Major shareholder’s perspective
I was a Hong Kong correspondent when the sinking of the Cheonan warship and shelling of Yeonpyeong Island took place. The attention of global investment bankers was focused on the Korean Peninsula. One day, I attended an investment information session. The presenter explained the relationship between China and the two Koreas with financial jargon: “If an M&A is excessively pursued, China will serve as the white knight. As a friendly investor, China will increase its stake with the justification of helping the merger.” They seem to agree that China is a major stakeholder in North Korea.
With the fourth nuclear test and long-range missile launch, North Korea took off the disguise of calling its nuclear development “self-defense or a negotiation card for its survival” and revealed its ambition to become a nuclear state. Now, it need only load a nuclear warhead onto an intercontinental ballistic missile. Despite the urgent situation, China’s perspective and approach hasn’t fundamentally changed.
Using financial terms, China-North relations can be understood as those between a major shareholder and plummeting stocks. As the Cold War ended, the Soviet Union stopped providing assistance to North Korea. But even as China was going through the Tiananmen Square Incident, it continued to provide aid. During the North’s Arduous March in the mid-1990s, China offered a lifeline. In the 2000s, as China’s power grew, food, oil and fertilizer assistance became a permanent deal. Serving as a buffer against the U.S.-Japan alliance’s strategic blockade, some Chinese netizens even call North Korea a guard dog in China’s front yard.
A major shareholder will sell plummeting shares when the stock becomes worthless or it finds another attractive opportunity. But the latest situation on the peninsula is apparently neither. South Korea and the United States have been encouraging the North’s denuclearization through China because of its leverage on Pyongyang. But from the shareholder’s perspective, it will not go for the sanctions that will further lower the price of its stock, or even make it worthless. The shareholder is not willing to push the North toward receivership.
China likes to use the word “abet” to mean “help” or “assist.” It has a negative connotation, as abetting sounds rather unofficial. But what we saw as “abetting” may have been complete and full support in the Chinese perspective.
China proposed that the United States simultaneously pursue a peace treaty and denuclearization. It seems like the major shareholder’s way of portfolio management to prevent the stock from falling further and going under receivership. Even when you don’t have romantic illusions about China, you should be careful not to react emotionally. The only way to change major shareholders is to convince them that the stock could become worthless or damage their credit.
The author is a deputy political news editor of JTBC.
JoongAng Ilbo, Feb. 25, Page 30
by CHEONG YONG-WHAN