But a recovery in the number of Chinese tourists has been boosting the casinos this year,” he said.

Is Macau Next?

The threatened trade war between the US and China became a full-scale reality on Thursday, as the Trump administration imposed 25 percent tariffs on Chinese goods worth $34 billion, and China reacted in kind.

As Beijing accuses Washington of “starting the largest trade war in economic history,” observers have suggested that US casino interests in Macau could become collateral damage.

Chinese visitors account for around two thirds of Macau’s casino patrons and around 90 percent of its gaming revenue. Meanwhile, Las Vegas-based companies like LVS, Wynn Resorts and MGM Resorts International derive a large portion of their revenues from the casino hub. They may soon find themselves in the cross hairs of Chinese economic retaliation.