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FILE PHOTO: Chinese tourists pose for a group photo at the Gyeongbok Palace in central Seoul, South Korea, October 5, 2016. REUTERS/Kim Hong-Ji

(reuters_tickers)

By Haejin Choi and Pei Li

SEOUL/BEIJING (Reuters) - China will allow travel agencies in Beijing and Shandong to partly resume sales of group tours to South Korea, in a sign of thawing relations between the nations that have been locked in a year-long diplomatic standoff.

However, executives from tour agencies in the regions said they had been told not to include in their travel packages units of South Korean retail-to-chemicals giant Lotte Group - which provided land for the installation of a U.S.-backed anti-missile system that Beijing vehemently opposed.

China had banned all group tours to the neighbouring country since March in the wake of South Korea's decision to install the U.S. Terminal High Altitude Area Defense system. Beijing worries the THAAD's powerful radar can penetrate Chinese territory.

In South Korea, a halving of inbound Chinese tourists in the first nine months of the year cost the economy $6.5 billion in lost revenue based on the average spending of Chinese visitors in 2016, official data shows.

But a late October agreement between the countries to move past the dispute had boosted hopes group tours may be allowed in the near future.

China National Tourism Administration will allow resumption of only over-the-counter sales of package tours from Beijing and Shandong to South Korea, Park Yong-hwan, deputy director at Korea Tourism Organization, and executives at Chinese travel agencies said on Tuesday.

Online sales of package tours, and chartering flights or cruise trips are still banned, Park said.

According to the executives at travel agencies, restrictions on including Lotte Group units, such as Lotte Duty Free, in tour packages also remain. The executives declined to be identified due to the sensitivity of the matter.

Lotte, South Korea's No.5 conglomerate, has faced a major setback in the wake of deteriorating bilateral relations, with most of its hypermarkets in China being shut down after fire inspections.

The South Korean travel ban is expected to be be in place for other Chinese regions for now and be gradually lifted going forward, Park said.

Shares in South Korean tourism and retail companies rallied after the news of the partial lifting of the ban, first reported by Yonhap earlier in the day.

Asiana Airlines gained 3.1 percent and duty free store operator Hotel Shilla rose 2.8 percent. Casino operator Paradise rose 2.2 percent, while cosmetics maker LG Household & Health Care added 3.7 percent.

(Reporting by Haejin Choi in SEOUL and Pei Li in BEIJING; Additional reporting by Hyunjoo Jin and Joyce Lee; Editing by Himani Sarkar)

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