Chinese Aggressions

South Korea is the latest to suffer from a hostile campaign backed by Beijing, but do such sanctions work in changing policy? 
By Ben Bland, Tom Hancock and Bryan Harris

Jeju used to bristle with Chinese tourists who flocked to the South Korean island to enjoy its beach resorts and rugged landscape.
But an industry set up to serve Chinese consumers shrivelled up almost overnight in March after Beijing stopped travel agencies from sending groups to South Korea in retaliation at Seoul’s decision to deploy a US missile defence system to protect itself against unpredictable North Korea.
The number of daily visitors from China dropped to 1,000 from more than 7,500 days earlier, according to official figures.
The situation is similar in Seoul, where shopping areas once popular with Chinese tourists are deserted.
“Since March 15, I haven’t seen a single Chinese person come to our shop,” says one salesperson. Another adds: “The company is forcing us to take unpaid leave simply because of the declining number of Chinese tourists.”
The impact has not just been felt by retailers and hotels.
Korean carmakers have also been badly hit.
Hyundai reported that sales in China, the world’s biggest automobile market, were down 14 per cent year on year in the first quarter, while Kia’s sales slid 36 per cent, even as the overall market in the country grew 4 per cent over the same period.
China has been implementing such boycotts against its foes for more than 100 years and it knows how to make them hurt economically and politically.

Tourist information helpers in Seoul. Chinese-speaking tourist guides have seen their work dry up as visitor numbers have plummeted.

Controlling access to China’s vast market gives Xi Jinping and the ruling Communist party tremendous leverage over trading partners and allows them to signal their nationalist credentials to the domestic audience.
But Beijing must play a delicate balancing act to ensure that its embargoes neither damage the Chinese economy nor unleash forces of jingoism and protest that could threaten one-party rule. Japanese carmakers, Philippine banana farmers and Taiwanese tourism workers have all previously been on the wrong end of hostile campaigns instigated to varying degrees by Beijing and the Communist party-controlled media.
Foreign diplomats and executives dread the accusation of having “upset the feelings of the Chinese people”, the Communist rhetoric often used to trigger an embargo.
Their fears are heightened by China’s growing economic might, the strident nationalist tone adopted by Xi and the fact that consumers are easily marshalled on social media sites such as Weibo and WeChat.
The results can be devastating, with cars smashed up, factories attacked and years of effort to crack one of the world’s biggest markets undone overnight.
“For foreign companies, there’s very little they can do to protect against this kind of politicised action, except lobbying domestically for maintaining strong relations with China,” says Duncan Innes-Ker, a China analyst at the Economist Intelligence Unit.
The history of the Chinese boycott predates the word itself, which came from 1880s Ireland, and it is a story that encompasses patriotism, anti-colonialism, economic rivalry and occasional outbreaks of violence.
In 1905, US President Theodore Roosevelt called for reform of a discriminatory law restricting Chinese immigration after an “especially injurious” boycott of US cotton.
“It is short-sighted indeed for us to permit foreign competitors to drive us from the great markets of China,” he warned.

A US intercept test using the THAAD missile defence system.

China’s role in the global economy as a manufacturer and end-market is now far more significant. And Beijing’s grip on the economy, through state-owned enterprises and leverage over private sector businesses, is powerful.
So for many countries and companies, Roosevelt’s warning about the risk of upsetting China resonates more than ever.
Yet China’s economic integration also acts as a restraint.
South Korea is the biggest supplier of imports to China and its fourth-biggest export market.
Like Japan, which has often suffered from Beijing’s embargoes, South Korea provides many high-technology components and machines to drive the Chinese manufacturing industry.
“This economic retaliation will also harm Beijing’s interests as China imports intermediate Korean goods to finish manufacturing and sell on to other markets,” warns Kim Tae-hwan, an official at the Korea Federation of Small and Medium-Sized Enterprises.
“Korean companies also employ many Chinese workers.”

 *** 

While Japan earned Chinese ire in recent years for opposing Beijing over disputed islands in the East China Sea, South Korea seemed to have pulled off a delicate balancing act by deepening its investments in China even while hosting a large contingent of US troops.
But that all changed with the decision last year to deploy the Terminal High Altitude Area Defence platform, a US missile defence system, to shoot down North Korean missiles.
Beijing was deeply angered by the move, which it fears could enhance US security architecture in the region and lead to greater surveillance of its own activities.
US forces said on Tuesday that Thaad had gone into operation.
China’s response to Thaad evolved gradually.
Initially Beijing targeted specific South Korean companies over health and safety issues.
But its position hardened as it became clear that Seoul would push ahead with the deployment.
Goods were held up at customs. 
Employees at Korean companies were harassed. 
Lotte, the South Korean retail group, was particularly hard hit, with 87 of its 99 Chinese stores closed because it had handed over a golf course to Seoul to assist the Thaad deployment. 

A protest calling for the boycott of South Korean goods in Jilin, north-eastern China, earlier this year.

The retaliation became blatant only when the US began installing the first parts of the missile battery in March.
Wang Yi, China’s foreign minister, warned that South Koreans “will only end up hurting themselves”. South Korea complained to the World Trade Organisation that China “may be in violation of some trade agreements”.
But Seoul is caught between its military and ideological alliance with the US and its commercial and economic ties with China, its largest trading partner.
The situation has been complicated by the ousting in March of president Park Geun-hye. 
Moon Jae-in, the leading contender in next week’s presidential election, is sympathetic to China and has long expressed reservations about the missile shield.
In a debate, he called on Beijing to “immediately stop” its boycott but added that Seoul should “make diplomatic efforts to persuade China”.
The campaign against South Korea has been driven by Beijing with the help of state media, which have unleashed a barrage of stories condemning the missile system and suggesting it is part of a US plot to contain China’s rise.
But, as with previous boycotts, local authorities fear protests may get out of hand.
After demonstrators outside a Lotte store in the southern province of Hunan smashed up a South Korean car in March, local police told residents that vandalism was illegal and called for “rational patriotism”.
“The tensions between the state and popular nationalism are at least 100 years old,” says Robert Bickers, author of Out of China, a book on Chinese nationalism.
“Sometimes the government is trying to agitate, sometimes it is trying to keep people in check and at other times it is taken completely by surprise.”
Kaiser Kuo, a Chinese-American cultural commentator and former executive at technology group Baidu, has suggested that the country’s leaders are standing “over the fire pit of nationalism with a fan in one hand and a hose in the other”.
“They can whip up the flames to intimidate, or to point to during a negotiation so their choices appear constrained by a loud domestic constituency,” he wrote in a recent essay.
“But with the hose they can also keep that fire from leaping out and burning down the valuable surrounding countryside.”

 *** 

Economists and investors have long debated the effectiveness of boycotts.
In his 1933 Study of Chinese Boycotts, CF Remer, a professor of economics at the University of Michigan, argued they had a strong “psychological” impact on the target nation, even if China also suffered economic blowback.
“Boycotting by a single nation is like the labour strike,” he wrote.
“The threat to strike is powerful; the strike itself is likely to be costly and inefficient.” 
More recent research points to a significant initial impact, followed by a later recovery in trade, suggesting that orders are delayed rather than cancelled for good.
In some cases, the embargoes fizzle out as the news agenda moves on.
In others, lengthy negotiations are necessary to mend ties.
Andreas Fuchs, an economics researcher at Heidelberg University, has found that countries tend to experience a temporary drop in exports to China if their governments meet the Dalai Lama, the Tibetan Buddhist leader seen by Beijing as a dangerous separatist.

A Chinese marine surveillance ship monitors a Japanese fishing boat off Uotsuri island, one of the disputed islands in the East China Sea.

The pattern was similar for the 2012 boycott of Japanese products.
Kilian Heilmann, a researcher at the University of California, San Diego, found that Japanese car exports to China tumbled 32 per cent, or $1.9bn, in the 12 months after the boycott launched in September 2012 in response to Tokyo’s purchase of the Senkaku islands
But trade returned to normal levels the next year.
Such recoveries beg the question of whether these boycotts are successful in changing the policy of foreign governments.
There have certainly been some big victories for China in recent years.
British investors successfully lobbied the UK government not to receive the Dalai Lama again after they were cold-shouldered by Chinese officials when David Cameron, then prime minister, met the spiritual leader in 2012.
Beijing had cancelled numerous meetings with UK ministers and investment deals were put on hold until it was clear that the meeting would not be repeated.
Norway had to go through years of talks and pledge to attach “high importance to China’s core interests and major concerns” last year in order to re-establish ties, after Beijing had punished Oslo over the 2010 decision by an independent group appointed by Norwegian politicians to award the Nobel Peace Prize to dissident Liu Xiaobo.
“The Chinese government can effectively use economic sanctions to affect the foreign policy positions of democratic governments, with potentially chilling effects for international progress on human rights,” argued Ivar Kolstad, the economist, in a paper for Norwegian think-tank CMI.
He calculated that the dispute cost Norway $780m to $1.3bn in exports and concluded that China had become “too big to fault”.
Philippines President Rodrigo Duterte took a similar view, reversing the confrontational stance of his predecessor over the South China Sea disputes in the hope of winning economic concessions from Beijing.

 *** 

Rory Medcalf, head of the National Security College at Australian National University, is urging countries to fight back against Beijing’s attempts to push the narrative of Chinese economic power with a more nuanced analysis of its actual influence. 
“China has done extremely well at exploiting the shadow of its growth,” he says. 
“There’s a myth in Australia that our economy is completely dependent on China’s demand for our mining exports.” 
China is the biggest market for Australian products, accounting for 27.5 per cent of exports, much of that iron ore and coal.
Yet unlike other developed economies, including South Korea and Singapore, trade is less important to Australia, so those exports add up to just over 5 per cent of gross domestic product.
Japan, the most frequent target of Chinese boycotts, is adapting to offset potential damage. 
“After the 2012 protests, many Japanese companies realised that our position in China would remain precarious, which has accelerated our move into other, friendlier markets like Southeast Asia,” says an executive from a Japanese manufacturer in Indonesia.
While different countries have varying degrees of exposure to Chinese economic pressure, Prof Bickers says the threat for all will continue to grow in line with Beijing’s increasing projection of its political and military might and the Communist party’s fears of losing power.
“We are entering a new phase with a successfully assertive China in the South China Sea,” he adds. “When Xi’s line on the rejuvenation of China comes together with China’s insecurity, I do worry very much.”

Action and reaction 
1843 Shanghai landlords refuse to rent properties to foreigners in opposition to the Nanking Treaty which ended the first opium war the previous year and forcibly opened China to more international trade 
1884 Chinese dock workers in Hong Kong refuse to service French ships, in opposition to the Sino-French war, leading to a general strike and violent clashes with police 
1905 Worldwide boycott of US products by Chinese merchants in opposition to discriminatory laws in the US. Action was taken by Chinese communities from Shanghai to Singapore and San Francisco.
1925-26 Strikes and boycotts in Hong Kong cripple British trade as part of the anti-imperialist May Thirtieth Movement, after colonial police in Shanghai open fire on protesters 
1930-32 The Kuomintang government leads boycotts of Japanese goods, as tension rises ahead of Japan’s invasion of Manchuria in 1931 
1946 Huge rallies and anti-US boycotts are staged after the alleged rape of a Peking University student by two US marines. The communists use the incident to rally opposition to the US-backed Kuomintang, which it defeats in 1949 
1999 Protests break out after the US bombs the Chinese embassy in Belgrade, killing three Chinese journalists. Washington’s ambassador to Beijing is trapped for several days as mobs attack US diplomatic facilities 
2010 China blocks exports of rare earths, vital for the electronics industry, to Japan after clash between a Chinese fishing boat and a Japanese coast guard in the East China Sea 
2010 China punishes Norway over the award of the Nobel Peace Prize to dissident Liu Xiaobo. 
2012 Demonstrations break out after an escalation of the Senkaku islands dispute. Protesters smash up Japanese cars and attack Japanese factories and shops selling Japanese goods 
2016-17 China takes action against South Korean businesses because of its opposition to Seoul’s US missile defence shield.

Axis of Evil

China’s Korea policy ‘in tatters’ as both North and South Korea defy sanctions
By Simon Denyer

BEIJING — More than half a century ago, hundreds of thousands of Chinese soldiers died in the Korean War, fighting on the side of their Communist allies against the American-backed South. 

Yet today, China finds itself in the uncomfortable position of falling out with both the Communist North and capitalist South of this troublesome peninsula, imposing sanctions on both countries but getting no satisfaction from either.

On Monday, South Korea announced it would press ahead with the “swift deployment” of an American missile defense system despite relentless and vociferous Chinese opposition.
In February, China said it was cutting off coal imports from North Korea in accordance with sanctions imposed by the United Nations Security Council in a bid to persuade the country to abandon its nuclear and missile program. 

On Sunday, North Korea ignored China’s pleadings not to raise regional tensions by conducting another missile test, albeit one that failed.
China has also deployed an unofficial and unilateral package of sanctions against South Korea to persuade it not to deploy an American missile defense system. 

On Monday, as Vice President Pence warned North Korea not to test U.S. resolve, South Korea’s acting president, Hwang Kyo-ahn, vowed to press ahead with the “swift deployment” of that system, known as Terminal High Altitude Area Defense, or THAAD.
“Even before the United States upped the tempo, China was in the unusual position of having really very bad relations with both the North and the South — that’s something of an accomplishment,” said Euan Graham, director of International Security Program at the Lowy Institute in Sydney. 

“Its peninsula policy was in tatters, and things have only got worse since.”
China is not alone in struggling to construct a successful policy toward North Korea, as the United States can attest. 

But the failure of its approach has seldom been more starkly outlined, as Pyongyang presses ahead with its nuclear program, the United States sends an aircraft carrier strike group to the region and fears of military conflict mount, experts say.
Both Beijing and Washington share the same goal, a peninsula free of nuclear weapons, but they often appear to be trying to realize those goals in mutually incompatible ways.
Under Barack Obama, the United States tried to isolate and pressure North Korea economically, an approach that China argues has raised tensions and forced its leader Kim Jong Un — and his father before him — into a corner.
China had banked on a very different approach, believing that building up North Korea’s economy would gradually bring about more moderate politics. 

That, though, has simply given North Korea the resources and the technology to build up its nuclear and missile programs, experts say.
Nor has it brought Beijing the leverage it desires: Kim has never met Xi Jinping and channels of communication between the two governments have never been thinner, experts say.
“China’s hope-based approach has encountered Kim Jong Un’s ‘I’ll have my cake and eat it’ approach,” Graham said. 

“What’s changed in the political relationship is Kim Jong Un’s total willingness to humiliate China, to slap it in the face, not to give China even the ritual obeisance his father did.”
China believes that having THAAD, with its sophisticated radar and missile defense capabilities, deployed on its doorstep will allow America to spy on it and undermine its own national security interests.
It has whipped up a frenzy of nationalist outrage against South Korea over the issue, with the sale of package tours to the country abruptly stopped in March and tourist numbers plunging. 

State-run media have called for boycotts of South Korean businesses and goods, and primary schoolchildren have even been encouraged to stage protests of their own. 

South Korean films were barred from a recent international movie festival in Beijing, and music videos blocked on streaming services.
Lotte, the South Korean conglomerate that turned over land to use for THAAD, has faced huge losses as 87 of its 99 stores have reportedly been closed in China, mostly for ostensibly breaching fire regulations.
But even as Beijing tries to persuade Seoul to cancel the deployment of THAAD, Pyongyang shows its utter disregard for China’s interests by launching missile after missile, making the case for the defense system ever stronger.
Now, Beijing has a new headache: brinkmanship not just from Kim Jong Un but also from Donald Trump, experts say, with the threat of U.S. military action against North Korea now on the table.
There is little doubt this has focused minds in Beijing.
Trump spoke to Xi about North Korea by telephone last week, and now says China is “working with us on the North Korean problem.”
But despite its frustration with Pyongyang, is Beijing really prepared to turn up the heat on its old ally?
There appear to be those within the Communist Party who think it should.
The nationalist Global Times newspaper argued in an editorial on Sunday that China should send a clear message to North Korea: If you conduct a sixth nuclear test, we will cut off the vast majority of your oil imports, through stiffer U.N. sanctions.
Shi Yinhong, professor of international relations at Renmin University of China, says Beijing is “still hesitant” to take such a radical step, one that would threaten the fuel supplies that keeps the North Korean military running.
Indeed, if the United States continues to turn up the heat, with more verbal threats or an even more robust naval presence, China could flip the other way, Shi argues: decide that Washington is the real threat to stability on the peninsula, and “shift from suppressing North Korea to opposing the United States.”
Even though coal imports from North Korea appear to have been cut, and Air China canceled some direct flights from Beijing to Pyongyang from this week, overall imports and exports between the two countries were up sharply in the first quarter of this year, data released by Chinese customs showed.
In the final analysis, some experts say, the legacy of the Korean War, and the survival of the regime China backed at the cost of so much blood, remains paramount.
“China may marginally increase economic pressure on North Korea by cutting down trade, tourist flows or food aide, but its primary goal is to placate Washington,” said Yanmei Xie, a politics and foreign policy expert at Gavekal Dragonomics. 

“Beijing has reasons and means to discipline Kim, but is more concerned with ensuring the survival of his regime, thus maintaining a buffer against U.S. military presence in the South.”

China stokes grievance against Seoul at its peril

The protests and the boycotts of South Korean goods may backfire 
Financial Times

History is littered with examples of governments removed by the same nationalist forces they tried to unleash on other countries.
The Chinese Communist party knows this but still insists on whipping up attacks and encouraging boycotts that target whichever country it happens to be upset with at the time.
Today it is the turn of South Korea.
Faced with the menace of a nuclear-armed Pyongyang, Seoul has allowed the US to deploy its Terminal High Altitude Area Defence (Thaad) missile shield on its soil.
China claims the weapons system’s radar will enable the US to see deep into Chinese territory, thereby tilting the strategic balance in the region and undermining Beijing’s own military capabilities. This is certainly part of the rationale behind Washington’s plan to deploy the shield.
The US is essentially telling Beijing that it is fed up with China’s lack of action in reining in its client state. 
If Beijing does not want Thaad to be deployed then it should do more to curb provocative aggression by North Korea. 
Instead, the Communist party has blanketed Chinese state media with anti-Korean vitriol, harassed South Korean businesses, stopped Chinese tourists from travelling to Korea and allowed schoolchildren to be indoctrinated through mass rallies and boycotts of Korean products. 
Korean supermarket chain Lotte, which provided some land for the deployment of Thaad, has borne the brunt of the Chinese attacks.
As many as 87 of its 99 stores in China have been temporarily or permanently closed, including many that have been targeted for spurious “fire safety” violations. 
This behaviour may violate World Trade Organization rules.
Seoul has already requested that the WTO looks into China’s actions.
At a time when Beijing is trying to counter the protectionist instincts of President Donald Trump, this behaviour is self-defeating.
It provides ammunition to those who would blame China for the ills of globalisation.
The Chinese government has tried to distance itself from the protests against South Korea by arguing that they are simply a reflection of public opinion.
But all forms of public protest in China are effectively banned, except those that happen to rail against the latest foreign enemy that party leaders are annoyed at. 
It is clear that Beijing is encouraging boycotts and stoking anti-Korean sentiment in the hope of forcing the next leader of South Korea into backing down over Thaad. 
Following the impeachment of President Park Geun-hye, the country will hold an election in early May.
The frontrunner to replace Ms Park, Moon Jae-in, has already said he would reconsider the deployment of Thaad and that South Korea must learn to say “no” to the US.
Whoever wins the presidential election must find a way to ease tension with North Korea.
They will have to work with China, which is South Korea’s biggest trading partner.
But caving into Chinese economic pressure and unilaterally backing down on Thaad would be a mistake. 
Beijing continues to use economic nationalism in its disputes with other countries because it believes the pressure is effective; in the past it has been quite successful in forcing those countries to back down. 
Wiser heads would be wary of mixing such strategic and commercial imperatives, while stoking nationalism at home.
Not only does this make for difficult trading relations, but those same nationalist forces could ultimately prove hard to control.

The Chinese Thief Crying about Theft

If China Wants To Prevent Trade Wars It Should Stop Waging Them
By Douglas Bulloch

A file photo of THAAD, an anti-missile defense rocket South Korea is planning to purchase from the U.S. this year.

The connection between politics and economics is often fraught. 

In the United Kingdom, for example, a putative takeover of a major UK multinational–Unilever–by an American conglomerate Kraft provoked a nationalist response. 

But there was much debate over whether the UK could, or indeed should, find some legally contentious way to frustrate the deal.
In China, clearly and obviously, it is different. 

In fact it is difficult to distinguish between economics and politics in China at all.

China's response to THAAD
Recently China has been responding to South Korea's intention to purchase the THAAD (Terminal High Altitude Area Defense) missile system from the U.S. with unusual vigor. 

Along with Russia, they have made their hostility very public, pronouncing it a threat to their interests, and demanding South Korea and the U.S. respect the "strategic balance" in the region by withdrawing the planned deployment.
Yet these diplomatic representations have not, so far, been enough to dissuade either South Korea or the U.S. 

Indeed Secretary of Defense James Mattis, on his first trip abroad in his new role, confirmed that the deployment will go ahead on schedule later this year.
Nor have China's efforts been limited to diplomatic overtures and high level threats. 

The country has gone so far as to stop flights from Korean airlines, ban the importation of electric vehicles with Samsung or LG batteries, and restrict imports of cosmetics, where Korean brands have a strong market presence. 

They have even prevented the broadcast of wildly popular South Korean soap operas, all in an effort to bring South Korea to heel.
In recent weeks this broader strategic issue has been brought into sharper focus by the crumbling of authority in South Korea, and the launch of an intermediate range missile by North Korea, thought by some to be Chinese in origin. 

But it is an instructive example of how China routinely interferes with normal trading relations in pursuit of political aims, and yet at the same time warns the U.S. against a looming trade war, declaring that such an outcome would not be in the interests of either country.

Using trade policy for political ends
Indeed, when China makes reference to the "ballast stone" and "propellor blade" of U.S.-China trade, it is worth comparing their desire to keep this relationship steady against China's record of trading relations with South Korea dating back (ostensibly anyway) thousands of years.
Although China has no qualms damaging South Korea's positive trade balance precisely in order to teach them a lesson for having the temerity to maintain a close security relationship with the U.S., the U.S. must not draw any conclusions about China's aggressive efforts against their own long standing security interests all the way from the Korean peninsula to the South China Sea. 

That would not be a "win win."
The difficulty for the U.S. is that using trade policy to pursue political ends is either conceived as a way of inducting developing countries into the wider–and importantly interdependent–world system or is much further along the ladder of policy escalation than it is for China. 

Sanctions against Russia followed the invasion and annexation of Crimea for example, and sanctions against Iran followed the repudiation of the Non-Proliferation agreement. 

China, on the other hand, resorts to punitive trade measures almost as a first step, particularly with countries which export extensively to China.

Disruptive and vexatious -- but also normal
Where there is no overt political reason, the U.S. tends to isolate trade disputes to questions of trade practice; dumping, IP violations, etc. 

Whereas China, being an authoritarian and centralized state is more than just a rule setter but directly manages most of the economy.
Investment decisions are made under state direction, facilitated by state banks, and conducted by state owned enterprises. 

Hurt the "feelings" of the Chinese people – as Norway apparently did when the the Nobel Peace Prize was awarded to a Chinese human rights campaigner – and China will simply close its markets to your main exports. (In Norway's case, salmon.) 

It is disruptive, and vexatious, but so normal as to have a name; "The Dalai Lama Effect" after another noted diplomatic sensitivity.
The simple fact of the matter is that for China, trade and investment are key levers of foreign policy and are routinely deployed at an instrumental level in the service of precise foreign policy objectives. 

Investments and market access are offered as sweeteners, and denial of market access and disruption to established patterns of trade is threatened as punishment. 

Anyone who wants to do business with China knows that conditions apply above and beyond price and quality.
Now China is faced with a U.S. President who also sees trade as a lever, and seems prepared to place the U.S.-China relationship in question. 

Furthermore, right across the East and Southeast Asian regions, Chinese and U.S. interests have rarely been so out of joint. 

It is worth noting that if the U.S. made the same connection between trade and foreign policy as China does routinely, relations would have long since broken down.
All of which leaves the distinct impression that if China was really sincere in its desire to avoid a trade war with its own largest export market, it might usefully consider not waging them in the first place.

The Good, the THAAD, and the Ugly

China’s Campaign Against Deployment, and What to Do About It
By Bonnie S. Glaser, Daniel G. Sofio, and David A. Parker

Since last July, China has been blocking a variety of South Korean goods and services from entering its market, in sectors from cosmetics and hardware to air travel and tourism. 

The cause of its actions appears to be Washington and Seoul’s decision that month to deploy the Terminal High Altitude Area Defense system to South Korea. 

The two allies argue that THAAD is designed to counter North Korean attacks, whereas Chinese officials paint the missile defense system as a tool whose radar could be used to snoop on China’s own arsenal of missiles, undermining the country’s nuclear deterrent.
Over the fall and winter, as South Korea descended into a political corruption scandal that eventually led to the impeachment of President Park Geun-hye, Beijing stepped up its economic coercion, appearing to take advantage of the domestic uncertainty in Seoul in a bid to undermine its security cooperation with Washington. 

Since then, Beijing has kept up the pressure. 

If China succeeds—or even appears to succeed—in blocking THAAD, it could set a dangerous precedent, emboldening Chinese policymakers to expand their use of economic leverage as a coercive tool against China's other trading partners. 

To counter this risk, the administration of U.S. President Donald Trump should continue to strengthen its cooperation with Seoul on North Korea and work toward THAAD’s deployment.

It should also look for opportunities to raise the costs of Beijing’s coercive behavior.
STOP THE MUSIC
The current spat is not the first instance of economic friction between China and South Korea. 

During the so-called Great Garlic War, between 2000 and 2002, China banned imports of South Korean cell phones and the common plastic polyethylene in response to tariffs that Seoul had imposed on Chinese garlic exports. 

In 2013, tensions between the two countries flared over a Chinese measure that effectively blocked imports of South Korean kimchi at a time when China’s own kimchi exports to South Korea were surging. 

Seoul has also been a third party to more than a dozen disputes with Beijing at the World Trade Organization. 

Yet all these conflicts were fundamentally commercial: they involved the kind of tit for tat that is common in large trading relationships, even between close allies. (The United States, for example, has received more complaints at the WTO from the European Union than from any other trading partner.)
China’s current campaign against South Korea departs from this trend, however. 

It is the first time that Beijing has attempted to use coercive economic diplomacy to influence South Korea’s security policy. 

South Korea has thus joined the growing list of countries that China has punished economically for unwelcome political moves—from Norway, whose salmon exports China blocked after the Norwegian Nobel Committee awarded its Peace Prize to the Chinese dissident Liu Xiaobo in 2010, to the Philippines, whose tropical fruit exports China subjected to a quarantine over tensions in the South China Sea in 2012.

A Terminal High Altitude Area Defense (THAAD) interceptor is launched during a test in an undated photo.

Beijing has not officially acknowledged that either of those commercial interruptions were politically motivated, claiming instead that they were simply the result of routine efforts to impartially enforce Chinese laws and regulations. 

By relying on national health and safety standards and other such criteria—areas in which international trade rules allow national governments broad discretion—China has deflected political responsibility for its actions and limited the ways that its targets can seek redress.
In public, Chinese officials have similarly denied that Beijing’s restrictions on South Korean goods are motivated by THAAD. 

But recent events suggest otherwise. 

Washington and Seoul began discussing THAAD’s deployment in February 2016, after North Korea carried out a nuclear test and a missile test. 

The Chinese ambassador to South Korea responded to those talks by saying that the Chinese–South Korean relationship would be “destroyed in an instant” if THAAD were deployed on South Korean soil. 

After the United States and South Korea formally agreed to deploy THAAD in July, Wang Yi, the Chinese foreign minister, warned his South Korean counterpart that Seoul had “undermined the foundations of trust between the two countries.” 

The next month, the performances of a number of South Korean artists in China were canceled, and Beijing began restricting the broadcast of South Korean dramas and Chinese television shows with South Korean actors on Chinese networks. 

The range of retaliatory measures has grown since then. 

China has imposed a ban on South Korean companies operating charter flights between the two countries; expanded its boycott of South Korean cultural products; prohibited the sale and distribution of South Korean cosmetics, air purifiers, and toilet seats; and barred electric-car makers that use batteries made by the South Korean firms Samsung and LG from receiving Chinese government subsidies. 

According to The Korea Times, not a single South Korean entertainer performed in China in October or most of November—a striking absence given the enormous popularity of South Korean pop stars in China. 

In total, according to the Korea Institute for National Unification, a government-run think tank, China has taken 43 retaliatory actions against South Korea: 23 in the cultural sphere, 15 in economic areas, and five on diplomatic, political, and military matters.
Perhaps the clearest indication of China’s retaliatory motives is the case of the South Korean conglomerate Lotte. 

In October, a commentary in the Communist Party–run People’s Daily—bylined to Zhong Sheng, meaning “Voice of China,” a pen name that signals an article’s alignment with official views—warned ominously that the United States and South Korea would “pay the price and receive a proper counter attack” if they went ahead with the deployment of THAAD. 

In mid-November, the South Korean government took a major step in that direction, reaching a land-swap deal with Lotte to deploy THAAD on a golf course owned by the conglomerate. 

The next month, Chinese authorities suddenly began a series of tax and safety investigations into Lotte’s operations in Beijing, Chengdu, Shanghai, Shenyang, and Tianjin. (According to the Financial Times, in late December, Chinese Foreign Ministry officials also directly threatened Lotte over THAAD, bypassing the usual official channels to do so.) 

The measures were not lost on Lotte’s management: a board meeting scheduled to confirm the land swap in mid-January was postponed, and when it was rescheduled, neither a final decision on the deal nor a timeline for reaching one materialized. 

On February 6, Lotte announced that it would close three of its stores in Beijing, citing what it called “the THAAD problem” as an element in its decision. 

Whether the land-swap deal between Lotte and the South Korean government will go ahead remains unclear.
China’s retaliatory measures have not been confined to the economic domain. 

In January, China expelled 32 South Korean Christian missionaries who had been working near the North Korean border. 

Officials from China’s Foreign Ministry have also stepped up contacts with lawmakers from South Korea’s opposition, seven of whom met with Wang in Beijing in January. 

After the meeting, the leader of that delegation, former Incheon Mayor Song Young-gil, said that the Chinese had privately acknowledged a tacit connection between THAAD and China’s cancellation of performances by K-pop musicians. 

A few days later, on January 9, Chinese military planes entered South Korea’s air defense identification zone. 

The incursion was unusual for its size—some eight aircraft were involved—and for the fact that it included six strategic bombers, an early warning plane (a kind of plane used as an airborne radar and command platform), and an intelligence-gathering aircraft. 

South Korean Defense Minister Han Min-koo suggested that the move may have been an attempt to pressure South Korea over THAAD.
So far, South Korea has stood firm and even pushed back against Chinese pressure. 

Last month, Seoul stopped issuing new visas or renewals for Chinese teachers at Beijing’s Confucius Institutes in South Korea (although it denied that the measure was politically motivated). 

The current South Korean government continues to strongly support the deployment of THAAD. 

But the political turmoil in Seoul and the potential for Beijing to ratchet up the pressure have injected new uncertainty into what previously seemed to be a done deal: although Gallup Korea polls suggest that domestic support for THAAD continues to hover around 50 percent, a poll conducted by Realmeter showed that the percentage of South Koreans in favor of THAAD’s deployment fell from 44 percent last July to 34 percent in December. 

Moon Jae-in, an opposition lawmaker who is the current front-runner in the race to be South Korea’s next president and has long been seen as an opponent of THAAD, has argued that the next government should decide whether the missile defense system will be deployed—without staking out a firm position himself.

MAKING COERCION COSTLY
Not all the troubles in the Chinese–South Korean relationship are related to THAAD’s deployment. The fact that South Korean exports to China have fallen for the past three years has more to do with the slowdown in global trade than with bilateral security tensions, for example. 

And China’s efforts to start producing domestically many of the products and services that the country now imports from South Korea will probably do more to shape the trade ties between the two countries than China’s economic coercion. 

Nevertheless, Beijing’s strategy has already helped shape the decisions of some major South Korean firms and has cast South Korea’s economic dependence on its larger neighbor in a new and worrisome light. 

And it represents a potent warning to other countries of the potential economic consequences of challenging Chinese interests.
If China succeeds in preventing THAAD’s deployment, the chance that it will behave similarly in the future will rise. 

That is troubling in part because more than 120 countries depend on China as their top trading partner, including many important U.S. allies and partners. 

As the Chinese economy continues to grow and Beijing steps up its economic statecraft, the world’s dependence on Chinese trade could increase—and few countries have the resources or the political will necessary to insulate themselves from the economic coercion such dependence could facilitate.
The United States has been the world’s largest economy for over a century, and Washington’s approach to economic statecraft—which focuses on promoting economic integration and depoliticizing disputes through rule-making and institution building—reflects this history. 

The lessons that Beijing learns from the current struggle over THAAD will shape the development of its own diplomacy as a great power. 

The Trump administration would do well to consider what those lessons might be.
The United States’ first priorities should be to further reassure South Korea of the United States’ commitment to their alliance and to ensure that THAAD is deployed. 

That would send a message to Beijing that coercive diplomacy cannot undermine the allies’ efforts to counter the nuclear threat.

The Trump administration should also work to ensure that U.S. and South Korean officials share information about China’s campaign against THAAD, which would limit Beijing’s ability to deny responsibility for its actions.

U.S. officials should also urge China to put greater pressure on North Korea to halt its nuclear and missile programs—an outcome that would greatly decrease the United States’ and South Korea’s security concerns and could make measures such as the deployment of THAAD unnecessary in the future. 

Finally, Washington, together with Seoul, should look for opportunities to raise the diplomatic costs of Beijing’s coercive behavior through public statements and by disclosing information about the economic effects of Beijing’s actions. 

If the United States and South Korea can make coercion costly, then China might find reason to rethink its tactics.