China, South Korea Agree to Shelve Thaad Missile Shield Spat

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  • Xi, Moon plan to hold summit on sidelines of APEC in Vietnam
  • Thaad-related stocks like Lotte Shopping advance in Seoul

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South Korea and China agreed to move beyond a year-long dispute over Seoul’s decision to deploy a U.S. missile shield, boosting stocks and paving the way for closer ties between two of Asia’s biggest economies.

The nations agreed to restore bilateral relations to a “normal development path swiftly,” South Korea’s foreign ministry said in a statement. Chinese President Xi Jinping plans to meet South Korean counterpart Moon Jae-in at the Asia-Pacific Economic Cooperation summit in Vietnam next month, Nam Gwan-pyo, a South Korean national security official, told reporters separately.

The Terminal High Altitude Area Defense system, known as Thaad, is designed to defend South Korea from an attack by North Korea. While Moon initially called for a review of the deployment, his government backed the system as Kim Jong Un’s regime accelerated efforts to obtain the capability to hit the continental U.S. with a nuclear weapon.

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Tensions over the missile shield had prompted Beijing to retaliate economically, suspending sales of package tours and hindering the operations of South Korean companies. The won extended gains after news of the agreement, appreciating as much as 0.3 percent against the dollar as of 11:07 a.m.

China is South Korea’s largest trading partner, buying about a quarter of the country’s exports. The deployment Thaad has shaved 0.4 percentage points off South Korea’s gross domestic product expansion in 2017, according to Bank of Korea estimates, preventing it from growing at the fastest pace since 2011.

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The agreement comes shortly before U.S. President Donald Trump visits Asia, a trip that will include stops in Tokyo, Seoul and Beijing. China has strongly opposed the introduction of the U.S.-made system, saying it would break the “strategic equilibrium in the region.”

China reiterated those concerns Tuesday, while South Korea said it didn’t pose a strategic threat to Beijing. In a statement, the two sides agreed that “South Korea-China relations are very important, and in accordance with the spirit of joint documents, decided to develop their strategic cooperation partnership.”

Lotte Shopping Co. and duty-free store operator Hotel Shilla Co. rose after the agreement, on expectations that China might lift its restrictions on group tour packages into South Korea. Hyundai Motor Co., the nation’s biggest automaker that suffered from sluggish sales in China, rebounded along with its supplier Mando Corp, and Hyundai Mobis Co.

Lotte Shopping, which had some of its stores in China temporarily closed this year because of alleged fire-safety violations, rose as much as 5.7 percent in Seoul. The company welcomed the news even while saying it still plans to sell its retail outlets in China.

“It’s true that we had to bear losses and damages that’s hard for a single company to tolerate, but we always believed that there will be an improvement in relations with China,” Lotte Shopping said in a statement.

South Korean tour operators are hopeful that China will soon lift the tourism ban, according to Jeon Hyo-sik, an executive director at Korea Tourism Organization in Wonju.

“It typically takes a month or two for tourism agencies to gather tourists after such curbs are lifted, and winter is a low season for tourism in Korea,” Jeon said on Tuesday. “We hope Chinese tourism can recover before the PyeongChang Olympics in February.”

— With assistance by Hooyeon Kim, Heejin Kim, and Sohee Kim

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