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All under government control

Published: 11 Dec. 2023, 19:50

HAN WOO-DUK
The author is a senior reporter of the China Lab.

The issue is urea again. Some say that ammonium phosphate needed to produce a chemical fertilizer is also at risk. Korean industries are nervous due to China’s export restriction. What is China’s real intention? Let’s revisit the 2023 government report that then-Prime Minister Li Keqiang submitted to the National People’s Congress on March 5. The answer can be found there.

The report suggested three major industrial policy directions for China to follow this year. One of them is the “parallel pursuit of development and security.” It means that China will consider “national safety” (read, security) when making industrial policies. It is an attempt to prepare for the U.S.-China rivalry.

The Chinese media explained the policy direction by citing the rare earth industry as an example. Early last year, China launched a state-owned enterprise called the China Rare Earth Group. It was created by taking the rare earth sections from three existing resource development companies such as the Aluminum Corporation of China, China Minmetals Corporation and Ganzhou Rare Earth Group. Two research institutes also joined the program. That means the state will directly manage the production and supply of rare earth materials.

Government intervention in the import and export sectors is even greater. Whether it is urea or ammonium phosphate, Beijing blocks export customs clearance if it is judged to have even the slightest impact on national safety. This was confirmed in cases of gallium, magnesium and graphite. That’s why China is said to be weaponizing its resources.

Another industrial policy proposed in the 2023 Government Report is “Strengthening and supplementing supply chains.” The report said, “China will check industrial supply chains and put excellent resources into the development of core technologies to fill gaps in the supply chains.” It seems that the state actively involves itself in the industrial supply chain management.

The third policy direction is the “new type nationwide system.” The government will initiate building a national innovation network connecting companies, academia and the market. The report states that China will reinforce global organizational capabilities of core technology development with the new type nationwide system.

At the core of the three policy directions is the integration of industry and security. Items that affect national security are controlled by the government, supply chains are reorganized and development resources are concentrated. It reminds me of a “wartime economy.” Under this system, urea can be a trivial item, but even the petty item for China can give Korea a “mental breakdown.”

Korea is too complacent. The governing and opposition parties were busy with political strife and delayed the passage of the “Economic Security Supply Chain Support Act,” a bill intended to prevent another urea water crisis. The bill was passed on Dec. 8 after the urea water situation worsened. As a result, Korea is once again hit by belligerent China.