[THE INVESTOR] Lotte Group is expected to lose most of the 2 trillion won (US$1.76 billion) it has invested in its Chinese business over the past decade following its planned exit from the market, according to news reports on Sept. 15.

The Korean retail giant has announced the withdrawal of its discount supermarket chain Lotte Mart from China as the prolonged diplomatic tensions between Seoul and Beijing have hampered sales there. Goldman Sachs was named as the deal manager. 

Even after the sale of assets, most of the newly secured cash will be used for repaying loans it has taken to revive sluggish Chinese sales.

The exit decision comes after Lotte announced an additional US$300 million funding for its Hong Kong unit that handles financing for Lotte Mart China in August. Along with the latest funding, it has invested more than 2 trillion won in the Chinese business since 2008.

“Even though we invested more money just a few weeks ago, we have decided to sell the Chinese business because there is no immediate sign of the situation improving,” a Lotte spokesperson told The Investor.

Lotte Mart has suspended operations of 87 out of the total 112 outlets in China after the authorities’ hygiene inspection. But it is still spending money to maintain the suspended stores, including salaries for employees, under the Chinese labor law.

Meanwhile, its crosstown rival E-mart is also considering an exit from China by selling its five stores to Thailand’s Charoen Pokphand Group, which owns the Lotus supermarket chain.

By Song Seung-hyun (ssh@heraldcorp.com)