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CNBC
02-05-2025
- Business
- CNBC
China looks set to turn to a tariff-proof sector as U.S. trade war bites — K-pop
Locked in a trade war with the United States and struggling with weak domestic consumption, China looks set to make a U-turn on an unlikely sector: K-pop. It was announced on April 28 that K-pop group Epex will be performing in Fuzhou, Fujian, province on May 31 — the first time an all-Korean idol group has held a concert in mainland China since 2016. On top of that, the large-scale annual Dream Concert — South Korea's longest-running K-pop event — has reportedly been scheduled to take place on Sept. 26 at a 40,000-seat stadium in Hainan province, the Korea Entertainment Producers' Association said on April 30. Those developments could signal an easing of China's unofficial ban on K-pop acts on the mainland after South Korea announced the deployment of the Terminal High Altitude Air Defense missile defense system in 2016, with China saying the system was aimed at constraining China's power in the region, among other reasons. The about-face on K-pop represents a "structural turning point" for the sector, according to Oh Jiwoo, research analyst at CGS International Securities Hong Kong. Oh told CNBC "this policy shift is part of China's broader strategy to revitalize domestic demand amid a prolonged consumption downturn." She noted that consumption contributed nearly 70% to China's gross domestic product growth in 2018, but the share has dropped to below 30% in recent years, with the country's consumer price index growth hovering near zero. "In response, the government has started promoting cultural events—including foreign pop concerts—to stimulate discretionary spending in tourism, hospitality, and local commerce," she added. On April 25, China's ministry of culture and tourism released a notice calling for the promotion of cultural events, including concerts and music festivals. Oh pointed out that China is South Korea's third-largest album export market after Japan and the U.S., and the second-biggest music market in Asia, "underscoring its strategic importance despite years of restrictions." Also helping the case for K-pop in China is the fact that the sector is seen as tariff-proof. Shinhan Securities' Ji In-hae wrote in a April 14 note that "although the market is very volatile due to the tariffs, [entertainment and media are] not affected by the tariffs at all, while the possibility of China's opening is valid."CGS' Oh said, "Core revenue drivers—streaming, concerts, and fan content—are digital and intangible, making them immune to cross-border tariffs." Even if fans buy albums and merchandise, tariff exposure is "negligible," given low unit prices and loyal fan demand. "In contrast with semiconductors or autos, where global trade policy directly impacts supply chains and pricing, K-pop consumption is far less sensitive to protectionist measures," she added. Semiconductors and automobiles are two of South Korea's key exports. Last month, South Korea announced a $23 billion support package for its semiconductor sector in light of uncertainty around U.S. tariffs. The Trump administration has imposed a 25% levy on all vehicles shipped to the United States, and another 25% on steel and aluminum imports. South Korea's Hyundai and Kia are among the top eight bestselling brands in the U.S, according to car marketplace Carpro. The country is also the fourth-largest exporter of steel to the U.S. in 2024, according to the International Trade Administration under the U.S. Commerce Department. But China's softening stance on K-pop has a diplomatic dimension that goes beyond the desire to increase domestic consumption, analysts say. Citi analysts John Wu and Alicia Yap said in an April 4 note that China may seek to restore ties with neighboring countries, including South Korea, in light of its own economic challenges. Cultural diplomacy could emerge as a key starting point, they said, leading to the easing of informal bans on South Korean content and resumption of K-pop's fan-driven revenue streams in the region. The sector has been described by them as "a long-term beneficiary of [a] changing world order." CGS' Oh echoes that view, telling CNBC that "the reintroduction of K-pop could help diversify cultural offerings and foster regional goodwill."She added China appears to be warming ties with South Korea while placing temporary limits on certain Western content, including Hollywood films. Oh said the shift not only restores access to a previously restricted fan economy, but also presents an opportunity to deepen cultural engagement in Asia, which will lay the groundwork for longer-term structural growth in the region. The developments could be good news for K-pop stocks. The earnings and share price of K-pop's four largest companies — known as the "Big Four" and all publicly listed — took a beating in 2024. That's despite the legions of adoring fans, multi-city concerts and billions of YouTube streams seen worldwide. But a rebound seems to be taking place in the first few months of 2025, with three of the Big Four companies registering substantial year-to-date increases. China's concert market would provide a substantial boost in 2025, should the country lift the unofficial ban on South Korean artistes. CGS' Joshua Kim wrote in a Feb. 10 note that the Chinese concert market size increased from $2.9 billion in 2019 to $8 billion in 2024, growing 189% during the period."Hence, if China lifts the ban on Korean artistes, we expect China to account for more than 25% of concert revenue in 2025, exceeding the contribution in 2016," he said. Morgan Stanley equity analyst Seyon Park said she would consider a China reopening a "potentially powerful catalyst" that could drive earnings and fair value estimates significantly higher, though the reopening is likely to be gradual. In Oh's view, the approval for Epex's concert is a "policy test case" that could pave the way for larger acts. She noted that smaller fan events by girl groups Twice and IVE in Shanghai could indicate China is starting with mid-tier acts, before progressing to broader re-engagement. Epex is a relatively rookie group in the industry, having debuted in 2021, but Oh said that these are not isolated approvals, instead, they are a broader transition toward high-capacity, high-visibility events. "With HYBE, JYP, SM, and YG already positioned for global arena tours, we expect Korean agencies to move quickly in monetizing demand once restrictions are fully lifted. These developments reinforce the case for a multi-phase reopening scenario and present a strong earnings catalyst for the Big Four," she said. Or to quote a 2009 song from YG Entertainment's 2NE1, K-pop is telling China, "it's been a long time coming, but we're here now."
Al Arabiya
11-04-2025
- Politics
- Al Arabiya
US shifts Patriot missile defense system from Asia to Middle East
The general in charge of the US military in Asia said that a Patriot missile defense system was recently moved to the Middle East from the Indo-Pacific region. Indo-Pacific Command (INDOPACOM) chief Adm. Sam Paparo told lawmakers this week it took 73 C-17 cargo planes to transfer one Patriot to the region. This comes on the heels of the increased military force posture ordered by the Trump administration as the US president threatens to strike Iran's nuclear facilities and continues to launch daily attacks on Houthi targets inside Yemen. Other air defense assets deployed by the US recently include Terminal High Altitude Air Defense (THAAD) systems, reportedly to Israel. A second US aircraft carrier also arrived in the Middle East, the US military said on Thursday, equipped with its air wing of F-35C fighter jets. The USS Carl Vinson carrier strike group is now accompanying the USS Harry S. Truman, which has been in the region since December. The bombing campaign against the Houthis escalated on March 15 after President Donald Trump ordered a more aggressive approach to pressure the militant group to stop attacking ships in the Red Sea. The Carl Vinson was also shifted from the INDOPACOM area of responsibility. The Truman is expected to return to her home base in the United States for regular maintenance in the next few weeks.
Chicago Tribune
26-02-2025
- Business
- Chicago Tribune
Column: President Trump's dramatic ‘Iron Dome' proposal has long history
President Donald Trump's dramatic surprise announcement giving priority to an advanced missile defense to protect the United States continues to generate debate. 'Iron Dome' is the name of the effective anti-missile defenses protecting Israel. Actually, missile defense is a well-established United States policy. North Korea threats led the Barack Obama administration to deploy Lockheed Martin's THAAD (Terminal High Altitude Air Defense) anti-missile system in South Korea, Hawaii and the island of Guam. The George W. Bush administration announced the deployment of ballistic missile defenses in Poland and the Czech Republic. Initially, the Obama administration planned to limit such weapons to sea-based forces, but Russia's 2014 annexation of Crimea and Ukraine invasion led to land-based deployment. Thereafter, a NATO summit meeting emphasized missile defense and new troop deployments in Europe. Debate over the best balance of defensive and offensive military capabilities is as old as warfare. Technology complicates, but does not abolish, this dual challenge. 'Hitting a bullet with a bullet' is the way even proponents of anti-missile systems describe the extraordinary technical challenge. Nonetheless, there has been sustained pressure within the U.S. government for many years to build such weapons. There also has been a remarkable success in the development of these complex weapon systems. During the Dwight Eisenhower administration, defense spending absorbed more than half the entire federal budget, and a much larger percentage of gross domestic product than today. Eisenhower maintained control over the military primarily, though not exclusively, by putting an overall ceiling on the Pentagon budget, effectively setting the Air Force, Army and Navy against one another for available resources. One byproduct was considerable duplication of effort. For example, each service developed a separate strategic missile program, jealously guarding research and development information from the others. In the successor John F. Kennedy administration, Defense Secretary Robert McNamara was immediately offended by the lack of formal logic in this approach, and decisively imposed organization-chart order. The Air Force was given land-based strategic missiles, the Navy sea-based submarine systems and the Army was removed from any program. Additionally, McNamara and his civilian analysts rejected arguments for anti-ballistic missiles because any conceivable defensive systems could be overwhelmed at a relatively low cost by simply increasing the number of attack vehicles. Using strategic concepts of that time, which McNamara's team embraced, leaving populations vulnerable was considered stabilizing, and termed 'Mutual Assured Destruction.' Defending missile sites was acceptable, since that move signaled we were not planning to attack the Soviets first. McNamara's domineering style quickly unified the services against him. The Army eventually achieved an anti-ballistic missile (ABM) role. President Lyndon Johnson, in desperate political trouble over the Vietnam War, forced McNamara to resign. Johnson generously named him president of the World Bank, but also forced him publicly to endorse the ABM. In the 1980s, President Ronald Reagan promoted space-based missile interceptors, termed the Strategic Defense Initiative. The Air Force became the lead service but the entire Joint Chiefs of Staff endorsed the effort. President Donald Trump during his first term created a new military 'Space Force.' An erratic, irrational nuclear-armed government or group, actual or potential, argues for developing our defenses. Influential if eccentric nuclear war strategist Herman Kahn used exactly this argument in print to help the humiliated McNamara when the earlier ABM system was announced. The radical rogue totalitarian regime of North Korea is precisely the sort of threat far-sighted Kahn had in mind. The startling manner of the White House announcement distracts from this long history. Arthur I. Cyr is the author of 'After the Cold War' (NYU Press and Macmillan/Palgrave).
