Seoul’s THAAD decision and its implications for China-ROK relations

On the heels of China’s approval of tougher sanctions on North Korea—following Pyongyang’s fourth nuclear test—there was, for a moment, a sense that China’s policy on Korea was changing. Many speculated that Beijing had finally abandoned Pyongyang in favor of warming diplomatic and economic relations with Seoul, which would undermine a strengthened US-Japan-ROK alliance. This interpretation, despite gradually losing credibility, shed light on China’s Korea predicament: its strategic objectives—regional peace and stability (under Chinese leadership) and denuclearization of the Korean peninsula—were becoming increasingly at odds with each other. Beijing would have to choke Pyongyang politically and financially to prevent it from fully nuclearizing and setting off an arms race in a region already mired in historic animosities and territorial rows. At the same time, too effective an intervention would trigger the collapse of the Kim regime, subsequent turmoil of which would be squarely borne by China. A sudden political vacuum in Pyongyang could even embolden Washington to unify Korea under US-allied Seoul’s leadership, depriving Beijing of its most valued strategic buffer.

Beijing prioritized a status quo in the past—keeping Pyongyang’s lifeline intact—but neglecting North Korea’s nuclear ambitions is proving more costly with each additional nuclear test. Notably, the absence of Beijing’s intervention has prompted Seoul’s renewed embrace of Washington, which is manifested in their joint decision to deploy Terminal High Altitude Area Defense (THAAD). The THAAD development has been the single clearest sign to Beijing that its failure to rein in Pyongyang’s nuclear pursuits can hurt its core strategic interests, although military experts insist that there is no such impact on its deterrence capacity.

In this commentary, I use THAAD as a case study to understand how China has sought to influence Seoul’s behavior and who in Seoul have been influenced by China’s strategy. I also explore how next year’s election may affect Seoul’s attitude toward China. Relying primarily on South Korean sources, I report on prominent voices within Seoul on China’s Korea policy, highlighting the differences among the three major parties as well as their internal divisions regarding THAAD specifically, and China more generally.

THAAD symbolizes a “no” to China

The THAAD decision makes for an interesting case study for a number of reasons. It promptly followed a period of significant courtship between South Korea and China, evidenced by cooling relations between Xi and Kim as well as Park’s attendance at Beijing’s victory day parade as the only leader of a US ally. These promising gestures fell short of convincing Seoul to forego THAAD, however, when it became increasingly wary about the limits of Chinese cooperation after North Korea’s fourth nuclear test. Indeed, when Pyongyang detonated an alleged H-bomb in January, Park experienced difficulties reaching Xi, prompting her to announce—with disappointment akin to rage: “We can no longer expect much from China.”

¹ THAAD, therefore, symbolizes Seoul’s reaffirmation of Washington as its primary security provider, marking a fundamental divergence in Beijing and Seoul’s perception about and approach to the North Korean nuclear threat.

China says “no” to THAAD

Beijing’s position on THAAD has been unequivocal. On August 3, Renmin Rìbao warned, “South Korean leaders must carefully solve the problem to avoid prompting a worst case scenario. The deployment of THAAD is not only unbeneficial but has the potential to involve South Korea in a military confrontation between the United States and China and Russia. In the event of a conflict, South Korea will be the first target.”² Huanqiu Shibao on August 10 went further by stating, “China must pressure South Korea politically, economically, in trade, tourism, and culture, militarily, and diplomatically. We have many means at our disposal.”³

China’s opposition to THAAD stems from its belief that its primary objective is to track missiles launched from China, rather than defend against North Korea’s nuclear weapons. China’s foreign minister Wang Yi stated, “The THAAD system has far exceeded the need for defense in the Korean Peninsula and will undermine the security interests of China and Russia, shatter the regional strategic balance and trigger an arms race.”⁴ Indeed, given THAAD, China will continue to develop newer, more powerful missile capabilities as a countermeasure.⁵ And at the same time, it will try to reverse, or at least suspend, Seoul’s decision by political, economic, and geostrategic blackmail.

China wants South Korea to say “no” to THAAD

China’s strategy to overturn the THAAD decision will likely involve the following three dimensions: 1) a political one in which China uses North Korea as a bargaining chip, 2) an economic one in which China leverages its commercial influence in South Korea, and 3) a diplomatic one in which China negotiates with the United States, bypassing South Korea altogether. At the time of writing, Korean sources suggest that the Chinese retaliatory measures remain mostly rhetorical, though they could turn more punitive, given South Korea’s vulnerabilities.

Politically, China has leveraged its influence in North Korea by unilaterally frustrating the implementation of Resolution 2270. It is common knowledge that China’s full and transparent participation will determine the effectiveness of the sanctions under 2270. China, however, continues to be lenient towards North Korea, failing to punish Chinese middlemen who facilitate Pyongyang’s WMD procurement processes and abusing the “livelihood exemption” to keep North Korea afloat. As demonstrated by Pyongyang’s fifth nuclear test in early September, just 8 months after the January test, North Korea is continuing to proliferate—in fact, at an accelerated pace. Seoul, of course, blames Beijing for it.

China has also hampered a united, timely international response against North Korea by using its UN Security Council veto power. China rejected the adoption of the Security Council’s statement on August 3 condemning North Korea’s firing of two ballistic missiles that reached Japan’s Exclusive Economic Zone.⁶ China insisted that the statement include an opposition to THAAD, which it believes is partly responsible for Pyongyang’s missile provocations. While China begrudgingly accepted the Security Council’s statement on August 26 after North Korea fired submarine-launched ballistic missiles (SLBMs), this decision is seen by many in Seoul as Beijing’s attempt to avoid confrontation prior to the G20 Summit.⁷ It remains to be seen whether China will cooperate as the Security Council moves to approve a fresh set of sanctions on North Korea.

Experts remain more concerned about possible economic retaliation.⁸ China (including Hong Kong) accounts for nearly a third of South Korea’s exports. Almost half of total foreign visitors to South Korea are Chinese, who spend, on average, five times more than an ordinary foreign tourist. Moreover, Chinese investors hold 17.5 trillion won in South Korea’s government bonds and publicly traded securities. In sum, China constitutes South Korea’s number one trading and investment partner by a wide margin, and could deliver a detrimental blow to the South Korean economy at will.

Besides South Korea’s economic vulnerabilities, past examples of Chinese behavior demonstrate its willingness to use trade to punish political differences. Jeong Hyung-gon from Sejong Institute confirms, “China has used non-tariff barriers against other countries before when there were security or history issues, and there is reason to worry that the same may happen to Korea.”⁹ Many cite Japan in this regard, which suffered China’s export restrictions on rare-earth metals in 2010 and mass cancelations of Chinese tourist visits in 2012, both following heightened tensions over the disputed islands in the East China Sea.¹⁰

Noting these concerns, Kim Heung-gyu and Choi Ji-yeong list five ways in which China could economically retaliate¹¹: 1) placing greater non-tariff barriers to trade such as customs and inspection requirements; 2) banning Chinese tourism to South Korea and slowing visa issuance; 3) using state-controlled media to organize boycotts and smear campaign against South Korean companies; 4) targeting South Korean companies operating in China, and 5) dumping Chinese capital investment in South Korean financial markets. Of these, they suspect the first two measures are the likeliest, albeit limited in scope.

Despite these prevalent concerns, there is no major sign of Chinese economic retaliation—yet.¹² According to the Korea International Trade Association, China has already adopted 26 measures that affect its members, including licensing restrictions on cosmetics and stricter hygiene inspection requirements on food items. But as others have noted, while South Korean exports to China declined by 9 percent in July, the figures are relatively modest when taking into account the broader context of sluggish economic growth. Allegations about China’s targeting of the South Korean entertainment industry remain unsubstantiated, and a sharp decline in share prices of South Korean companies in tourism, electronics, and cosmetics appears to reflect market uncertainty based on expectations of retaliation, not retaliation itself.¹³ Indeed, no source has been able to verify a direct link to Chinese intervention.

Most analysts deem large-scale retaliation by Beijing unlikely, as sanctions may violate the terms of their bilateral free trade deal concluded last year and disrupt China’s efforts to win market economy status from the World Trade Organization (WTO).¹⁴ Further, a weakening of economic ties with South Korea is undesirable for China, particularly as it struggles to engineer an economic recovery through expansionist policies. Though the degree of economic reliance between China and South Korea is asymmetric, China risks considerable pain in pursuing economic retaliation against Seoul.

So, if both political and economic retaliation are restrained by interdependency, what else can China do to retaliate against Seoul? From South Korea’s perspective, perhaps the most humiliating measure China can take is to bypass Seoul altogether and negotiate with its “big brother,” Washington. In fact, this is what Kim and Choi believe is happening: “China has decided to resolve the conflict over THAAD through negotiations with the United States,” which implies that “China does not regard South Korea as a responsible party for dialogue in regard to issues on the Korean Peninsula.”¹⁵

In this scenario, Beijing does not even attempt to change Seoul’s behavior. Instead, it negotiates the degree to which it will cooperate on North Korea for Washington’s alterations to the THAAD arrangement with Seoul. Eric Heginbotham and Richard Samuels argue that “if China were to agree to serious graduated sanctions on North Korea, the United States could agree to freeze the number of ground-based missile interceptors on the Korean Peninsula.” In addition, Washington “might also agree, after consulting South Korea, to withdraw THAAD from the peninsula when North Korean nuclear weapons no longer pose a threat."¹⁶ This type of diplomatic retaliation would signify China’s belittlement of South Korea as a satellite state of the United States, and may hurt the reputation and legitimacy of Seoul as a principal actor in the North Korean conundrum.

Some say “yes,” some say “no” to China

The THAAD issue has severely deepened the party fault lines on how Seoul should handle North Korea’s nuclear threat vis-à-vis Washington and China. Prominent figures within the three major political parties in South Korea have voiced opinions ranging from abandoning THAAD and engaging with North Korea through China to developing indigenous nuclear capabilities in South Korea, in defiance of Washington.

Members of the conservative New Frontiers Party (NFP) largely stand by Park’s THAAD decision, though fragmentation is certainly visible and growing. While the latest nuclear test has helped legitimize the government’s decision by boosting public support for THAAD, it also culminated in the resurgence of pro-proliferation arguments, which the Park administration disavows. ¹⁷  Some now claim that Seoul should ask Washington to re-deploy tactical nuclear weapons, which were withdrawn in the 1990s, while others suggest that it should make its own nuclear weapons.¹⁸ When the NFP adopted an official party platform in favor of THAAD, Jeong Woon-cheon expressed the party’s message to China: “If China had put serious weight behind the Six Party Talks, THAAD would not have come into play. China should solve the North Korean nuclear problem and there will be no need for THAAD.”¹⁹

Responses from the opposition have been varied and shifting as well. Initially, the interim leader of the Together Democratic Party (TDP) Kim Jong-in expressed “regrets” that the government had not sufficiently consulted the opposition prior to announcing its decision, but added that he did not categorically oppose THAAD.²⁰ In contrast to his moderate stance, six members of the TDP traveled to China to discuss THAAD with the Chinese elites in a widely criticized attempt to defy Park’s decision.²¹ Upon being elected the new chairwoman of the TDP, Choo Mi-ae also declared that her party will take a tougher stance against THAAD, which she deems militarily useless and diplomatically undesirable as it pushes Beijing closer to Pyongyang. She even claimed that Pyongyang’s nuclear development had been triggered by the decision of Park and her predecessor Lee to abandon the Sunshine Policy.²²   

Anti-THAAD voices in the People’s Party (PP) have also shifted in tone and intensity. Initially, when the THAAD decision was first announced, Ahn Cheol-soo of the PP called for a public referendum on THAAD and vehemently criticized the TDP for failing to adopt an official party platform against THAAD, which the PP had promptly done.²³ As public support for THAAD intensified in recent weeks, however, the PP toned down its explicit rejection of THAAD into more moderate disagreement. Ahn now claims that THAAD is Seoul’s only bargaining chip against Beijing, and that the government must secure and use the possibility of rolling back on THAAD deployment in exchange for China’s full cooperation against Pyongyang.²⁴ While criticizing the government for its THAAD decision, the PP also depicts Chinese threats as “overstepping the boundary.”²⁵ Sohn Geun-joo of the PP pointed out, “China should be reminded that it is also at fault for failing to hamper North Korea’s nuclear and ballistic missile advances.”²⁶

Saying “no” to China

THAAD demonstrates the divisiveness in Seoul about the right way to deal with North Korea vis-à-vis Washington and Beijing. Indeed, Seoul’s decision is largely framed as a binary choice: deploying THAAD and consolidating security alliance with Washington or foregoing THAAD and incentivizing Beijing to take more proactive measures against Pyongyang. This binary approach is evident in Korean public discourse, which labels those who support THAAD as “pro-American,” and those who oppose it as “pro-Chinese.”²⁷ Seoul’s current policy favors Washington, though multiple variables could upend the present state of affairs, most importantly China’s Korea policy and South Korea’s upcoming presidential election.

Despite its continued opposition to THAAD, Beijing’s attitude toward Seoul has somewhat softened since North Korea’s fifth nuclear test. As many analysts note, this timely development is likely to prevent Beijing from closely aligning with Pyongyang, which has, once again, defied Beijing’s call for stabilization and worse, validated Seoul’s position on THAAD.²⁸ Following the fifth nuclear test, Chinese foreign minister Wang Yi condemned Pyongyang’s provocations, calling for additional measures to impede North Korea’s nuclear and ballistic missile programs.²⁹ Skepticism remains, however, about the degree to which Beijing will actually discipline Pyongyang. Jang Yong-seok of Seoul University argues, “China will probably agree to a new set of Security Council sanctions, but sustain Pyongyang at a minimum and seek other initiatives. China’s words and actions might differ.”³⁰

Seoul’s approach to THAAD—and China more broadly—could also change depending on the outcomes of the upcoming presidential election in December 2017 (which coincides with the deadline for THAAD deployment). Among the prominent candidates, Moon Jae-in of the TDP has maintained an ambiguous stance on THAAD, while Ahn of the PP has firmly established his opposition. Analysts note that Moon is particularly careful about voicing his opinion on THAAD and preference for the Sunshine Policy, as he suffered being labelled “jong-buk”—“follower of the North”—in the last presidential election, which he lost to Park by a slim margin.³¹ While THAAD itself may not be an important issue in the next presidential election, the candidates’ approach to the North Korean problem will be critical. Given South Korea’s strong executive system, the newly-elected president could completely reshape Seoul’s North Korea policy—including THAAD—and what role Beijing will play.

Whether Seoul will maintain its “no” to China depends on a number of factors. How far Beijing decides to cooperate with Seoul on North Korea and who becomes South Korea’s next president will play a significant part. Other variables such as Pyongyang’s additional provocations—a possible sixth nuclear test—and China-US dynamics in the South China Sea cannot be ignored, either. The deepening division within Seoul about how to deal with North Korea and the growing instability in the region make Seoul’s trajectory all the more volatile.