February 8, 2017 / 8:35 AM / in 9 months

China halts construction at major Lotte project amid THAAD tension

SEOUL (Reuters) - South Korea’s Lotte Group said Chinese authorities have halted construction at a multi-billion dollar real estate project after a fire inspection, amid worries in Seoul that Beijing is retaliating against the country’s plans to host a U.S. missile defense system.

FILE PHOTO - The logo of Lotte Hotel is seen at a Lotte Hotel in Seoul, South Korea, June 7, 2016. REUTERS/Kim Hong-Ji/File Photo

Separately on Wednesday, Hyundai Motor (005380.KS) said it may procure electric vehicle batteries from Chinese companies for a planned China model after South Korean battery makers failed to make a list of approved vendors last year.

Beijing is widely believed in South Korea to be discriminating against some of its companies and cancelling performances by Korean artists without explanation.

South Korean media have described a string of inspections at Lotte’s Chinese ventures as retaliation over the government’s decision to deploy the Terminal High Altitude Area Defence (THAAD) system on land that is currently part of a golf course owned by Lotte, South Korea’s fifth-largest conglomerate.

Since December, Chinese authorities have conducted fire inspections, facility inspections or tax investigations at most of Lotte’s sites in China including some 120 retail stores, a source with direct knowledge of the matter told Reuters.

The source was not authorized to discuss the matter with media and declined to be identified.

THAAD’s powerful radar is capable of penetrating Chinese territory, and Beijing has said THAAD threatens China’s own security and will do nothing to ease tension on the Korean peninsula.

Chinese Foreign Ministry spokesman Lu Kang, asked if THAAD had an impact on the Lotte project, told reporters at a daily briefing on Wednesday that he had no understanding of the status of the specific project.

“On principle I can say that China welcomes foreign enterprises to invest. At the same time, relevant companies operating in China must abide by laws and regulations,” Lu said.

He said China’s opposition to the THAAD deployment was clear.

Lotte said construction on its project in the northeastern city of Shenyang was halted in December and that it was working to address a matter that needed to be remedied, adding that there had been no major disruptions so far as little construction takes place during the winter.

Lotte Group spokesman Song No-hyun declined to comment on media reports about the motives of Chinese authorities.

The proposed land swap deal with the South Korean government for the THAAD site, roughly 200 kilometers from Seoul, still needs to be approved by a board of a Lotte Trading Co unit.

Lotte’s Shenyang project, which covers 1.45 million square meters, includes a department store and movie theater that are already open. It plans to construct residences and a theme park.

South Korea said last month it will look to improve communication and cooperation with China to resolve difficulties faced by South Korean companies there.

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Hyundai said it was now considering a Chinese battery for a plug-in hybrid version of its Sonata sedan to be sold in China.

Last year, Beijing declined to award certification to South Korea’s LG Chem Ltd (051910.KS) and Samsung SDI Co Ltd (006400.KS), both among the world’s largest electric vehicle battery makers, potentially excluding them from state subsidies and eroding their price competitiveness.

The South Korean automaker declined to comment on reports that its decision was due to tension with Beijing over THAAD.

“Considering various factors in Chinese market and price competitiveness, Hyundai Motor Company is also looking at cooperation with Chinese battery suppliers,” the company said in a statement sent to Reuters.

($1 = 1,141.9900 won)

Reporting by Joyce Lee and Hyunjoo Jin; Additional reporting by Michael Martina in Beijing; Editing by Tony Munroe and Edwina Gibbs

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