South Korea’s first female president, Park Geun-hye, was ousted by South Korea’s constitutional court on March 10. She was impeached over a bribery scandal that rocked the South Korean business and political world. This is a good news for South Korea’s young democracy, but the timing couldn’t be worse. It took place less than one week after North Korea conducted its second missile test in 2017 and barely two weeks after the assassination of Kim Jong Nam (the half-brother of dictator Kim Jung Un).
Compared to the rest of the world, South Koreans have the most to worry about. North Korea conducted it latest missile test while the United States and South Korea were conducting joint military exercises. Once again, Pyongyang demonstrated its determination to push forward its intercontinental missile program and put its neighbors and likely the United States in danger. In addition, the method of Kim Jong Nam’s murder (he was poisoned by VX gas, which the United Nations (UN) has designated as a weapon of mass destruction) shows Pyongyang not only has chemical weapons but also won’t hesitate to use it against its perceived threats.
South Korea’s largest city, Seoul, a city of 11 million people, is only 35 miles away from the demilitarized zone (DMZ), the world’s most heavily fortified border. Given such reality, anyone with common sense would think it’s within South Koreans’ rights of self-defense that they install the advanced U.S. missile-defense system, known as THAAD, as soon as possible. But Pyongyang’s most important economic and political backer, China, apparently disagrees.
China Sees South Korea as Bigger Threat than North Korea
China has long viewed THAAD as a bigger threat to China’s national security than North Korea possessing nuclear weapons. China’s chief concern is that it believes THAAD’s radar could penetrate China’s military system, which “represents a serious reduction in the effectiveness of the buffer zone between U.S. and Chinese forces in place since the end of the Korean War in 1953.”
To teach Seoul a lesson, China is punishing South Korea through “unofficial” economic sanctions. One South Korean business suffering the most from China’s retaliation is the Lotte group, a multinational conglomerate that engages in diverse industries from energy to retail. After Lotte agreed to provide land that would allow South Korea to install THAAD, a Chinese newspaper characterized Lotte’s action as stabbing China in the back and suggested that the Chinese government “showing Lotte the door will be an effective warning to all the other foreign forces that jeopardize China’s national interests. This is the dignity China should have as a major power.”
Since then, Lotte stores in China have faced a firestorm of protests. One protest banner read “South Korea’s Lotte has declared war on China. Lotte supports THAAD. Get the hell out of China.” Lotte’s online shopping site was crippled by cyber-attacks. On March 6, Lotte announced more than 10 of its Chinese retail stores closed after inspections by Chinese authorities. Lotte’s share price fell more than 4 percent upon the news.
The punishment didn’t stop there. Many Chinese companies reportedly voluntarily cancelled business trips to South Korea and vowed to purge Lotte products from their stores. China’s tourism ministry instructed tour companies to stop selling trips to South Korea starting March 15.
The Chinese government denies there are any official economic sanctions against either Lotte or South Korea. Its mouthpiece, China Daily, proclaimed “Chinese consumers’ resolute and voluntary fight back never crosses the line of law, and it is a natural outcome that the company should have predicted before it made the decision.” Yet for an authoritarian country like China, protests and corporate boycotts against foreign companies or a nation can rarely take place without government sanction.
Relying on China Economically Gives them Political Power
Like many other countries, South Korea’s economic well-being has been increasingly dependent on China. China is South Korea’s largest trading partner. Bilateral trade between the two countries reached $220.63 billion in 2011. China’s economic retaliation against South Korea will have a more damaging effect on Seoul than on Beijing.
South Korea is not the first target China has employed its mighty economic power against. For example, in spring 2012 during China’s 10-week standoff with the Philippines over fishing rights around the Scarborough Shoal in the South China Sea, the number of Chinese tourists to Philippines drastically decreased from an “unofficial” travel ban. China also conducted unparalleled inspections of bananas imported from the Philippines, which left many rotting at Chinese ports. Eventually, the Philippines conceded by withdrawing its maritime vessels from the waters surrounding Scarborough Shoal.
This episode illustrate that deepening economic ties with China comes with a steep price tag. Unlike any other place China targeted with its economic punishment, South Korea has the misfortune of living next door to a crazy dictator who has control of nuclear weapons and is sustained by China’s economic and political support.
China may point to its recent ban on coal imports from North Korea to demonstrate it’s a responsible global citizen. But according to The Wall Street Journal, the ban came after Chinese imports of North Korea coal in 2017 had already reached the UN annual limit of $400 million. Therefore, the ban is largely a symbolic gesture. In addition, with the so-called “humanitarian aid” loophole, China can and will continue to send North Korea food, energy, and anything else to sustain the regime.
Trading with Chinese Competitors Advances U.S. Interests
Does the rest of the world recognize the irony here? China is extending its economic support to the North despite repeated missile tests while punishing the South economically for its attempt to defend itself. South Korea now finds itself stuck between a rock and a hard place and is forced to choose between its security and its economic interests.
The recently ousted Park Geun-hye supported THAAD. The first components of THAAD have arrived in South Korea on March 7, right before her removal. But these components may not get installed because all leading candidates seeking to succeed her want to “rethink” installing THAAD in exchange for closer ties with China and North Korea.
I still believe President Trump made a strategic mistake by withdrawing from the Trans-Pacific Partnership (TPP), which left Asian allies to be more easily coerced by China’s economic power. Not surprisingly, China never liked TPP and was happy to see it fail.
The usually combative President Trump has been unusually quiet about North Korea’s missile tests and South Korea’s perilous situation. Either he doesn’t have a good strategy, or he has been too busy with various domestic issues to have time to formulate one. But time is of the essence here. Without an effective strategy, South Koreans won’t be the only people who live on edge. Whatever strategy the Trump administration comes up, it needs to include an economic component.