Seoul still reeling from THAAD retaliation

Optimism has surfaced that the Sino-Korean relationship will improve after the two countries agreed to renew their currency swap deal last week.

But Seoul is still reeling from the impact of Beijing’s retaliatory measures after Korea’s decision to deploy a U.S. Terminal High Altitude Area Defense (THAAD) missile system here.

The world’s No. 2 economy has stepped up its criticism on the THAAD placement, claiming the missile shield compromises its security.

The currency swap between the two countries is worth $56 billion (63.6 trillion won). This is the largest among the countries that Korea has signed such an agreement with.

Other partners include Indonesia, Malaysia and Australia.

Worse, pessimists seem to outnumber optimists on whether the renewal of the currency contact would lead to thawing of the bilateral relationship, which plummeted to its lowest ebb over the past couple of years.

“It is not in the interest of China to see its relations with Korea deteriorate. Its swap renewal, however, is a signal, winking to Korea that it is now Seoul’s turn to do something about it that can justify Chinese reason to maintain the deal and improve relations,” said Kim Man-gi, a professor of Chinese business at Sookmyung Women’s University.

“The swap renewal raises both hopes and concerns. Just as Korea, China wants to see the relationship changed and improved. The deal came as a reflection of this, and China is going to see what Korea will do to keep its end of the bargain.”

Following the THAAD deployment, China has taken a hard-line stance so as to cut economic rela- tions with Korean corporations in such industries as retail and batteries.

In particular, Lotte Group was the biggest victim to the retaliation, as the company offered land for the THAAD site in Sangju, North Gyeongsang Province.

Lotte affiliates, including Lotte Mart and Lotte Department Store, have continued to suffer dwindling sales in China. Last month, the Chinese government decided to suspend operations of Lotte Mart there.

The Korean government faces a growing dilemma over resolving the growing political uncertainties.

Korean strategy

Against this backdrop, Korean businesses hope the Moon Jae-in administration will play a proactive role to normalize the strained relationship with its giant neighbor.

However, the Moon administration seems stuck on explaining THAAD is about Pyongyang not Beijing and waiting until China changes its stance.

Seoul has iterated that the anti-missile battery is aimed at dealing with missile threats from Pyongyang.

But Beijing, Seoul’s biggest trade partner, has not accepted the explanation, claiming THAAD can monitor airborne objects in Chinese airspace.

Along the same lines, Korean Ambassador to China Noh Young-min said in a recent meeting with reporters he would continue to explain the THAAD deployment is not aimed at posing a military threat to China, but for national defense.

“The bilateral conflicts, initiated by the THAAD deployment, should not persist any longer,” he said.

“Both countries understand the ongoing economic relation is not in the right direction.”