China - South Korea relations
China - South Korea relations


Shift In Sino-South Korea Relations – Analysis

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There are some interesting developments in the East Asian region that are reshaping power relations and this has kept security analysts engaged in examining the dynamics of such changes.

While China’s relentless surge in its ability to project power beyond its territory has been the talking point, North Korea’s continued nuclear weapons program is another matter of concern. Then the recent decision of the Japanese government to reinterpret the Constitution by passing a Cabinet decision on 1 July 2014 giving Japan the freedom of exercising the right of collective self-defence has evoked sharp reactions from Beijing and somewhat mild protest from Seoul. Both China and South Korea see the move by Shinzo Abe government as a return to remilitarisation of Japan. This issue gets further complicated as Abe has got the support of not only the US but also some other Asian countries such as Vietnam, the Philippines Australia and possibly India. These countries see common ground to check China’s assertive position on territorial issues and on areas of global commons such as the South China Sea which are critical for maritime commerce to many countries in the Asia-Pacific.

These developments are visible to any casual watcher of the Northeast Asian issues. But what remains somewhat overlooked is the new bonhomie that Beijing and Seoul have developed in recent times surprising analysts to re-examine what went wrong in the Beijing-Pyongyang relationship. This came demonstrably clear when Xi Jinping made his first Presidential visit to the Korean Peninsula in the first week of July 2014. During the visit, the Chinese President discussed with his South Korean counterpart Park Geun-hye, apart from economic issues, on how to resolve the North Korean nuclear impasse and Japan’s intensifying revisionist campaign. The significance of this cannot be lost when no single summit meeting has taken place between Abe and Park or between Xi and North Korean leader Kim Jong-un, while this was the second summit meeting between Park and Xi.

Evolution of Park-Xi bonhomie

After assumption to office, both Presidents Park and Xi have demonstrated remarkable bonhomie. Both the Japan and North Korea factors have contributed to this strengthening of relationship. On the invitation of President Xi, Park made a visit to Beijing in June 2013 and held the first bilateral summit talks. In a joint statement apparently aimed at Japan, they said “confrontation and distrust between countries in the region are increasing due to historical and related issues”. Significantly, however, the joint statement issued in July 2014 when Xi visited Seoul made no mention of Japan’s attempts, as alleged by both, to whitewash its World War II atrocities, apparently in order to prevent creating diplomatic friction with Tokyo.

In 2014 while China’s and South Korea’s ties with Japan deteriorated further, ties between South Korea and China deepened. On January 19, China opened a memorial hall dedicated to Ahn Jung Guen, a South Korean who assassinated Hirobumi Ito on 26 October 1909, Japan’s first resident governor in Korea. The hall was built in Harbin in China’s Heilongjiang Province where Ito was shot. While Japan considers Ahn as a “terrorist”, South Korea reveres him as a hero. Though Park had initially sought a stone monument erected for Ahn, China exceeded this by building a memorial hall in his name. This was a deliberate move on the part of China to inflame and hurt sentiment in Japan.

This was followed by criticism by both China and South Korea on 29 January in a UN Security Council debate on Abe’s controversial visit to Yasukuni shrine in December 2013. On 8 February, Chinese and South Korean universities held an international conference on the “Comfort Women” issue in Shanghai, another move by both to dig the past to hurt Japan. Then on 23 March at The Hague, Xi told Park that he personally issued “direct instructions” to erect the memorial hall for Ahn, which pleased Park but insulted Japan again. President Barack Obama was getting increasingly worried that ties between two US allies in Asia are increasingly becoming hostage to historical issues. He, therefore, brokered a trilateral meeting between himself, Abe and Park at The Hague on 25 March during the Nuclear Security Summit, just to break the ice. It transpired subsequently that while Abe was warm towards Park, her response to Abe was rather cold, to the extent that she even avoided eye contact with Abe. Obama’s intention was not only to make the two Asian leaders talk but also to discuss North Korea’s nuclear weapons issue. Finally, it proved to be a non-starter as relations between Japan and South Korea continued to deteriorate while that between South Korea and China continued to warm.

The “propaganda war” by China and South Korea against Japan continued. To worsen the situation further, Chinese and South Korean community groups making up about 30 per cent of Strathfield’s population proposed erecting a statue symbolising “Comfort Women” in the Sydney suburb of Strathfield. Its deputy Mayor, a man of Korean origin, supported the move. Obviously, the Japanese embassy in Canberra opposed the proposal and finally the Strathfield Council put off making a final decision on the statue. Nevertheless, the issue ignited a barrage of articles about “sex slaves” and Japanese officials struggled hard to clarify Japan’s position. Similar movements also occurred in other parts of Australia where there were sizable number of Korean and Chinese people were residing. Japan was worried that the Australian people were fed with one-sided information tarnishing Japan’s image. The combined South Korea-China anti-Japanese crusade considerably increased after Park became President in early 2013. To make matters worse, a delegation of government officials visited the Ahn hall on 9 May, further triggering anti-Japanese passion.

Seeking Common grounds

The summit between Park and Xi served as an ideal opportunity for both the countries to improve and deepen their diplomatic relations. Another issue of concern and was a matter of discussion was that the Abe government seems determined to find some solution to the issue of abduction of Japanese nationals by North Korea in the 1970s and 1980s and has started engaging in dialogue with the regime in Pyongyang. Japan unilaterally scraped some sanctions imposed against North Korea, thereby weakening global sanctions intended to pressure the country into giving up its nuclear arms program. Japan also could possibly offer an economic package if it is able to get back its nationals from Pyongyang. If Pyongyang cooperates with Japan to its expectations, Abe may even visit Pyongyang sometime in August to meet with Kim Jong-un. What this means is disunity among the members of the Six-Party Talks, which though remains suspended for the past six years, now would have hope of revival. Though it remains suspended now, this is the only and ideal crisis prevention mechanism that could possibly help prevent an escalation from North Korea. Beijing is keen for its restart but feels helpless. This again means that North Korea’s nuclear weapon program issue remains unlikely to be addressed. This is further more so because ties between Beijing and Pyongyang have already deteriorated after Kim Jong-un executed his uncle Jang Song-thaek in November 2013, which even surprised Beijing, Pyongyang’s biggest ally so far.

It transpires therefore that there is a clear power struggle between the US, China, Japan and Russia and this could possible alter the political landscape in Northeast Asia. Beijing and Seoul are already worried that Tokyo, with the support of Washington’s “pivot to Asia” policy, has approved reinterpretation of its pacifist Constitution allowing it to fight war in combat zone even if it is not under direct attack. Seoul is also perturbed that Japan intends to have a re-look at the “Kono Statement” of 1993 apologising for the wartime atrocities on Korean women called the “Comfort Women” issue, which the present government feels was issued because of pressure from Korea.

Seen differently, if Park was trying to reach out Beijing, Japan was trying to do the same in reaching out to Pyongyang to keep China in check and assert its own identity as an Asia leader. The positive part is that Japan has more allies in Asia to back its cause. The same is not true in case of South Korea and China. Japan will surely take advantage from the fact that though Beijing often stressed the principle of keeping the Korean Peninsula free of nuclear weapons, it has rarely gone beyond rhetoric and failed as a result to prevail upon Pyongyang to halt its nuclear weapons programs. This has clearly unnerved Seoul and Beijing as both realise that they will not be able to check Japan’s unilateral attempts to warm up to North Korea so long as they themselves do not address Pyongyang’s nuclear issue with sincerity. Resolving the abduction issue was one of Abe’s key promises to the people during the election campaign and he is just following to fulfil that promise in trying to reach out to Pyongyang. This emotive issue goes beyond any strategic consideration and Abe needs to be understood from that perspective.

China’s panda diplomacy

China is shrewd to play its panda diplomacy whenever it suits its interests. No wonder, President Xi offered to send a couple of pandas to Seoul as a symbol of the bilateral friendship. Beijing often sends the endangered animals to foreign countries as gifts aimed at cementing relations. According to internal Chinese regulations, the pandas will be presented to Korea as a loan and are expected to arrive in Seoul sometime in late 2014 due to the complicated customs procedure.

Even before, China had presented pandas to Korea. It loaned out a couple of pandas, named Mingming and Lili, to Korea on the second anniversary of the establishment of diplomatic relations between the two countries in 1994. But Korea sent them back to China during the financial crisis in 1998 due to the exorbitant upkeep cost. Beijing wanted the bonhomie to continue this time by repeating the gesture.

Economic Links

President Xi used the opportunity to deepen economic links with South Korea. During the visit, Xi and his wife Peng Liyuan took along with them a large delegation of some 250 business people. The Korea Chamber of Commerce and Industry hosted a business forum on 4 July for Xi and the Chinese business people. Xi also privately met a dozen major Korean and Chinese business leaders.

The two sides also agreed to introduce direct trading between the Korean Won and the Chinese Yuan, a measure that will help expand the use of China’s currency. This implied that from now onwards, the tightly controlled Chinese currency Yuan will be convertible with the Won. So far, major currencies such as the US dollar, Japanese Yen and Euro were convertible with the Chinese Yuan. The decision also meant that the Yuan is now the second currency after the US dollar that is directly convertible with the Won. This is expected to help boost trade.

The currency agreement is a step forward in China’s ambitions for the Yuan to rival the US dollar as the favoured currency for trade and financial transactions. Though China has a long term plan eventually to allow the Yuan to float freely, it might be decades away as Beijing is always reluctant to allow big changes in the currency for fear of hurting exporters that employ millions of workers.

Economic and business relationships between the two countries have flourished since the establishment of diplomatic ties 22 years ago. The commitment to deepen economic links could be deciphered from the fact that the delegation included luminaries such as Jack Ma, founder of the Alibaba e-commerce empire, and Robin Li, chairman of search engine Baidu. It was the biggest ever foreign business delegation that South Korea had ever hosted.

President Xi gave South Korea a green light to invest tens of billions of Yuan (billions of dollars) in Chinese bonds and stocks. Bilateral trade surpassed $270 billion in 2013, an increase of 7 per cent year on year, exceeding the combined value of South Korea’s trade with the US and Japan. Both leaders committed to strive to boost their trade to top $300 billion soon. China is South Korea’s No.1 trading partner, largest export destination and import source, and No. 1 destination of overseas investment. South Korea is China’s third largest trading partner based on the 2013 data and fifth largest source of foreign direct investment. China also plans to grant Korea the Renminbi Qualified Foreign Institutional Investor (RQFII) status, which allows unprecedented access to China’s onshore equity and fixed income securities markets. Korea’s RFQII investment ceiling will be set at 80 billion Yuan.

China is also a crucial market and a production base for South Korean exporters. Leading Korean companies such as Samsung, Hyundai and LG are key foreign investors in China. But nearly all South Korean exporters and importers trade in US dollar as Won and Yuan were not directly traded, incurring additional costs.

According to the Bank of Korea, more than 90 percent of exports and imports with China were transacted in the US dollar in 2013. South Korea wants to make Asia’s fourth-largest economy to become a major centre for trading the Yuan by the end of 2014.
The currency agreement gives Seoul an edge over Hong Kong and Singapore, two other Asian financial centres with Yuan ambitions.

Both leaders also announced new measures to boost South Koreans’ use of the Yuan for investment and saving. South Korea previously relied on a bank in Hong Kong to settle Yuan payments. But a Chinese bank in Seoul will now take on that role. That will help increase Yuan savings in South Korea and reduce transaction fees.
While committing to expand economic ties, both Xi and Park resolved to complete a long-negotiated free trade agreement by the end of 2014. About a dozen rounds of negotiations have already taken places but they were not able to narrow their stances on the removal of tariffs on goods and services. In particular, South Korea is reluctant to open up its agricultural sector. This ongoing free trade talks got a boost with Xi’s visit and expected to be concluded by the end of 2014. China agreed that South Korean institutional investors will now be able to invest up to 80 billion Yuan ($13 billion) in Chinese stocks, about the same limit as Britain and France though smaller than Hong Kong and Taiwan.

South Korean companies are also doing brisk business in the Chinese market. For example, China emerged as the biggest revenue generator, accounting for about one fifth of its revenue and nearly twice as much as revenue from its home market for Samsung Electronics Co. Samsung’s sales from China surged from 23.1 trillion Won ($23 billion) in 2011 to 40.1 trillion Won in 2013. Sales in South Korea shrank from 26.5 trillion Won to 22.8 trillion Won over the same period.

Japan factor

While all the above moves are pushing South Korea closer to China, Seoul has made little headway in its relationship with Japan. In fact, after assumption of office by President Park, relations with Japan have nosedived and a summit meeting also has not been possible even after almost two years the leaders –Park and Abe – are in office.

While relations in political realms have deteriorated, it has adversely affected the economic ties as fallout. In 1996, South Korea briefly opened a market where traders could directly exchange Won and the Yen. This was shut down after a few months. Trade talks between the two were halted in 2004 and are yet to resume. The shadow of history continues to haunt bilateral ties. Seoul has always accused Tokyo as attempting to whitewash past wartime atrocities, including the sexual enslavement of Korean women for the Japanese military. The focus of South Korean tourism also shifted to Chinese visitors because the depreciation of the Yen in the past two years dented Japanese appetite for foreign travel.

North Korea’s Nuclear Issue

Since Kim Jong-un started ‘disrespecting’ North Korea’s long-time benefactor China, thereby creating a hiatus in Beijing-Pyongyang understanding, Seoul saw the new situation ripe to capitalise on this downturn in China-North Korea ties. The common anti-Japan stance also helped. Yet, North’s nuclear issue remains a worry. Both Xi and Park, therefore, agreed to ‘resolutely’ oppose further nuclear tests by North Korea and work towards its denuclearisation. Xi’s visit to South Korea coincided with North’s launching of missiles and declaration that its development of nuclear capability will continue.

Though Xi’s visit to Seoul was intended to be a snub to North Korea, Pyongyang retaliated by firing several short-range rockets off its east coast to show its disapproval. It was for the first time a Chinese President visited South Korea ahead of North Korea, a traditional friend of the communist state. In fact, Xi is yet to meet Kim Jong-un, who took power in 2011 after his father’s death.

The trip was another shrewd move by China to bring South Korea closer into its sphere of influence and thereby alienate Japan. This was also a part of China’s strategy to resist Washington’s rebalancing policy in Asia by curbing Japan and contribute towards frictions between Japan and South Korea. South Korea, along with its allies in Washington, has been pushing China to apply more pressure on North Korea to abandon its pursuit of nuclear weapons.

While Beijing went along with expanded UN sanctions against the North, Japan recently lifted some of its sanctions with a view to find a solution to the abduction issue. It is a different matter, however, that despite Pyongyang’s recalcitrant attitude, Beijing has been reluctant to publicly make any statements that would upset Pyongyang; instead it calls for the denuclearisation of the entire Korean peninsula.

Assessment

What does this shift in Sino-Korean relations mean for the rest of Asia? If it was Xi’s intention to drive a wedge into cooperative ties among Japan, the US and South Korea by wooing Seoul to its side, it appears partly successful. The continued defiance by Pyongyang also contributed towards Beijing reaching out to Seoul.

But Xi’s long term goals are to isolate the US when he floated his “Asian security concept” and called upon Seoul to take joint steps to realise this. By excluding the US from his security framework of Asia, Xi wants to put China in the driver’s seat to guarantee Asian security, as he is known to have articulated the view that “Asian security must be protected by Asian people”. But Beijing has been making unilateral attempts to change the status quo in Asia by disrespecting international law and trying to take control of others’ territories, even calling the whole South China Sea as “China’s lake”.

Beijing has already antagonised many Asian nations by its aggressive behaviour. Countries such as Vietnam, the Philippines, India, Japan and others are unlikely to accept a China-driven Asian security framework. If Xi takes South Korea along with Seoul willing, whose economy heavily depends on China, in creating a China-led order, Xi may be building castle in the air because regional security issues are too complex to make such an idea succeed. Park may be careful not to fall into China’s trap as China has not been shy in demonstrating its hegemonic intentions.

Dr. Rajaram Panda, former Senior Fellow at the IDSA and a leading expert from India on Japan and East Asia, is currently The Japan Foundation Fellow at Reitaku University, Chiba, JAPAN. E-mail: [email protected]

Rajaram Panda

Dr. Rajaram Panda, a leading expert from India on East Asia with focus on Japan and the Koreas, was formerly Senior Fellow at the Institute for Defence Studies and Analyses, and is currently Visiting Faculty at the Centre for Japanese, Korean and Northeast Asian Studies, School of Language, Literature & Culture Studies, Jawaharlal Nehru University, New Delhi.

E-mail: [email protected]

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