The Chinese tax authorities also launched an investigation into Lotte, a Korean retail giant that does business in China, while South Korean pop artists have been banned from appearing on Chinese TV programs.

"Despite a tightened Korea-China relationship, we keep in touch with China through a dialogue channel under the bilateral free trade agreement," said the official. "We will deal with the issue in a rational manner."

China is South Korea's biggest trading partner with its exports reaching $124.3 billion last year to account for 25 percent of the country's total outbound shipments.

The two countries agreed on the FTA which took effect in December 2015, with tariffs on about 90 percent of goods to be eventually removed over the next two decades. (Yonhap)