Diplomatic representatives from South Korea held a meeting with their counterparts in China yesterday. The goal of the meeting was to discuss a number of outstanding issues including South  Korea’s potential involvement in a US chip alliance and the addition of more THADD missile systems in South Korean territory.

The plan for the Chip 4 alliance was announced by the US back in March. It would connect the US, Japan, Taiwan and South Korea in an alliance aimed at creating enough self-sufficiency to insulate the members from any economic pressure applied by China. Prior to the meeting yesterday, South Korea said it was interested in the alliance but wanted to know more about its goals.

While Japan and Taiwan appear willing to join the initiative, Korean government is still mulling the choice as concerns remain over its strong economic ties with China, its biggest trade partner. China, including Hong Kong, accounts for almost 60 percent of the total exports of South Korean chips.

China has also been very critical of South Korea joining the US-led alliance, even saying it would be “commercial suicide” for Seoul, hinting it would mean losing the Chinese market.

On Friday, a local daily reported that Seoul was positively reviewing participation in the Chip 4, but will be asking for the US to make adjustments to the conditions for joining the alliance…

Seoul’s Foreign Ministry denied that the government has made a decision yet, but said Friday the government was currently in discussion with the US via various channels to strengthen semiconductor cooperation.

So South Korea is sort of caught in the middle here between the US and its major trading partner, China. Naturally, at the meeting yesterday this was a major topic of conversation with China arguing that outsiders (he means the US) shouldn’t be allowed to politicize the marketplace.

“Globalisation has encountered adverse currents, and some countries have politicised the economy … undermining the stability of global production and supply chains,” [Chinese Foreign Minister Wang YI] was quoted as saying in a Chinese foreign ministry statement.

“China and South Korea should jointly resist such acts that violate the laws of the market, and jointly maintain the security and stability of production and supply chains in the two countries and the world.”…

“The Chinese side is willing to work with South Korea to adhere to the positioning of the strategic partnership of cooperation determined by the two sides and promote the healthy and stable development of China-South Korea relations,” Wang said.

It sounds to me like China is warning South Korea that their access to markets is dependent on rejecting the US offer. Of course that’s the problem with doing business with China. They will inevitably use that leverage to force you to go along with whatever they are doing without criticism or else they’ll literally make you pay.

But if South Korea is on the fence about Chip 4, it seems much more resistant to Chinese pressure regarding additional THADD missiles. This is a debate that traces back to 2017:

Bilateral ties took a significant hit in 2017 when South Korea installed a missile battery employing the U.S. Terminal High-Altitude Area Defense system, or THAAD, in response to nuclear and missile threats from North Korea.

The decision drew an angry reaction from China, which said the anti-missile system could be reconfigured to peer into its territory. Beijing retaliated by suspending Chinese group tours to South Korea and obliterating the China business of South Korean supermarket giant Lotte, which had provided land for the missile system.

South Korea’s previous president, Moon Jae-in, a liberal who pursued engagement with North Korea, tried to repair relations with Beijing by pledging the “Three Nos” — that Seoul wouldn’t deploy any additional THAAD systems; wouldn’t participate in U.S.-led missile defense networks; and wouldn’t form a trilateral military alliance with Washington and Tokyo.

The problem for China is that South Korea has a new administration since May and the new president, Yoon Suk Yeol, is more US friendly than his predecessor.

The Yoon government has maintained that THAAD is a defensive tool for protecting South Korean lives and property, and that it’s a national security matter that Seoul isn’t willing to negotiate with Beijing. It also insisted that the “Three Nos” were never a formal agreement or promise.

In other words, the new president isn’t taking “three Nos” for an answer. Hopefully the US will be able to win South Korea over on joining Chip 4 and further isolating China from the free world.