From economic to diplomatic to military fronts, private sector and government both taking steps to avoid being caught in a clash of major powers
It’s an uneasy time for Asian nations as the rivalry between China and the United States intensifies and uncertainty hangs on whether they can resolve their trade war beyond the 90-day truce. In this special series the South China Morning Post explores how the China-US rivalry is affecting four countries in Asia. In part two, Lee Jeong-ho looks at South Korea.
As the confrontation between China and the United States spills over from trade to a wider range of issues challenging their relations, South Korea is taking steps on the economic, diplomatic and military fronts to avoid being caught between the two giants.
South Korea, which relies on the US for its security and on China for its economy, is among the nations that stand to suffer serious collateral damage from the trade war. The clashes of the two heavyweights vying for greater geopolitical interests over the Korean peninsula have sandwiched the “middle power”, with South Korea unable to fully accommodate both the US and China’s demands.
This is not South Korea’s first experience being caught between major powers in a period of transition. Indeed, the peninsula’s location has historically drawn great powers to engage it. Koreans have seen their lands used by major powers as a proxy to achieve geopolitical interests in the first Sino-Japanese war, the Russo-Japanese war and, of course, the Korean war, all of which resulted in millions of casualties and total destruction.
Vowing to learn from history, though, South Korea – both the government and the private sector – is implementing a new strategy to actively hedge the risks.
Economic shelter from the trade storm
The US-China trade collision is accelerating South Korean companies’ plans to exit China and would further lessen their presence in the world’s second-largest economy.
South Korean firms have long considered relocating their production facilities, due to rising wages and political uncertainties in China. Well before the current circumstances, the pace of South Korean manufacturers’ investment in China had already slowed for the past few years due to China’s unfair market practices and increased labour costs, according to a white paper by the Korea Chamber of Commerce in China.
Samsung Electronics, the world’s largest mobile phone maker, closed its China network equipment manufacturing unit in Shenzhen last year, and moved a production base to Vietnam. Samsung is also considering shutting its Tianjin mobile phone production plant by the end of this year, according to South Korean media outlet Electronic Times.
Samsung did not respond to a request for comment.
Still, experts say the US-China trade war has firmed the resolve of South Korean companies to exit China and seek other destinations for their investments.
One beneficiary is Vietnam: South Korean investment there came to US$1.97 billion in the first half of this year, exceeding South Korean investment in China – US$1.60 billion over the same period – for the first time, according to data compiled by the Export-Import Bank of Korea.
The South Korean retail giant, Lotte, is diversifying into Vietnam, planning to build the Lotte Mall Hanoi, a US$600 million multi-purpose shopping centre, by 2020.
