China has warned South Korean conglomerate Lotte over its involvement in a planned US missile shield on the peninsula — the first time Beijing has openly criticised the group after months of pressure via undeclared economic sanctions.

“Lotte will hurt the Chinese people and the consequences could be severe. The Chinese people will not support a company complicit in damaging China’s interests,” according to a commentary by Xinhua, the Beijing mouthpiece.

The development underscores China’s two-track approach to the Korean peninsula amid heightened tensions over North Korea’s nuclear and ballistic weapons programmes.

On one hand, it is increasing pressure on Pyongyang following a declaration on Sunday that it would stop importing North Korean coal.

On the other, it is squeezing Seoul on its plans to deploy the US missile shield that Beijing says is a “threat to regional security and stability”. 

North Korea has re-emerged as potential conflict hotspot after last year testing two nuclear devices and more than 20 ballistic missiles.

Earlier this month, Pyongyang launched an advanced mid-range missile off its east coast in what observers saw a test of the new Trump administration.

“The proposed deployment of a US missile defence system in the Republic of Korea is a threat to regional security and stability, and Lotte Group is one decision away from becoming an accessory to the act,” said Xinhua.

Lotte is in talks with the Seoul government to trade the land needed to host the Terminal High Altitude Area Defence platform, more commonly known as Thaad.

However, South Korea’s fifth-largest conglomerate has dragged its heels on negotiations in recent months as Beijing stepped up retaliatory measures against its operations in China.

In December, it emerged the group’s premises across China had come under increased scrutiny and had been subject to an array of health and safety and tax investigations.

Earlier this month, the company said it would close three retails stores in Beijing, partly as result of the deteriorating bilateral relationship over Thaad.

“Lotte stands to lose Chinese customers and the Chinese market. That would be a very large slice out of their business pie,” said Xinhua.

The commentary urged Lotte to defer or reject the Thaad deal.

The ultimatum puts the company in a difficult position — caught between its business interests and the will of the South Korean government.

The issue is also a sensitive one for policymakers in Seoul who recognise the importance of relations with their biggest trading partner but are increasingly anxious about North Korean belligerence. 

“Lotte has the position to resolve this issue from the broad point of view, in other words, for the sake of the national security and national interests,” said the South Korean defence ministry.

The warning to Lotte came after China announced it would suspend coal imports from North Korea in a sign of Beijing’s displeasure with the reclusive regime.

China is North Korea’s main trading partner, and coal is one of its biggest imports from the country.

“This warning against Lotte is only the first step in pressuring the company as well as the government,” said Cai Jian, a professor at Fudan University in Shanghai.

“If Lotte does not budge, the penalties will get worse in terms impact and severity.”

Additional reporting by Sherry Ju

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