China’s Charm Offensive on South Korea Is Starting to Work

The governments of China and South Korea recently announced an understanding to improve bilateral relations. What appears to be a classic diplomatic fudge — let’s agree to disagree and move on — actually represents a course correction in Chinese foreign policy and raises questions for international efforts to arrest North Korea’s nuclear and missile programs.

The understanding shelves a yearlong dispute over the deployment of a U.S. missile defense system in South Korea known as the Terminal High Altitude Area Defense (THAAD). The United States and South Korea agreed in 2016 to deploy THAAD in response to the North Korean missile threat. Beijing objected that the system’s powerful radar and advanced interceptors could compromise China’s missile capabilities. Chinese policymakers were also suspicious that THAAD could be the first step toward a more sophisticated multilateral missile defense system designed to “contain China.”

In an effort to prevent, delay, and reverse THAAD deployment, China waged an economic and diplomatic pressure campaign against South Korea. Chinese counterparts canceled various governmental meetings and people-people exchanges. An unofficial boycott of Korean pop culture, cosmetics, and tourism cost the South Korean economy billions of dollars in revenue and was beginning to affect autos and other industries. Chinese media regularly berated the South Korean government, elevating THAAD to a “sovereignty” issue on which China could not compromise.

Despite all this, the two countries were able to find a way forward. In part, this is because the administration of South Korean President Moon Jae-in has explicitly sought to improve relations with China since taking office in May. In response to Chinese concerns, Foreign Minister Kang Kyung-wha said on Oct. 30 during testimony at the National Assembly that South Korea’s trilateral security cooperation with the United States and Japan “will not develop into a trilateral military alliance.” The Moon government also suggested that it has no intention of welcoming the deployment of additional THAAD batteries or of building a regional missile defense network with Japan and the United States.

These remarks set the stage for simultaneous press statements in Seoul and Beijing on Oct. 31 on improving bilateral relations. Since South Korea did not change its policy or request that the United States alter THAAD deployment, the understanding provides an example of how Beijing can productively adjust its policy approach when it sees potential benefit or a need to cut its losses.

However, when the Chinese Foreign Ministry stated that relations between Beijing and Seoul should return to a “track of normal development,” it also maintained that “China’s position on the THAAD issue has been clear and consistent” and “remains unchanged.” So South Korea-China relations may have turned a corner, but the THAAD controversy is not resolved, especially insofar as it became an extension of domestic politics and a proxy for geopolitical competition that is likely to recur in the future.

The drawn-out nature of the dispute may have been the result of domestic politics in both nations. Moon’s predecessor, Park Geun-hye, devoted significant effort at cultivating relations with China but was blacklisted by Beijing after her decision in favor of THAAD deployment. Park’s subsequent corruption scandal strengthened Chinese determination to wait out Park and deal with South Korea’s next leader. The election triggered by Park’s impeachment and removal from office elevated the progressive Moon, whose party had been critical of THAAD.

These political developments, along with an environmental impact study ordered by Moon, likely gave Chinese decision-makers false hope that Seoul’s position on THAAD would change. North Korea’s increasingly provocative missile tests precluded such change, but China was already deeply invested in its pressure campaign against the missile defense system. Analysts speculated that it would be a domestic political embarrassment for the Chinese government to abandon its economic coercion with nothing to show for it, meaning the Communist Party would need to successfully hold its landmark five-yearly meeting before adjusting policy toward South Korea. The 19th Party Congress concluded on Oct. 24 with Xi Jinping emerging with unrivaled political power, and the China-South Korea understanding on THAAD was reached one week later.

It remains to be seen if Chinese and South Korean security officials will restore all bilateral dialogues, reactivate their hotline, and deepen coordination on dealing with North Korea. However, bilateral relations appear to be improving. On Oct. 13, China and South Korea successfully extended their currency swap agreement, and on Oct. 24, the two countries’ defense ministers held their first bilateral meeting in two years on the sidelines of the ASEAN Defense Ministers’ Meeting-Plus in the Philippines. China’s and South Korea’s leading diplomats on the North Korean nuclear issue met in Beijing on the day of the THAAD understanding. Most visibly, Xi and Moon held a bilateral summit on Nov. 11 on the sidelines of the Asia-Pacific Economic Cooperation (APEC) meeting in Da Nang, Vietnam, and Xi may host Moon in China for a bilateral summit in December.

The damage may not be so easy to heal at the public level. State leaders cannot just turn nationalist sentiments on and off like a switch. Indeed, the Chinese side claimed that the losses by Korean companies in the Chinese market were the result of consumer choice, not government policy. Meanwhile, South Korean public opinion of China reached new lows, with 81 percent of respondents to one poll perceiving relations as bad and only 19 percent saying they trust China. After previous downturns in relations, such as when South Koreans expressed disappointment at Beijing’s tepid response to North Korea’s naval and offshore island attacks in 2010, mutual perceptions eventually bounced back. But public opinion may be slower to improve this time around.

Trade between South Korea and China remains robust. However, the industries hit hard by China’s economic retaliation against THAAD will likely take time to recover. As package tours for Chinese tourists visiting South Korea come back online, hospitality and duty-free businesses will benefit. People-people exchanges may ramp up again, in time for the Pyeongchang Winter Olympics in February 2018. South Korean pop culture still has a large following in China but may struggle to regain market share, as Chinese television drama and music video producers pursued an import substitution strategy during the THAAD row.

Even if the regulatory harassment and informal boycott of Korean companies ends, the Lotte Group — involved in the land swap deal whereby the South Korean government provided the site for THAAD deployment — has stated it still plans to sell off its supermarkets business in China. Chinese and South Korean companies will be more cautious investors in each other’s countries for some time.

Meanwhile, the Oct. 31 understanding may have unintended consequences from the perspective of the Donald Trump administration, which is looking for China to increase pressure on North Korea. Beijing’s ties with Pyongyang have been strained over China’s willingness to join international sanctions against North Korean violations of U.N. Security Council resolutions. Along with the THAAD controversy, this meant that China faced an unusual situation of sour relations with North and South Korea at the same time. Traditionally, Chinese leaders have sought to balance relations between the two Koreas. Thus, having reached an understanding with Seoul, Beijing may soon scale up political exchanges with Pyongyang.

Regarding trilateral coordination among the United States, Japan, and South Korea, the THAAD controversy may have helped Pyongyang divide its neighbors by complicating U.S. allies’ productive engagement of China. If those disagreements are now shelved, multilateral efforts at dealing with North Korea may be strengthened. On the other hand, the Oct. 31 understanding suggests that Seoul’s diplomatic balancing act may involve limits on its missile defense cooperation with Tokyo and Washington. That would be a win for North Korea. But concerns to that effect are likely exaggerated, as South Korea reserves the sovereign right to upgrade its capabilities and international cooperation, including on missile defenses, as the threat environment warrants.

So perhaps the more interesting angle is whether the THAAD understanding was intended to alter the rhetorical trajectory on North Korea ahead of President Trump’s visit to Asia. The Trump administration has been more focused on military maneuvers and isolating sanctions, whereas leaders in Seoul and Beijing see an opening for dialogue since North Korea has not conducted a missile test since Sept. 15. North Korea’s apparent restraint may have more to do with its seasonal military activity patterns than diplomatic signaling. But after the THAAD understanding, Trump’s speech to the South Korean National Assembly on Nov. 7 notably left room for diplomacy with Pyongyang.

While a U.S. presidential visit to Asia may help explain the timing of Beijing’s strategic move with Seoul, multilateral summits in the region can also take credit. The diplomatic calendar suggested not only that Xi and Moon would meet Trump in November but also that they would be expected to meet each other. China exhibits a pattern of patching up (or papering over) diplomatic disputes before leaders have to shake hands for the cameras: for example, conciliatory statements on the East China Sea before Xi and Japanese Prime Minister Shinzo Abe met at APEC in November 2014; on Doklam before Xi and Indian Prime Minister Narendra Modi met at the BRICS Summit in September; and on the South China Sea before Xi traveled to Vietnam this month. If Asia’s multilateral forums aren’t just talking shops because they provide deadlines for deal-making, this would bode well for South Korea’s middle-power diplomacy.

Diplomatic spats in Asia are often characterized in Confucian terms as “teaching the other side a lesson.” The behind-the-scenes process that led to the Oct. 31 understanding may have begun when Chinese Foreign Minister Wang Yi met his South Korean counterpart on the sidelines of the U.N. General Assembly on Sept. 20, soon after THAAD deployment was publicly and fully completed. Perhaps Seoul managed to offer a lesson to Beijing regarding the limits of economic coercion against a sovereign country when its national security is at stake.

Chinese strategists may consider Seoul’s assurances about the limits of missile defense cooperation a victory. Others may believe that Lotte’s forced retreat will cause international corporations heavily invested in China to think twice before crossing Beijing’s purported security interests. On the other hand, the THAAD dispute has taught South Korean companies not to put all their economic eggs in the Chinese basket and likely increased global assessments of the political risks of doing business in China.

These contradictory would-be lessons have led some international observers to conclude that China gave up, while others accuse South Korea of giving in. In fact, there’s a word to describe the Oct. 31 understanding: diplomacy. Given all that’s at stake in dealing with North Korea, it’s something we could stand to see a bit more of in East Asia.