Agencies, cosmetics feel pinch from Beijing’s ban

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Agencies, cosmetics feel pinch from Beijing’s ban

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Entertainment and cosmetic companies who rely on business with China are suffering after Beijing’s apparent move to ban Korean cultural imports like TV shows, films and entertainers.

The ban appears to be a reaction to the Korean government’s decision to deploy the U.S.-led Terminal High Altitude Area Defense missile defense system in July.

Following reports that China’s government ordered local broadcasters not to air Korean dramas, movies or entertainment shows on Monday, shares of three major management agencies and cosmetics companies popular in China experienced a sharp fall, although they recovered a bit on Tuesday.

YG Entertainment, the agency behind popular bands such as Big Bang and singers like Psy, fell 6.9 percent to 26,300 won ($22.40) on Monday, the lowest of this year, before it edged up by 0.38 percent to 26,400 won next day.

The Monday plunge came after the Park Geun-hye administration announced it had chosen Seongju County, North Gyeongsang, as the site for the Thaad battery.

YG shares closed at 39,150 won on July 12 but dipped to the 38,000-won level by the end of July, after the deployment decision was announced. The decline accelerated in October and the 30,000 won level was shattered on Oct. 26.

A source at a showbiz management agency said that it recently suspended the debut of a band it represents in China due to the unfavorable atmosphere.

“We have put the plan on hold,” the source said, “For now, we will only operate a Weibo account for Chinese fans.”

Shares in CJ E&M, an entertainment company that exports movies and variety show formats to China, declined by 1.82 percent to 59,500 won Tuesday, following a drastic 6.77 percent fall on Monday to 60,600 won.

The showbiz sector is not alone in feeling Beijing’s wrath. Makeup manufacturers already feel a freeze. Korean makeup is associated with its entertainment stars and is popular in countries that like Korean singers, TV series and movies.

“Every company that exports cosmetics to China must acquire a certificate called a hygiene license from the China Food & Drug Administration. For a company to obtain the license, a company should not use banned chemicals and list new ingredients used,” said Kim Seong-sik, head of 2AB, a local marketing company targeting Chinese consumers.

“A company might not receive approval in a year if it has filed an application recently.”

One cosmetic company that wants to expand its business in China is facing a challenge, since its Chinese partner keeps delaying investment.

“They kept on pushing back on the contract for investment since last month,” a representative of the company said on the condition that the company’s name is not published.

“We suspect if it is because of the government’s pressure.”

Hwagok-dong in western Seoul normally bustles with Chinese wholesalers looking for Korean cosmetics at cheaper prices. It’s much less busy these days.

“After the Thaad dispute got tough in July, sales on the street were hit hard,” said a source at a wholesale store.

“Now a big purchase is about 20 million won,” the source said, “Korean products become popular through drama and entertainment shows, and now they’re not going to get that kind of exposure.”

Kim Jin-seok who sells Korean makeup in Hwagok-dong, says established brands are in better shape than newcomers.

Although AmorePacific, the country’s largest cosmetics group, dropped 3.76 percent Monday, it recovered 0.3 percent to 334,000 won on Tuesday.

“Korean dramas and movies help promote our products,” said a spokesperson of AmorePacific. “But reduced publicity in China won’t hurt our products’ essential reliability and consumers’ trust. The decline in stock prices is a temporary issue.”

BY YOO BOO-HYEOK, SUNG HWA-SEON AND PARK EUN-JEE [park.eunjee@joongang.co.kr]

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