Jitters rise over China’s THAAD reaction

With Beijing’s rebuke showing little signs of abating over the U.S.’ envisioned THAAD stationing here, concerns are intensifying that China may take retaliatory steps that may take a substantial toll on the South Korean economy.

Following last Friday’s announcement, Chinese Foreign Minister Wang Yi and other officials have reacted with sharp criticism, urging South Korea and the U.S. to shelve the plan. Official media churned out editorials and articles calling for military action and economic countermeasures possibly together with Russia.

President Park Geun-hye on Monday sought to defend Seoul’s decision, calling it a “matter of survival” and a “presidential duty to protect the people and the nation.”

“(The deployed THAAD) would not be directed at a third party nation nor intrude upon its security interests,” she said during a meeting of senior presidential secretaries at Cheong Wa Dae.

Foreign Minister Yun Byung-se, for his part, said the ministry has been and will be continuing communications with China and Russia to promote their understanding.

“To China and Russia, we have emphasized that the deployment was being considered from the aspect of exercising our right to self-defense in light of North Korea’s expanding nuclear and ballistic missile programs,” he said at a session of the parliamentary foreign affairs and unification committee.

“We will take all necessary measures going forward to counter the threats.”

On Saturday, China’s state-backed Global Times suggested a cutoff of transactions with businesses involved in the deployment of the Terminal High Altitude Area Defense system and an import embargo on their products, as well as a travel ban on politicians who advocate the decision.

On the military front, the newspaper said Beijing should formulate a solution to minimize threats that may be posed by the assets, such as technical disturbances and directing its missiles toward the battery.

It also raised the need for Beijing to “reevaluate the long-term impact” of sanctions on North Korea because the THAAD system would tip the regional strategic balance -- a veiled guidance that China would not need to squeeze its isolated, impoverished neighbor as much now.

Seoul officials and experts anticipate that China will likely take some tit-for-tat steps given past patterns and levels of resistance. Yet the consequences may amount to more than souring public sentiment there even if no official measure is put in place. The results could include a drastic fall in the sales of Korean goods and cultural products and the number of Chinese tourists here.

Cheong Seong-chang, chief of unification strategy at the Sejong Institute, mapped out four ways a Chinese backlash could occur: a plunge in the number of Chinese travelers; a freeze of the Korean Wave in China; a boycott of Korean products; and other “invisible” disadvantages for Korean firms in China such as tightened regulations.

“They would probably be some kind of retaliation, not right now but once the deployment is complete. And it doesn’t necessarily have to come from the government -- there is much to take a hit from in the private sector which can also go unnoticed,” a senior Foreign Ministry official said, requesting anonymity due to the sensitivity of the matter.

China is not new to economic retaliation. In 2000, Seoul increased tariffs on garlic imports from China more than tenfold as part of its special safeguard measure aimed at protecting Korean farming families. Beijing shot back, imposing an embargo on Korean exports of mobile phones and polyethylene totaling $500 million, prompting Seoul to quickly cancel the duty increase.

Such a trade dispute is much less likely to unfold again given that China is now a member of the World Trade Organization, which applies strict rules on export restrictions.

Yet China has taken similar steps since, barring exports of rare earth minerals to Japan at the height of its territorial rows in the East China Sea in 2010 citing reasons of “protecting natural resources” as enshrined in the WTO guidelines. Later that year, Beijing banned imports of Norwegian salmon after the Scandinavian country gave a Nobel Peace Prize to jailed Chinese dissident Liu Xiaobo.

But another Seoul diplomat said that while non-tariff barriers are possible, a formal sanction could dent China’s image as a WTO member.

“If China goes too far, it would further complicate its efforts to secure ‘market economy’ status under the WTO,” he said.

“Even without a government guidance, Chinese companies could curb transactions with South Korea or group-tour programs on their own, wary of the frosty atmosphere, for the time being.

“But now more than half of Chinese tourists coming here do so on an individual basis, and (Chinese) firms need to cooperate with our businesses for their own needs, whether technology or management skills, for which they may find it hard to get a decent quality substitute at a reasonable price.”

By Shin Hyon-hee (heeshin@heraldcorp.com)