Photographer: Anadolu Agency/Getty Images

China to Assess Using Trade to Hurt South Korea Over Thaad

Updated on
  • Beijing to consider limiting imports from South Korea
  • Move shows the potential fallout of missile defense deployment

China is considering steps such as limiting imports of South Korean goods and services as it seeks to apply pressure on Seoul not to deploy a U.S. missile shield system, according to people familiar with the matter.

Authorities are also considering the suspension of some investments and acquisitions in South Korea, said the people, who asked not to be identified because the discussions are private. China is also assessing the impact of steps already taken on visas and in the entertainment and tourism sectors, they said.

The Chinese government has yet to decide what, or whether, additional measures should be taken, the people said. China’s Ministry of Foreign Affairs, Ministry of Commerce and Ministry of Industry and Information Technology didn’t immediately respond to requests for comment. The foreign ministry said in a faxed statement last week that it strongly urges South Korea and the U.S. to reverse their decision on the deployment of the Terminal High-Altitude Area Defense system, known as Thaad.

The nations have been at odds ever since South Korea agreed to deploy the missile defense system on its soil. Relations that only recently were hailed by both countries as the best in history -- China is by far South Korea’s biggest trading partner -- have soured, with China’s planned review of trade and investment ties highlighting the potential economic fallout from Thaad deployment.

Battery Makers

Another step Chinese authorities are considering is the exclusion of South Korean makers of batteries for electric vehicles from a list of suppliers that meet China’s technical standards, according to the people. Samsung SDI Co. and LG Chem Ltd. are among foreign battery makers not currently on that list

Chinese automakers such as Anhui Jianghuai Automobile Co. have stopped producing cars that use Samsung batteries over concerns they may be stuck with unsold stock if those models are disqualified from government subsidies because their battery suppliers don’t qualify. Samsung SDI dropped as much as 2 percent Friday, its biggest intraday drop in two weeks.

China’s foreign ministry said last week that Thaad’s powerful radars threaten its national security, warning about taking “necessary measures to safeguard” its interests. This view has been compounded by South Korea showing willingness to share information collected from Thaad with Japan.

Diplomatic Spats

Against the backdrop of the tensions, North Asian buyout firm MBK Partners has delayed by a week the final bid deadline in its sale of ING Life Insurance Korea Ltd., according to people with knowledge of the matter. Some Chinese suitors needed more time to work on the terms of their offers, the people said, asking not to be identified because the talks are private. Binding bids for MBK’s controlling stake in the business, which could fetch about $3 billion, had been due Friday, the people said.

A spokesman for MBK didn’t immediately respond to a phone call and e-mail seeking comment.

Shares of some South Korean companies that rely on Chinese demand have fluctuated amid strained diplomatic relations between the two nations. The Korea International Trade Association, an influential business lobby group, has identified 26 measures already imposed by China that hurt its members.

This isn’t the first instance in which Chinese trade policies have been intertwined with diplomatic disputes. In 2010, the nation limited exports of rare-earth metals to Japan amid a territorial dispute. Exports of bananas and other fruit from the Philippines to China were disrupted in 2012 as the two countries became embroiled in a dispute over territorial claims in the South China Sea.

— With assistance by Jonathan Browning, Steven Yang, Keith Zhai, and Ying Tian

(Updates with MBK Partners delaying final bids for insurance business in eighth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE