17 July 2017

Proxy Sanctions: THAAD and the Republic of Korea

Beijing is angry about the US placement of the THAAD missile system in South Korea. With valid reason they view it as a threat and one pointed more at them, than the North Koreans. The rulers of China have decided to punish South Korea through business sanctions.

Beijing is not yet prepared to punish American businesses in this way. Few American products are sold in China so a boycott like this wouldn't be effective. China could severely cripple US business interests if they shut-down trade and blocked the export of parts and goods. And yet doing so would harm the Chinese economy.
If tensions continue to escalate Beijing might start to pick 'winners and losers' and use 'blocking' power to punish domestic businesses and players who are non-compliant with the CPC's dictates. Though once again, it's a dangerous game.
Punishing South Korea through a boycott is far less painful and yet it sends a clear message to both Seoul and Manhattan. Both Kia and Hyundai (the latter owning the former) employ thousands of Americans and not a few US dollars are invested in these companies. From institutional investors to hedge and pension funds, the West is deeply invested in Hyundai and the rest of the South Korean economy.
The relationship is reciprocal. Just earlier this year, Hyundai committed to a $3bn investment in US research and manufacturing facilities.
South Korea is not only a US ally, for most of its short history it has functioned as a client-state or satellite. While Washington has not always exercised direct control, it has often ruled through strong-men and has deep and controlling connections to both the South Korean military and the KCIA, the intelligence organisation founded by and patterned after the American agency based in Langley. The South Korean Deep State (as it were) is in substantial part managed by elements based in Washington. The Wall Street masters do not control the chaebol (the family business conglomerates) but they can and do exert influence. If China declares an economic war on the chaebol, it has to be understood as an asymmetrical move against US power centres.

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