China has intensified inspection of South Korean businesses and created nontariff barriers to trade and tourism between the two countries. Such behavior raised concern for China’s economic retaliation against South Korea for its move to deploy the Terminal High Altitude Area Defense (THAAD) system. China consistently opposed THAAD deployment on grounds of breach in their national security.
THAAD, America’s latest missile defense system, can shoot down ballistic missiles at their terminal phase, offering South Korea enhanced protection against North Korea’s missile threats. Seoul and Washington had started discussing its deployment in the backdrop of North Korea’s series of missile tests. On March 6, the first set of equipment for a THAAD battery arrived at Osan Air Force Base, said Yonhap News.
China has shown strong aversion to THAAD deployment since the issue first came about. Many experts believe that China’s biggest reason for opposing THAAD lies in its fear of a growing American influence, especially because part of Northeast China may be exposed to THAAD radars. In a February press conference, Colonel Ren Guoqiang, a spokesperson for China’s Ministry of National Defense, directly expressed such concern.
“It [THAAD] sabotages the strategic security interests of the surrounding countries including Russia and China, and also breaks the strategic equilibrium in the region,” he said. “We are absolutely opposed to it.”
As Washington and Seoul agreed in July 2016 to deploy the THAAD system, many believe that Beijing is retaliating economically by suppressing South Korean businesses and individuals operating inside China. Lotte Group, which offered its golf course as the site to host the THAAD system, faced the brunt of the economic sanctions. According to The Wall Street Journal, China strengthened inspection of Lotte construction projects, and Reuters also reported that China has launched cyberattacks against Lotte’s duty-free website.
Other businesses and individuals have also been affected. The Wall Street Journal further reported that South Korean businessmen are now required to process the visa to enter China themselves, rather than through a proxy. Stricter standards for Korean exports to China have also diminished trade gains, including high-tech bidets and cosmetics. Additionally, Beijing banned Chinese travel agencies from selling trips to South Korea, said Yonhap News Despite economic attacks on various fronts, it is difficult for South Korea to prove that Beijing is retaliating economically and therefore cannot take any legal action.
Since China is South Korea’s number one export destination, China’s actions are a staggering blow to Korea’s economy. Investors have responded to China’s economic hostility towards South Korean businesses by bidding down their stock prices, including Lotte stocks. Last month, the Korean government launched an operation to meet with businesses operating inside China to hear their complaints and devise potential countermeasures to Beijing.
South Korean lawmakers have expressed frustration with China, with some arguing for Seoul’s firmer stance. South Korean Vice Minister for Foreign Affairs, Lim Sung-nam, voiced his frustration with China’s behavior, arguing that China does not understand that THAAD is only aimed at defending South Korea from North Korea said Voice of the People. Some lawmakers have even argued for filing a complaint with the World Trade Organization, but without China’s acknowledgement of its responsibility, Korea’s hands will likely remain tied.