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Future of Korea-China relations

Korea’s leadership should be alert and design a future with China firmly in mind.
Nov 15,2017
I watched the movie “The Fortress,” which reminded me of the tragedy of a small country surrounded by big powers and not well informed of the international situation. It highlighted that Qing Emperor Hong Taiji pushed the Joseon court to the Namhan Fortress despite hardships and dangers, not to conquer the country or plunder, it but to tame his neighbors and maintain the existing order under China’s regional hegemony.

At the 19th National Congress of the Communist Party of China, Beijing declared its long-term goals and outlined a specific road map to become the most powerful country in the world in terms of comprehensive strength and international influence. Chinese President Xi Jinping warned the rest of the world, “No one should expect us to swallow the bitter fruit that is harmful to our sovereignty, security or development interests.” China showed that it will abandon Deng Xiaoping’s policy of “tao guang yang hui,” or “keeping a low profile,” and won’t be reluctant to lead the world order beyond hegemony in the Asian region.

Korea has already experienced various types of economic retaliation from China over the deployment of the Terminal High Altitude Area Defense (Thaad) missile shield. The problem is that similar things could happen again. As the closest neighbor of superpower China, Korea needs long-term and short-term strategies to enjoy the benefits of being a neighbor to the Chinese economy and to exist and thrive with China while striving to overcome any geopolitical and economic vulnerabilities.

First of all, Korea needs to enhance economic leverage as much as possible. The Thaad-related retaliation was concentrated on non-product trade such as tourism because most of Korea’s exports to China are intermediate goods for China’s exports. If China blocked them, it would suffer too.

How long can Korea maintain its economic leverage with China? China is already working to domestically manufacture major parts and products with its Made in China 2025 strategy. For example, one of its goals is to replace more than one third of the demand for smartphone chips with Chinese-made products by 2025. China is aggressively recruiting technology workers from the United States and Europe and investing in technology development. Next year, China’s spending on R&D is expected to surpass that of the United States.

What’s more serious is that China is already ahead of Korea on the fourth industrial revolution front. A technology magazine published by MIT commented that the future of AI is happening in China. It is widely known that Chinese IT companies can freely pursue innovative activities as long as they cooperate with the government’s censorship mostly for non-economic reasons.

In fact, China’s remarkable leap forward in the so-called new economy was made possible by innovations by private companies under favorable circumstances. Korean companies, its government, politicians and the National Assembly should be alert and design a future with China firmly in mind.

Moreover, Korea needs to strengthen its diplomatic relations with other powerful neighbors, such as Japan and Russia. As reaffirmed by President Moon Jae-in last week, a strategic partnership with China, which would not give up on a North Korea with nuclear weapons, should be reinforced based on a solid Korea-U.S. alliance.

While expanding trade with Asean, India, Central Asia, the Middle East and Africa’s emerging economies, Korea can share experiences of economic development and offer material and human resources to become a trusted and respected role model. Moon made a timely declaration of his New Southern Policy during an Asean visit.

Along with the “neighbor effect” of being next to the world’s largest economy, Korea would have many win-win opportunities through cooperation with China. With rapid urbanization, China’s middle class will lead consumption of various services and high value-added products. Thanks to the consumer revolution of online shopping, China’s e-commerce is the most advanced in the world, with 11 times more paid for on mobile phones than the United States.

Korea needs to seek ways to benefit both countries through a revision of the Korea-China FTA along with negotiations on the services sector, which is not included in the FTA. There is great potential for cooperation not only in tourism, healthcare, medical services and education but also in public services such as national pensions and health insurance. We must do our best if we do not want to repeat the tragedy the Joseon court had to suffer four centuries ago.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, Nov. 11, Page 31

*The author, a former minister of finance, is an adviser to the JoongAng Ilbo.

Sakong Il