The Chinese government is allowing travel agencies to begin selling tour packages to South Korea, but there are substantial restrictions. First, the China National Tourism Administration (CNTA) is only allowing agencies to sell packages that transit from Shandong and Beijing to South Korea. Second, all sales must be made over-the-counter, with online sales still prohibited. Moreover, agencies cannot charter flights or sell cruise ship packages. Finally, any tours sold cannot include stops at Lotte outlets for duty-free shopping.
The sale of South Korean tour packages is still prohibited on online platforms
The row began with the deployment of the THAAD missile defense system by the United States on land bought by the South Korean government from the South Korean retailer Lotte. The system includes radar that Beijing fears will impede its ability to launch a nuclear response.
Beijing responded to the deployment by banning the sale of tour packages to South Korea, which made up most of the Chinese travel to South Korea. Chinese citizens can still legally travel South Korea legally if they travel independently. Beijing has repeatedly denied the implementation of any “tourist ban.”
South Korea lost $2.73 billion in tourism-related revenue between January and August
Industries dependent on revenue from Chinese tourism suffered dramatically during the ban. Overall, South Korea lost $2.73 billion in tourism-related revenue between January and August, a loss 23.6 percent during the same period last year. The number of international arrivals to South Korea fell by 22.8 percent, down to 8.86 million. China accounted for about half of the international arrivals in 2016.
All of this led to a substantial tourism deficit for South Korea, totaling $8.67 billion, which could rise to $13 billion by the end of the year. This deficit was driven by stronger outbound South Korean tourism, with spending by South Korean tourists rising by $17.5 billion or 14.7 percent.
Beijing and Seoul reached an agreement to end the dispute in October. Beijing agreed to end the ban and cease protests over the deployment, but South Korea was forced to agree never to deploy any additional missile defense systems, never to join any regional missile defense organizations involving the United States, and never join any alliances involving the United States and Japan.
South Korea has agreed to never join any alliances involving the United States or Japan
It’s not clear why the ban was only partially lifted and only restricted to two provinces. It seems likely that Beijing will continue to lift the ban piece by piece over a relatively long period. Shares of South Korean firms dependent on Chinese tourism, like Hotel Shilla and Asiana Airlines, rose in response to the news. It’s possible that Beijing wants to lower the profile of any ban reversal domestically, as it denies the policy’s existence. However, actual recovery of tourism revenue is a long way off, and South Korea has made substantial diplomatic and defense sacrifices.