Addressing the China risk

China has gone all-out to punish Korean enterprises after Seoul disobeyed its wishes and is poised to go through with the plan to deploy U.S. antimissile system Terminal High Altitude Area Defense (Thaad) in Korea. State media outlets have upped their offensive campaign.

Peoples Daily’s social media accounts suggested an end to diplomatic relations, and its tabloid publication Global Times warned that Lotte should pay the price for its support of the deployment.

In Wednesday’s editorial, the English edition of the Global Times outright said “We don’t have to make the country bleed, but we’d better make it hurt, encouraging the “ordinary Chinese” to “play a major role in sanctioning South Korea” through boycotting Korean products and stop watching Korean programs and travelling to Korea. Samsung and Hyundai both have factories in China and sanctioning them could lead to complicated outcome, but they must “suffer sooner or later,” it warned.

The overbearing tone of Chinese state media underscores our vulnerability to the Chinese market over the quarter of a century since normalization of ties. China accounts for a quarter of Korea’s outbound exports. Korea should have leveraged against the risk by diversifying its exports portfolio and reducing excessive reliance on a single market because China no longer appeals in labor cost and high growth. The average salaries of Chinese workers have tripled in recent years and they are paid 50 percent more than Mexicans and Brazilians. Growth has slowed to the 6 percent range.

Due to its promotion of domestic industries, Beijing has been upping trade barriers on imports. Customs are often denied. It outright discriminated Korean electric vehicle battery makers to give opportunities to domestic players.

The trade environment will become more unfavorable for Korean companies once U.S. President Donald Trump acts on protectionist trade policies and collides with Beijing. A study by a research arm of Samjong KPMG showed that non-tariff import regulations against South Korean products surged 45.7 percent between 2012 and 2016, tripling the global average. Korea must seek diverse market routes and enhance product and service competitiveness to weather the trade challenges.

JoongAng Ilbo, March 2, Page 30