6 December 2019
President Xi Xinping wants South Korea to become part of China's efforts to establish a bigger global presence. Photo: Bloomberg
President Xi Xinping wants South Korea to become part of China's efforts to establish a bigger global presence. Photo: Bloomberg

How Beijing-Seoul ties could be a game changer

President Xi Jinping’s visit to South Korea last week showed Beijing considers Seoul as a counterpoint to the “Asia pivot” policy of the United States. Even more, China may want to shift the bedrock of Washington’s alliance in the region by firstly wooing South Korea.

It is more than obvious that Beijing highly values its ties with Seoul after Xi took office.

The importance Beijing attaches to its neighbor can be seen in many respects. Xi broke with tradition by visiting South Korea before going to North Korea. This clearly shows China’s patience with its naughty ally in Pyongyang is wearing thin and there is apparently more rapport between China and South Korea now.

Economic ties are the stabilizer and booster of the relationship between Beijing and Seoul. Both countries have a good understanding of this. They signed wide-ranging deals during Xi’s visit.

The two aim to complete negotiations on a free trade pact before the end of the year and plan to directly trade their currencies. China designated the Bank of Communications as the yuan clearing bank in Seoul, giving South Korea a seat at the table of offshore yuan trading centers.

An 80 billion yuan (US$12.88 billion) quota was also granted to South Korean financial institutions to invest in China’s equity market using yuan.

Globally, Seoul is not a prominent financial center such as London, Paris or Singapore but the quota awarded to Seoul matches the one given to London and Paris and compares with the 50 billion yuan quota for Singapore. The quota for Seoul speaks volumes about China’s attitude toward South Korea.

Politically, the two moved a step forward by announcing the start of talks on maritime demarcation next year. The two countries have overlapping claims in their exclusive economic zones, one of a few irritants in their bilateral ties.

The talks come as China sees increasing territorial disputes with its neighbors in the East and South China seas. South Korea has maritime disputes with Japan.

The joint condemnation of Japan’s militarism by Xi and his South Korean counterpart, Park Geun-hye, seemed to bring the two nations one step closer. Both are victims of Japan’s invasion during World War II. The rift between Seoul and Tokyo, two important allies of the US in East Asia, gives China an opportunity to loosen the alliance and increase its influence in the region.

Among all traditional US allies that surround China, South Korea looks the most friendly, politically and economically, to China. That’s why Beijing wants to use the country to crack the US alliance.

That intention was hinted at in Xi’s speech at a business forum in Seoul on Friday. He said: “China and South Korea should jointly combat protectionism. Companies from the two countries can enhance exploration and expand cooperation in aspects such as setting global rules, developing world markets and participating in regional integration. China welcomes South Korea to participate in the establishment of the Asian Infrastructure Investment Bank.”

Clearly, Xi wants South Korea to be on his side in, and be part of, China’s pursuit of a larger global presence. Trying to make Seoul part of the China-initiated infrastructure investment bank, which many analysts believe is intended to counter the influence of US-Japan-dominated Asian Development Bank, shows China’s eagerness to pull South Korea from the US influence.

Can China succeed?

The answer may take time. For now, South Korea is playing a balancing act, just like many countries and regions such as ASEAN and Mongolia. They are maximizing the benefits by taking advantage of the big powers in the region.

Seoul’s closeness with China comes as its ties with Japan are souring. But South Korea’s presence in the US-led Trans-Pacific Partnership also shows it doesn’t want to distance itself from the US influence. After all, US military presence in South Korea ensures US interests in the region are represented.

China also knows that, so it tries to strike a balance as it grows closer with Seoul.

During his South Korean visit, Xi said China is a friend of the whole of the Korean peninsula, an apparent attempt to soothe worries in North Korea. He also said Asia is open to outsiders, making a friendly gesture to the US.

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The writer is an economic commentator. He writes mostly on business issues in Greater China.