Vice Chairman of the Workers’ Party of Korea (WPK) Central Committee Ri Su Yong visited Beijing at the end of May to deliver a message of friendship from Kim Jong Un and to report on the results of the May 6-9 WPK Congress, which reportedly marked the “official start to Kim Jong-un’s era.” Ri’s visit drew attention to Pyongyang’s nuclear policy as a continued source of friction in relations with Beijing. China-ROK tensions rose with the announcement of a US-ROK agreement to deploy the THAAD missile defense system in South Korea and South Korean protests against illegal Chinese fishing. Exclusive Economic Zones (EEZs) remain another point of China-ROK tension. Although China and South Korea seek to advance trade within various frameworks, such efforts only highlight a widening gap between the economic and political aspects of their relationship.  Current security priorities require effective approaches to both immediate differences over THAAD and EEZs and longer-term preferences over how to effectively promote lasting stability on the Korean Peninsula.

North Korea’s fourth nuclear test in January and long-range rocket launch in February drew global opposition in the form of UN Security Council (UNSC) Resolution 2270 and condemnation by regional leaders.  Pyongyang, however, promptly dismissed such calls with a series of short- and mid-range missile launches in March and April.  Presidents Xi Jinping and Park Geun-hye expressed support for full implementation of UN sanctions in bilateral talks at the Nuclear Security Summit (NSS) in Washington.  Foreign Ministers Wang Yi and Yun Byung-se pledged their commitment to denuclearization at the fifth Foreign Ministers Meeting of the Conference on Interaction and Confidence Building Measures in Asia (CICA) in Beijing on April 27-28, where Xi declared that China “will absolutely not permit war or chaos on the peninsula.”  Despite Beijing’s hardened rhetoric, current tensions on the Korean Peninsula point to enduring differences between Beijing and Seoul’s strategic preferences.

The September China-ROK summit in Beijing catalyzed the resumption of trilateral talks with Japan in October and the launch of the China-ROK Free Trade Agreement in December. Beijing’s Korean engagement also included a visit to North Korea in October by Politburo Standing Committee member Liu Yunshan for 70^th anniversary celebrations of the founding of the Workers’ Party of Korea (WPK).  The visit was credited with preventing a rocket launch by Pyongyang that had reportedly been planned to mark the anniversary. Meanwhile, Pyongyang’s reached out to Beijing with a “friendship tour” to China led by Choe Hwi.  Despite new initiatives to expand economic cooperation, Pyongyang’s apparent defiance of Chinese diplomatic efforts on denuclearization suggests further difficulties in Sino-DPRK relations.

President Park Geun-hye’s participation in China’s 70^th anniversary celebrations of the end of WWII in September affirmed Seoul’s ties with China, while enabling Seoul to go on the offensive to win Beijing’s acceptance of a Seoul-led reunification of the Korean Peninsula.  The escalation of inter-Korean tensions in late August revealed the dilemmas underlying Seoul’s regional diplomacy that continue to undermine coordination on North Korea and other security challenges. Nevertheless, both China and South Korea are engaging in parallel efforts to revive commercial ties with the North.   Meanwhile, South Korea has made clear for now that its ability to engage China lies firmly on the foundations provided by a strong US-ROK security alliance; however, we expect that Beijing will continuously test Seoul’s allegiances.

A theme of South Korean opinion leaders in recent years has been the desire to avoid choosing between Beijing and Washington, but this strategy became more difficult in early 2015, as Seoul had to decide how to deal with issues such as AIIB (Asian Infrastructure and Investment Bank) and THAAD (Terminal High Altitude Area Defense) where Beijing and Washington are on opposing sides.  As South Korea weighed these choices, there was a series of high-level Chinese visits to South Korea, including Vice Premier Wang Yang’s to discuss furthering China-ROK economic and cultural cooperation on the foundation of closer political ties and State Councilor and Defense Minister Chang Wanquan to reaffirm opposition to Pyongyang’s nuclear weapons program.  On the economic front, China and South Korea are pushing to sign their FTA deal this year, holding the latest trade meeting on April 9.  Meanwhile, normalization of regional relations in Northeast Asia moved forward with the resumption of trilateral foreign ministerial talks with Japan on March 21 in Seoul.

Although North Korea’s diplomatic activity in 2014 spiked with senior-level outreach to Southeast Asia, Iran, Russia, the Middle East, Africa, and the United Nations, Beijing has been little more than a stopover for these officials. China-DPRK security and economic ties remain strained as Pyongyang continues its dual pursuit of nuclear and economic development. Instead, South Korean politicians and diplomats have been flocking to Beijing for endless consultations. Multilateral engagements were the primary venue for maintaining the momentum in high-level China-South Korea exchanges following the Xi-Park summit in July. The seemingly perennial agenda for discussion between the two countries was North Korea, followed by discussion of China-South Korea trade, including the announcement that the two countries would meet their end-of-year target to conclude negotiations on a free trade agreement (FTA).

Presidents Xi Jinping and Park Geun-hye met in Seoul while North Korea conducted a series of short-range missile and artillery tests.  The summit produced a joint statement reaffirming cooperation on Korean denuclearization, but Chinese efforts to form a united front in opposition to Japan on history and collective self-defense issues were rebuffed.  Instead, they agreed to move forward on negotiating a China-ROK free trade agreement. Beyond the summit, China-South Korean exchanges remained focused on the North Korean nuclear issue and reviving the Six-Party Talks. Pyongyang has maintained limited contacts with Beijing while attempting to diversify its contacts with other political and economic partners.

In early January South Korean President Park Geun-hye said relations with China had reached an historic high point, but North Korean belligerence posed a challenge to implementation of the China-ROK Joint Statement. Despite increased tensions on the peninsula, China and the ROK have continued to build on their cooperative strategic partnership.  President Xi Jinping and Park met on the sidelines of the Nuclear Security Summit and talked by telephone a month later.  Premiers Li Keqiang and Jung Hong-won met on the sidelines of the Boao Forum for Asia in Hainan, while Foreign Ministers Wang Yi and Yun Byung-se held periodic telephone talks. In contrast, China-DPRK contacts have been limited to low-level visits and routine “friendship” exchanges. The highest level meeting was between President Xi and Kim Yong Nam on the sidelines of the Sochi Winter Olympics.  China’s engagement with the DPRK has focused primarily on mediating the resumption of the Six-Party Talks.

New strategic challenges have emerged in recent months that will influence China’s relations with both Koreas into the New Year.  China’s declaration of an ADIZ that overlaps South Korean jurisdictional claims and developments inside North Korea emerged in November as two priority concerns in Sino-South Korean relations, obscuring more mundane areas of progress in implementing the June 2013 Park-Xi summit statement. Meanwhile, Sino-DPRK relations appeared to suffer a setback following the Dec. 13 execution of Jang Song Thaek, raising concern about policy changes that might result. Kim Jong Un’s strategy of simultaneous nuclear and economic development remains in conflict with Beijing’s priorities, reinforcing widespread pessimism over prospects for the renewal of talks on Korean denuclearization.

China-Korea relations entered an active phase of leadership exchanges following North Korea’s satellite launch, its nuclear test, and the passage of UN Security Council resolutions condemning these actions. Although the aftermath drove continued debate on the extent of Chinese leverage and patience with Pyongyang, Beijing has reaffirmed its commitment to bring North Korea back to multilateral talks through revived bilateral exchanges with Pyongyang. Beijing’s frustration with its North Korean ally has expanded Chinese willingness to include denuclearization as a policy objective it shares with the US and South Korea, but differences remain regarding long-term strategic interests and the preferred tools for pursuing the objective.

South Korea and China both welcomed new leaders as Park Geun-hye and Xi Jinping began their presidential terms.  Both leaders sent signals prior to assuming power that they wanted to repair relations that had frayed under their predecessors.  They also faced an early challenge from Kim Jong Un as North Korea defiantly responded to two UN Security Council resolutions condemning Pyongyang’s December 2012 rocket launch and third nuclear test.  Escalating tensions in Korea provided an urgent rationale for Park and Xi to redouble efforts to establish a stable relationship and to respond to North Korean provocations.  China and South Korea must establish a productive relationship and coordinate policies toward North Korea in an increasingly challenging regional political and strategic environment.

The appointment of Xi Jinping as general secretary of the Chinese Communist Party on Nov. 15 and the election of Park Geun-hye as president of South Korea on Dec. 19 raised hopes for improvement in China-South Korea relations.  Pyongyang’s Dec. 12 rocket launch provides an early challenge at the UN Security Council, where South Korea begins a two-year term alongside permanent members China and the US.  Xi and Park will face a full agenda that includes management of growing economic ties, policy toward North Korea, and a complex regional environment beset by territorial and historical disputes.  Another factor complicating the regional picture is that both leaders face territorial disputes with Japan under returning Liberal Democratic Party (LDP) Prime Minister Abe Shinzo.

Senior-level dialogue between China and North Korea resumed this summer when head of the Chinese Communist Party (CCP) International Department Wang Jiarui became the first senior foreign visitor to meet Kim Jong Un. Previously, there had been a great deal of speculation regarding the absence of leadership exchanges since Kim Jong Il’s death. Several other high-level exchanges followed. Discussions focused on reconciling priorities and Chinese support for Kim Jung Un’s consolidation of power. Although more subdued, there were also several high-level exchanges between China and South Korea as they celebrated the 20^th anniversary of diplomatic ties, initiated talks on establishing a bilateral free trade agreement, held the second round of strategic defense talks, and sparred over South Korean concerns about human rights.

The 20-year anniversary of diplomatic relations between China and South Korea may provide a pretext for more active diplomacy to meet a growing list of potential disputes in the relationship. Presidents Hu Jintao and Lee Myung-bak have held two summits this year and there has been increased interaction among other senior leaders as well. These exchanges have sharpened focus on the prospects for the partnership. Meanwhile, high-level contacts between China and North Korea have stalled.  Beijing renewed calls for restraint following North Korea’s failed launch of an “earth observation satellite” and a UNSC President’s Statement strongly condemning it. This has dampened China’s hopes for regional engagement.

Beijing underscored maintaining peace and stability on the Korean Peninsula following Kim Jong Il’s death.  North Korea’s leadership succession raises questions about the future direction of China’s Korea policy, which was most recently reaffirmed during an October visit to the two Koreas by Vice Premier Li Keqiang, the presumed successor of Premier Wen Jiabao.  Li met Kim Jong Il, top legislator Kim Yong Nam, and Premier Choe Yong Rim in Pyongyang, and met President Lee Myung-bak, Prime Minister Kim Hwang-sik, and Parliamentary Speaker Park Hee-tae in Seoul.

Prior to Kim Jong Il’s death, China and North Korea maintained regular high-level contacts at the state, party, and military level.  DPRK Premier Choe Yong Rim visited China in late September. He met President Hu Jintao and Premier Wen Jiabao in Beijing and toured Chinese companies in Shanghai and Jiangsu.  A Communist Party of China (CPC) delegation led by Guo Shengkun, alternate member of the CPC Central Committee and secretary of the CPC Guangxi Zhuang Autonomous Regional Committee, paid a visit to North Korea in early October and met top legislator Kim Yong Nam.  Li Jinai, director of the General Political Department of the People’s Liberation Army (PLA), led a military delegation to North Korea in mid-November and met senior DPRK officials including Kim Jong Il.

There have also been mutual efforts to stabilize Sino-South Korean relations despite many differences that have risen in the aftermath of North Korea’s 2010 provocations.  The fourth China-ROK high-level strategic dialogue was held on Dec. 27 in Seoul, where Vice Foreign Minister Zhang Zhijun met ROK counterpart Park Suk-hwan, Foreign Minister Kim Sung-hwan, and Unification Minister Yu Woo-ik.  Foreign Ministers Yang Jiechi and Kim Sung-hwan met on the sidelines of the annual UN General Assembly session in New York on Sept. 20.  President Lee and Premier Wen attended regional meetings in Bali on Nov. 18-19, including the ASEAN Plus 3 Summit, East Asia Summit, and a China-ROK-Japan trilateral meeting.  Special Representatives Wu Dawei and Lim Sung-nam held talks on Korean Peninsula denuclearization in November and December in Beijing.

High-level exchanges between China and South Korea’s foreign and defense ministries appeared to recover momentum as the two countries marked their 19^th anniversary of diplomatic relations on Aug. 24.  The first China-ROK “strategic defense dialogue” was held in Seoul on July 27 following talks between Defense Ministers Liang Guanglie and Kim Kwan-jin in Beijing on July 15 and in Singapore on June 4 on the sidelines of the Shangri-La Dialogue. Foreign Ministers Yang Jiechi and Kim Sung-hwan met June 6 ahead of the Asia-Europe Foreign Ministers Meeting in Budapest and held another round of talks July 21 in Bali on the sidelines of ASEAN regional meetings.  But efforts to consolidate the China-ROK strategic partnership have exposed policy differences over North Korea and the ROK alliance relationship with the US.

China and North Korea commemorated the 50^th anniversary of the Treaty of Friendship, Cooperation and Mutual Assistance in July.  Kim Jong Il visited China on May 20-26, holding talks with President Hu Jintao and Premier Wen Jiabao. He returned Aug. 25-27 and met State Councilor Dai Bingguo in Heilongjiang province on his way back from a meeting in Siberia with Russian President Dmitry Medvedev.  Kim’s May visit was publicly revealed during bilateral talks between Premier Wen and President Lee on the sidelines of the fourth Trilateral China-ROK-Japan Summit in Tokyo.  Communist Party of China (CPC) and DPRK counterparts held an unprecedented “strategic dialogue” ahead of the 90^th anniversary of the CPC in June.  China and North Korea also agreed to strengthen military cooperation during a visit by a Korean Peoples’ Army (KPA) delegation to China on Aug. 25-26.  China and North Korea’s new joint economic projects have raised debate on the prospects for North Korean reform.  DPRK denuclearization efforts remain stalled despite apparent increases in regional diplomatic efforts toresume the Six-Party Talks.

In the aftermath of North Korea’s artillery shelling of Yeonpyeong Island on Nov. 23, 2010, Chinese officials showed great concern about the possibility of escalation, focusing special concern on the possibility that South Korean military exercises might lead to military escalation.  The January summit between Presidents Hu and Obama served to reduce tensions to some degree, especially through a call for resumption of inter-Korean talks in the US-China Joint Statement released at the summit.  Following the apparent stabilization of inter-Korean relations, China has stepped up calls for “creating conditions” for the resumption of Six-Party Talks, engaging in diplomatic exchanges with both Koreas, including meetings between Special Representative for Korean Peninsula Affairs Wu Dawei and ROK nuclear envoy Wi Sung-lac on Feb. 10-11 in Beijing and again on April 26 in Seoul, and through DPRK Vice Minister Kim Kye Gwan’s meetings in Beijing with Wu Dawei, Foreign Minister Yang Jiechi, and Vice Foreign Minister Zhang Zhijun respectively in mid-April in China.  Although South Korea in April agreed to China’s proposed “three-step” process toward restarting Six Party Talks – (1) Inter-Korean, (2) US-DPRK, and (3) Six-Party Talks – this plan makes the resumption of multilateral talks depend most critically on reaching consensus on the preconditions for inter-Korean talks, which remain stalled since a preparatory meeting for inter-Korean defense ministers’ talks broke down in February.

Despite the regional stalemate on DPRK denuclearization, China and South Korea have attempted to stabilize and consolidate cooperation on other issues. Foreign Minister Yang met President Lee Myung-bak in Seoul on Feb. 23. ROK Foreign Minister Kim Sung-hwan returned the visit on March 28-30 and met Premier Wen Jiabao and Wang Jiarui, head of the party’s international department.  ROK Prime Minister Kim Hwang-sik visited China in April, holding talks with President Hu Jintao in Sanya, Hainan Province on April 14, and with Wen Jiabao and China’s top legislator Wu Bangguo in Beijing on April 13.  Chinese and ROK leaders also held a series of three-way talks with Japanese counterparts, including a ministerial conference on culture on Jan. 11 in Nara, a foreign ministers meeting on March 19 in Kyoto, trade ministers talks on April 24 in Tokyo, and an environment ministers meeting on April 29 in Busan.

North Korea’s artillery attack on Yeonpyeong Island on Nov. 23 placed the Korean Peninsula at the center of regional attention and intensified diplomatic pressures on China as an indispensable player.  Beijing mobilized a remarkably swift diplomatic effort in response, sending State Councilor Dai Bingguo to Seoul to meet President Lee Myung-bak and Foreign Minister Kim Sung-hwan, and to Pyongyang to meet Kim Jong Il and Vice Premier Kang Sok Ju.  Chinese calls for regional dialogue intensified with South Korean efforts to deter North Korea through joint naval exercises with the US in the Yellow Sea and live-fire artillery drills.  Despite urgent Chinese entreaties to convene “emergency consultations” among senior envoys, North Korean provocations appeared to undermine already limited prospects for Six-Party Talks. Beijing’s persistent calls for both Koreas to return to dialogue and Seoul’s apparent support for inter-Korean dialogue and Six-Party Talks, may open the way for a return to negotiations, but South Korea’s position remains conditional upon North Korea acknowledging its responsibility for provocations and taking concrete steps to show its commitment to denuclearization.

Following North Korea’s Workers’ Party of Korea (WPK) Conference on Sept. 28, China and North Korea took unprecedented steps to consolidate political ties through historic high-level party and military exchanges in October commemorating the 65^th anniversary of the founding of the WPK and the 60^th anniversary of the entry of the Chinese People’s Volunteers (CPV) into the Korean War.  Zhou Yongkang, member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee and Secretary of the CPC Political and Legislative Affairs Committee, led a party delegation to North Korea and met Kim Jong Il and Kim Yong Nam, president of the Presidium of the DPRK Supreme People’s Assembly.  A week later, Kim Jong Il received CPV veterans and a Chinese military delegation to Pyongyang led by Guo Boxiong, Vice Chairman of the Central Military Commission, who also held talks with Ri Yong Ho, vice chairman of the WPK Central Military Commission.  ROK and Chinese leaders, meanwhile, met on the sidelines of major regional and international summits. Presidents Lee Myung-bak and Hu Jintao met at the G20 Summit in Seoul and Foreign Ministers Kim Sung-hwan and Yang Jiechi met ahead of ASEAN-related summits in Hanoi.  President Lee and Premier Wen Jiabao met at the Asia-Europe Meeting in Brussels and held trilateral talks with Japanese Prime Minister Kan Naoto in Hanoi.

China reaffirmed its traditional friendship with a revamped leadership in Pyongyang that emerged from the historic Workers’ Party of Korea (WPK) conference that re-elected Kim Jong-il as party and state leader.  Kim Jong-il visited Northeast China, holding his second summit with President Hu Jintao this year. Immediately after Pyongyang’s party conference, Secretary of the WPK Central Committee Choe Tae-bok led a senior party delegation to Beijing to brief President Hu and other officials. Meanwhile, China-ROK relations remain strained following the March 26 Cheonan incident, marking the lowest point in bilateral relations since diplomatic normalization in 1992.  The third China-ROK high-level strategic dialogue was held in Beijing. China and South Korea also held their first preliminary round of free trade agreement talks. Beijing promoted resumption of the Six-Party Talks, sending Special Representative for Korean Peninsula Affairs Wu Dawei to meet counterparts in Pyongyang and Seoul.

The March 26 sinking of the South Korean warship Cheonan in the West Sea that killed 46 soldiers served as the backdrop for a series of high-level exchanges between China and the two Koreas as China came under international pressure to provide a tough response to the incident.  Kim Jong-il paid an “unofficial” visit to China on May 3-7 and met President Hu Jintao in Beijing, days after ROK President Lee Myung-bak’s summit with Hu.  Kim’s delegation included senior officials from the Foreign Ministry, Worker’s Party of Korea, and the DPRK Cabinet. Lee attended the April 30 opening ceremony of the 2010 World Expo in Shanghai, where President Hu also met the DPRK’s top legislator Kim Yong Nam.  Lee and Hu held another round of bilateral talks on the sidelines of the G20 Summit on June 26 in Toronto, where they pledged to strengthen the China-ROK strategic cooperative partnership despite unresolved tensions over North Korea.  Premier Wen Jiabao paid a three-day visit to South Korea on May 28-30 and met President Lee in Seoul prior to the third China-ROK-Japan trilateral meeting in Jeju.  Foreign Ministers Yu Myung-hwan and Yang Jiechi also held talks on the sidelines of the fourth trilateral foreign ministers meeting with Japan on May 15-16 in Gyeongju.

South Korea formally referred the Cheonan case to the UN Security Council on June 4 after results of an international investigation were released on May 20 indicating that the warship sinking was caused by a North Korean torpedo. Meanwhile, Beijing has repeatedly called for “calm and restraint” in dealing with the crisis.  South Korean media criticized President Hu for remaining “non-committal” toward the sinking of the Cheonan at his summit with President Lee in Toronto, where Hu stated that “China opposes and condemns any act that would undermine stability in the region” but did not make any reference to North Korea.

China and North Korea sustained high-level contacts during the quarter, but there seems to be little to show for it. Wang Jiarui, head of the International Department of the Communist Party of China (CPC) Central Committee, met Kim Jong-il in Pyongyang and delivered a letter from President Hu Jintao, reportedly extending an invitation to Kim to visit China.  Following the visit, the Chinese Foreign Ministry confirmed Pyongyang’s “persistent stance” toward denuclearization while Hu affirmed that friendly ties is China’s “consistent policy” toward Pyongyang.  Two weeks later Kim Yong-il, director of the International Affairs Department of the Workers’ Party of Korea (WPK) Central Committee, visited Beijing, where he met President Hu.  North Korea’s major push to attract foreign investment appears to involve potential economic deals that Beijing has claimed do not violate UN resolutions toward the North. Meanwhile, Chinese leaders presented a positive outlook for the resumption of Six-Party Talks on the sidelines of the annual session of the National People’s Congress (NPC) and Chinese People’s Political Consultative Conference (CPPCC) in March.  Having received the title of representative for Korean Peninsula Affairs, China’s lead representative to the Six-Party Talks Wu Dawei stated that talks might resume before July this year in light of favorable diplomatic contacts with Pyongyang.  Foreign Minister Yang Jiechi expressed support for improved inter-Korean and US-DPRK ties.  China and South Korea officially launched Visit China Year 2010, pledging to strengthen their strategic cooperative partnership through intensified diplomatic, cultural, and economic exchanges.  ROK Foreign Minister Yu Myung-hwan held talks with Premier Wen Jiabao and Foreign Minister Yang Jiechi in Beijing.

The last quarter of 2009 raised hopes for developments in China’s relations with both Koreas.  Chinese Vice President Xi Jinping received head-of-state treatment during his mid-December visit to South Korea. In Seoul, Xi presented a series of proposals to further the China-ROK strategic cooperative partnership, including pressing for a free trade agreement.  President Lee Myung-bak and Premier Wen Jiabao held bilateral talks on Oct. 10 in Beijing on the sidelines of the China-ROK-Japan trilateral summit, which Lee used to promote his “grand bargain” on North Korean denuclearization.

There were also several exchanges between China and the DPRK. In early October, Premier Wen led a large delegation to Pyongyang and proposed a comprehensive set of deals with North Korea. As the first Chinese premier to visit Pyongyang in 18 years, Wen was warmly hosted by Kim Jong-il. Following Wen’s visit, the director of the United Front Department of the Workers’ Party of Korea (WPK) and Pyongyang’s official in charge of inter-Korean relations, Kim Yang-gon, made a five-day trip to China. President Hu Jintao reportedly extended a formal invitation to Kim Jong-il to visit China “at a convenient time” at his meeting with Choe Thae-bok, secretary of the WPK Central Committee and one of Kim’s closest aides, who led a WPK delegation to Beijing in late October.

North Korea’s missile tests in early July marked an apparent peak in its provocative behavior as Pyongyang shifted to a “charm offensive” strategy toward the international community from August.  Pyongyang’s turn toward diplomacy has shifted attention to a series of meetings between North Korea and the international community, including Kim Jong-il’s talks with former U.S. President Bill Clinton and Hyundai Chairperson Hyun Jung-Eun in August, China’s State Councilor Dai Bingguo in September, and finally Premier Wen Jiabao in early October. Kim Jong-il’s encouraging statement regarding prospects for renewed multilateral and bilateral dialogue during Dai’s visit and his further statement during Wen’s visit that “the DPRK is willing to attend multilateral talks, including the Six-Party Talks, based on the progress in the DPRK-U.S. talks” has set the stage for new engagement with North Korea by the U.S. and the international community.  It remains to be seen if this engagement will lead to tangible North Korean actions in the direction of denuclearization.

Presidents Lee Myung-bak and Hu Jintao both traveled to the U.S. in September for the G20 summit in Pittsburgh and UN General Assembly in New York, where they met on the sidelines to discuss North Korea and other issues in their strategic cooperative partnership.  The Lee-Hu summit came days after Lee’s “grand bargain” proposal for dealing with North Korea, which seeks complete and irreversible denuclearization in exchange for a full package of incentives.  While Lee noted China’s recent diplomatic outreach to North Korea, it is unclear whether Beijing is on board with Lee’s plan or has its own plans for dealing with North Korea.

North Korea’s missile launch on April 5 and nuclear test on May 25 posed a test to the international community following two UN Security Council resolutions in 2006 condemning North Korea’s actions.  For China, the tests again highlighted the tensions between its emerging role as a global actor with increasing international responsibilities and prestige and a commitment to North Korea as an ally with whom China shares longstanding historical and ideological ties.  On June 12, China voted in favor of UN Security Council Resolution 1874 condemning North Korea’s nuclear test, banning sales of nuclear and missile-related technology and heavy weapons to North Korea, authorizing financial sanctions against companies involved with North Korea’s missile and nuclear programs, and authorizing the implementation of an inspections regime for suspect shipments into and out of North Korea.  China now must decide whether it will actively implement the resolution.  As a result of North Korea’s declining trade with South Korea and the international community, China’s economic leverage with North Korea has grown. But it is unclear whether China will utilize such leverage given strategic concerns about regional stability and the impact on the political succession process now underway in Pyongyang.

Meanwhile, economic policymakers in Seoul are aggressively seeking to expand South Korea’s share of the Chinese market in an effort to shore up the economy and benefit from Beijing’s massive stimulus plan.  However, there is growing Sino-South Korean competition to secure overseas export markets and energy sources. This competition is influencing South Korean assessments of China’s role as a global economic power.

Top-level diplomacy between Beijing and Pyongyang intensified this quarter in honor of China-DPRK Friendship Year and the 60^th anniversary of diplomatic relations.  Prior to the Lunar New Year holiday in mid-January, Kim Jong-il held his first public meeting since his reported illness with Chinese Communist Party International Liaison Department Head Wang Jiarui. In March, DPRK Prime Minister Kim Yong-il paid a return visit to Beijing.   The Chinese have accompanied these commemorative meetings with active diplomatic interaction with the U.S., South Korea, and Japan focused on how to respond to North Korea’s launch of a multi-stage rocket.  Thus, China finds itself under pressure to dissuade Pyongyang from destabilizing activity and ease regional tensions while retaining its 60-year friendship with the North.  Meanwhile, South Korean concerns about China’s rise are no longer confined to issues of economic competitiveness; the Korea Institute for Defense Analysis has produced its first public assessment of the implications of China’s rising economic capabilities for South Korea’s long-term security policies.  The response to North Korea’s rocket launch also highlights differences in the respective near-term positions of Seoul and Beijing.  Following years of expanding bilateral trade and investment ties, the global financial crisis provides new challenges for Sino-ROK economic relations: how to manage the fallout from a potential decline in bilateral trade and the possibility that domestic burdens will spill over and create new strains in the relationship.

High-level interaction between Presidents Hu Jintao and Lee Myung-bak continues to intensify following the upgrading of the Sino-South Korean relationship to a “strategic cooperative partnership” in August of 2008.  The increase in the number of meetings between top leaders is in part a by-product of the proliferation of regional forums in which China and South Korea both have membership and in part an affirmation of the rising importance of the relationship to both sides.   This quarter Hu and Lee participated in the Asia-Europe Meeting (ASEM) in Beijing in October as well as the G20 meeting in Washington and the Asia Pacific Economic Cooperation (APEC) forum in Peru in November. Lee and Premier Wen Jiabao also met as part of the first trilateral meeting among Chinese, South Korean, and Japanese leaders held in Dazaifu, Fukuoka in mid-December.  In contrast, Chinese and North Korean leaders rarely meet these days, and Chinese officials confess ignorance regarding the health of Kim Jong-il despite being North Korea’s closest of neighbors.

The global financial crisis and the widespread effects of China’s tainted food exports are the latest wild cards in the Sino-South Korean relationship.  Likewise, North Korea’s intransigence brings China and South Korea closer together, while its vulnerability may pose insurmountable contradictions between Seoul and Beijing. Chinese analysts suggest that their government has reconciled itself to maintaining relations with North Korea at some level in order to preserve stability and secure its own strategic interests, although some suggest that things will never be the same as before as long as North Korea retains its nuclear weapons capability.  Chinese analysts voice heightened concern about the deterioration of inter-Korean relations, South Korean expressions of “extreme nationalism,” and South Korea’s apparent tilt toward the U.S. under President Lee. In order to meet emerging challenges as a by-product of intensified relations, China and South Korea continue to develop new mechanisms for  bilateral and multilateral engagement, both to address “strategic issues” and  emerging nontraditional security issues like public health.

The Games of the 29^th Olympiad had preoccupied Chinese leaders for almost a decade as they sought to utilize it to project to domestic and international audiences China’s accomplishments on an international stage. It has framed many issues in Sino-Korean relations, especially given the many resonances between the 1988 Olympics in Seoul and the Beijing Olympics two decades later.  But now that the Games are over, Chinese leaders may adopt a different frame for viewing the world and the Korean Peninsula, the details of which have begun to emerge in the “post-Olympics era.” President Lee Myung-bak was among the many world leaders who attended the opening ceremonies, while President Hu Jintao returned the visit to Seoul only two weeks later, less than a day after the closing ceremonies in Beijing.  In contrast, Kim Jong-il was a no-show not only for the Olympics, but also for the 60^th anniversary commemoration of the founding of the DPRK on Sept. 9.  The Olympics brought with it a surprising undercurrent of popular anti-Korean sentiment in China, most of it stimulated through internet rumors and the attempt by Korean journalists to tape and release a portion of the Olympic opening ceremonies days before the event.  This sentiment may suggest that the “Korean wave” (Chinese attraction to Korean pop culture) is receding – or at least that it is accompanied by a strong undertow of backlash among certain segments of Chinese society.  On the Korean side, Chinese product safety issues are another drag on the relationship.

The Lee Myung-bak administration committed to the establishment of a “strategic cooperative partnership” with China during Lee’s inaugural visit to Beijing as the new president of South Korea.  The visit occurred on schedule in late May, coming only weeks after the tragic Sichuan earthquake and in the midst of protests in South Korea over Lee’s decision to allow imports of U.S. beef.  Those events also quickly overshadowed a late April flap during the Olympic torch relay in Seoul over Chinese students who came to cheer the torch but reacted violently to Korean groups protesting Chinese government treatment of refugees and political suppression in Tibet.  PRC Vice President Xi Jinping, China’s designated successor to President Hu Jintao, made his maiden international visit to Pyongyang where he met with North Korea’s top leaders, including Kim Jong-il and affirmed the importance of the Sino-DPRK relationship.  As host of the Six-Party Talks, China received North Korea’s declaration of its nuclear programs on June 26 in what really was a formality given the critical role of U.S.-DPRK talks in paving the way for the declaration. Nevertheless, the submission of the declaration did set the stage for the reactivation of Six-Party Talks in Beijing.  Hyundai-Kia opened a new factory in Beijing and SK Telecom responded to strategic changes in China’s telecommunications market by diversifying its investments in various Chinese multimedia companies in pursuit of a “convergence strategy” for delivery of multimedia, computer, and telecommunications applications to Chinese consumers.

The South Korean political transition to a new administration under President Lee Myung-bak catalyzed diplomatic contacts designed to size up the new leader and to establish the foundations for a new era in the Sino-South Korean relationship.  Accompanying this transition, Beijing redoubled efforts to manage relations with Pyongyang through high-level party-to-party exchanges with Kim Jong-il.  Chinese food assistance to North Korea and the North Korean commitments in the Six-Party Talks framework to declare nuclear-related programs dominated conversations with the Dear Leader.  The rise in “fly-by-night” departures of South Korean small investors from China resulting from rising Chinese labor costs and changing incentives for investments in China requires diplomatic management between Beijing and Seoul.  Finally, “yellow dust,” Tibet, Taiwan, and quality controls on food exports to Korea are nagging issues that cloud the relationship.

The Oct. 3 Six-Party Talks agreement on next steps in North Korea’s denuclearization and the Oct. 4 inter-Korean summit declaration shaped developments in China-Korean relations in the last quarter of 2007, as China reaffirmed its peacemaking role on the Korean Peninsula.  Chinese Communist Party official Liu Yunshan visited Pyongyang in late October with a message from Hu Jintao, resuming party-to-party high-level contacts with Pyongyang after a year’s break.  Similarly, Six-Party Talks lead negotiator Wu Dawei visited Pyongyang in mid-December to encourage North Korean counterparts to follow through on obligations to disable and declare nuclear facilities by the end of the year in accordance with the Feb. 13 and Oct. 3 agreements.  South Korean telecommunications companies worked hard to gain an advantage over global competitors in the Chinese market, while Korean automobile and steel manufacturers faced new challenges as industrial espionage involving proprietary technology drew an even higher profile in both sectors.  China’s search for financing has not bypassed the Korean equity market, as Korea’s China-focused equity funds gained while the Korean Stock Exchange attempts to attract Chinese firms to list directly on the Korean exchange.

China and South Korea commemorated the 15^th anniversary of diplomatic normalization Aug. 24.  In contrast to the unbridled optimism and buoyant lure of mutual economic opportunity that characterized the 10^th anniversary of normalization, this one was greeted with more realism and mixed feelings about the future of the relationship.  China’s relationship with North Korea, in contrast, remained estranged as ever despite an important meeting between Foreign Minister Yang Jiechi and National Defense Commission Chairman Kim Jong-il in Pyongyang. This was the first Chinese high-level contact with Kim Jong-il since Tang Jiaxuan went to Pyongyang as a special envoy immediately following North Korea’s nuclear test in October of 2006.

Changes in the Sino-South Korean economic relationship, driven by China’s rising international competitiveness, changes in Chinese investment regulations safety, and concerns attached to Chinese consumer products, were reinforced by the sudden death due to medical error of South Korea’s number two diplomat in Beijing. South Korean caution regarding Chinese policies toward North Korea remained a central focus of concern, as China’s economic growth and influence continued to expand in both parts of the Korean Peninsula.

China’s shadow over the Korean Peninsula is growing larger, stimulating strategic efforts in Seoul and Pyongyang to draw in the U.S. As soon as KORUS FTA negotiations were concluded, the South Korean media played up the FTA as having both strategic and economic significance as a counter to the centripetal pull of China’s economic rise. Likewise, despite a quarter of delay, North Korea’s eagerness to accept a surprise visit by Assistant Secretary of State Christopher Hill in an effort to confirm North Korea’s intention to shut down the Yongbyon reactor has stimulated concern among some Chinese analysts that a rapid U.S.-DPRK rapprochement would cut China out of the picture. Meanwhile, the Sino-DPRK trade and aid relationship continues to grow, creating another source of anxiety for South Koreans worried that China is taking advantage of special concessions in economic relations with the North.

During Chinese Premier Wen Jiabao’s meetings in Seoul on April 9-10, he pressed for an early opening of FTA negotiations with Seoul, celebrated the 15^th anniversary of China-ROK diplomatic normalization, and cultivated deepening economic ties. In seeming parallel with the improved mood in U.S.-DPRK relations, China and South Korea agreed to open a military hotline and exchanged top-level visits between defense ministers and army chiefs of staff. While the Sino-South Korean economic relationship continues to grow steadily, China is gradually cutting the technology gap, either because South Korean employees are willing to sell proprietary technologies for personal gain or because of China’s continuing wage advantages and increasingly modern plant.

China played a key role in resurrecting the Six-Party Talks from near death through a Feb. 13 agreement in which North Korea would shut down its reactors for 50,000 tons of heavy fuel oil and disable its reactors for an additional 950,000 tons of heavy fuel oil or the equivalent. The deal had stalled by the end of the quarter over the return of North Korean funds frozen at the Macau-based Banco Delta Asia (BDA) to the account owners. This glitch underscored the extent of North Korea’s financial and political isolation from China as well as the distance between Beijing and Pyongyang, especially on economic matters. During bilateral working group meetings with the United States in New York in early March, DPRK Vice Foreign Minister Kim Gye-gwan publicly vented frustrations about China, even while Kim Jong-il maintained the facade of Sino-DPRK friendship through a rare visit to the PRC Embassy in Pyongyang during the first full moon following the Spring Festival.

China-South Korea coordination in the six-party process and through three-way dialogue with Japan on the sidelines of the ASEAN Plus Three Meeting continued to develop. South Korea proposed to institutionalize tripartite consultations among the three foreign ministers. China-South Korea trade and investment grew to new highs amid a mounting list of irritations and obstacles. These challenges included disputes over the handling of North Korean refugees, worsening pollution from China, historical and territorial spats, concerns over changes in Chinese investment rules, and shifts in the balance of China-South Korea trade and investment relations.

The North Korea’s Oct. 3 announcement and Oct. 9 test of a nuclear device provided the catalyst for regional diplomacy this quarter, including enhanced scrutiny and a possible reevaluation of China’s strategic relationship with North Korea. Near-term Chinese responses to North Korea’s test included public rhetorical condemnation of North Korea’s “brazen” act, a Chinese decision to back a stronger-than-expected UN Security Council resolution that imposes limited sanctions on North Korea, stepped-up speculation among Chinese and international analysts about how China might effectively utilize its economic leverage to rein in North Korea, and enhanced efforts to manage diplomatic fallout from the test by re-establishing direct dialogue with Kim Jong-il and through efforts to re-establish multilateral dialogue through Six-Party Talks.

North Korea’s nuclear test also stimulated intensive high-level Chinese meetings with South Korea (although South Korea’s diplomatic influence was further constrained by regional responses to North Korea’s test). President Roh Moo-hyun met Hu Jintao during a Beijing summit one week after North Korea’s test. Incoming UN Secretary General and former South Korean Foreign Minister Ban Ki-moon, who could not have been selected for the post without China’s support, made a special visit to Beijing in November to discuss the response to North Korea’s test prior to departing for New York to take up his new post. Despite a steady increase in Chinese-South Korean trade, investment, and tourism, the tone of China’s relations with South Korea has become more sober due to persistent sensitivities in Seoul regarding China’s Northeast Asian history project and rising anxieties about slowing growth of South Korean exports to China and rising imports of cheap Chinese industrial goods, among other issues.

North Korea’s July 5 missile tests set the stage for a quarter of active diplomacy designed to prevent Pyongyang from taking additional escalatory actions and to further isolate and punish Pyongyang. To the surprise of many, China signed on to the strongly worded UN Security Council (UNSC) Resolution 1695 that condemned the North Korean missile tests.  This followed the failure of last-ditch diplomatic efforts to convince North Korea to exercise restraint and return to the negotiating table.

Diplomatic activity this quarter focused almost exclusively on how China could re-establish high-level communications with North Korea while seeking to revive an effective multilateral channel for addressing North Korea’s nuclear challenge. PRC Foreign Minister Li Zhaoxing met with his counterpart Ban Ki-moon several times during the quarter to discuss North Korea, and Roh Moo-hyun placed a rare phone call in late July to Hu Jintao, who counseled patience and restraint on the part of all parties in responding to the situation. Rumors of North Korean plans for a nuclear test gained momentum throughout the quarter and were given official credence by the North Koreans in an official statement Oct. 3. Union leaders from ailing Ssangyong Motors took a page from North Korea’s book with a general strike against Chinese management at Shanghai Automotive Corporation, while China’s attempts to restrain its booming economy reverberated in the form of slower growth of Korean exports to China.

A series of false starts characterized Chinese efforts to reinvigorate diplomacy to address North Korea’s nuclear weapons program this quarter.  Chinese negotiator Wu Dawei failed in his efforts to jump-start six-party contacts through a nonofficial meeting in Tokyo between U.S. Assistant Secretary of State Chris Hill and DPRK Vice Minister Kim Gye-gwan. Then attention shifted to whether the Bush-Hu summit might catalyze a resumption of Six-Party Talks, but the summit produced no apparent agreement between the two leaders and probably gave North Korea no reason to come back to the negotiations. Chinese State Councilor Tang Jiaxuan’s meetings with Kim Jong-il following that visit likewise yielded no diplomatic progress, while the quarter ended with another widely anticipated, but (as of the end of this quarter) nonevent:  North Korea’s widely anticipated and widely publicized launching of Taepodong 2, a multi-stage rocket. [Editor’s Note: The multiple launches of misiles July 4-5 will be taken up in next quarter’s analysis.]  The lack of progress took its toll on South Korea-China relations due to mounting frustrations in Seoul until Foreign Minister Ban Ki-moon visited Beijing for consultations on a coordinated approach toward North Korea at the end of June. China’s defense minister did manage a successful visit with counterparts in both North and South Korea in April.

China-South Korea economic relations centered on a shift in the bilateral trade balance as Chinese imports to South Korea have begun to outpace growth in South Korean exports to China.  South Korean foreign direct investment in China has continued to grow, while facilities investment in South Korea has remained low, leading to worries in South Korea over its own long-term competitiveness vis-à-vis China.  SK Telecom’s attempts to gain a significant stake in China Unicom are emblematic of South Korean investment opportunities in China, while South Korean telecommunications companies face slowing exports as China’s market matures.  POSCO completed a major new investment in a steel mill in Zhang Jia Gang, China, while Hyundai’s striking success in China was overshadowed by CEO Chung Mong-koo’s legal problems over questions of political influence buying and illegal wealth transfers to his son. Finally, despite efforts in recent years to curb “yellow dust” from China by planting trees in the Gobi Desert, this spring was one of the worst, with the dust containing considerably higher levels of toxic materials than in the past.

With prospects for renewed Six-Party Talks diminishing, Kim Jong-il’s unannounced visit to China in January appears to have been a turning point for the Korean Peninsula and the North Korean nuclear issue. The rumors began as soon as Kim’s special train was sighted crossing the border into China Jan. 10, sparking a week of “Where’s Waldo” speculation and media sightings of Kim in various parts of China. Despite the rumors, Chinese officials followed precedent and kept mum until Kim’s departure on Jan. 18. The fact that Kim’s route overlapped with that of Deng Xiaoping’s famous 1992 southern tour stimulated further speculation about North Korean efforts at economic reform. Chairman Kim got the red carpet treatment: he was accompanied throughout his visit by all nine members of the Central Committee of China’s Politburo, and capped the trip with a meeting with President Hu Jintao in Beijing. But unlike Korea’s tributary relationship with the Middle Kingdom in dynastic times, Chairman Kim seemed to come with empty suitcases, prepared more to pack and take home China’s reward for good behavior than to offer gifts of his own.

China’s embrace of Kim has produced considerable angst in South Korea, which fears that North Korea will become “China’s fourth northeastern province,” and thwart South Korean hopes for enhanced influence and eventual unification with North Korea. South Korea’s “China threat” usually refers to China’s rapid erosion of critical Korean technological advantages even as China’s overall growth remains a boon to South Korean producers in many sectors. South Korean businesses face the dilemma of figuring out how to benefit from China’s rise, while fending off its effects on Korea’s competitiveness.

Completion of the Sept. 19 Joint Statement at the Six-Party Talks set the stage this quarter for top-level Chinese diplomatic interaction with the two Koreas. PRC President Hu Jintao made successive visits to Pyongyang and Seoul in October and November.  Hu’s visit to Pyongyang at the end of October was the first visit by a Chinese president since Jiang Zemin’s visit in September 2001, and his state visit to Seoul in conjunction with the APEC meeting in Busan was his first as president of the PRC. Both visits boosted China’s diplomatic aims and strengthened China’s relations with Pyongyang and Seoul, respectively.  But the visits also highlighted the economic, diplomatic, and policy gaps in China’s relationships with the two Koreas and shed new light on the difficulty of reaching a satisfactory solution to the DPRK’s ongoing nuclear development efforts.

The economic balance sheet illustrates the differences in China’s relationship with the two Koreas: Hu’s visit marked an intensification of China-DPRK economic ties, with reports of PRC pledges of up to $2 billion in investments in the DPRK within the next few years to enhance stability and promote economic reform in North Korea, while indirectly stimulating greater PRC-DPRK trade that could expand as much as 30 percent to $2 billion in 2005. During Hu’s visit to Seoul, South Korea formally gave the PRC “market economy” status. The PRC-ROK bilateral trade balance will reach over $100 billion for 2005, three years earlier than had been anticipated. In addition, South Korea has emerged in 2005 as one of the top three leading investors in China. The issue of North Korea’s counterfeiting of U.S. dollars also involves China since U.S. sanctions on a bank located in Chinese-controlled Macao became a central challenge for Chinese diplomats responsible for overcoming an emerging stalemate in the Six-Party Talks.

Despite continued growth in the bilateral trade volume, tensions reemerged with the outbreak of public and symbolic “kimchi wars” over phytosanitary standards for South Korean imports of kimchi made in China. There were also a number of private-sector developments in the automobile and high-tech sectors that illustrate the complexity and likely challenges that intensified bilateral trade relationships may bring to the China-South Korean economic relationship.

After over a year of anticipation, the fourth round of Six-Party Talks finally reconvened and even made progress, concluding with a joint statement of principles that will serve as guidelines for a more specific agreement on how to resolve the North Korean nuclear crisis. China was the linchpin and host of the diplomatic effort to achieve an agreement, the outcome of which was largely influenced by a combination of Chinese efforts to woo the North Koreans back to the talks and Beijing’s increasingly steadfast alignment with South Korea as factors that ultimately constrained and induced concessions from both the DPRK and the United States. PRC State Councilor Tang Jiaxuan’s visits to Pyongyang and Washington in July for meetings with Chairman Kim Jong-il and President George W. Bush, respectively, were emblematic of China’s diplomatic efforts to push forward the six-party process. Although the Bush administration’s willingness to initiate bilateral negotiations with the DPRK inside the six-party framework was a prerequisite for progress and South Korea’s enhanced efforts through a revived inter-Korean dialogue also facilitated the process, Chinese diplomacy with North and South Korea was possibly the critical factor in shaping – and limiting – the parameters of a deal.

The impact of China’s yuan revaluation reverberated in South Korea this quarter with mixed effect.  On the one hand, the South Korean won is one of the currencies against which the Chinese yuan will “float,” a tangible recognition of the rising importance of the Sino-South Korean trade relationship; on the other hand, South Korean companies nervously watched the effect of the revaluation on exchange rate margins on their operations in China and anticipated whether and to what extent those margins may be adjusted. A spate of tainted food cases involving imports to South Korea from China was a public health concern for Korean families that slowed but has not derailed a more active interest within the private sector for a China-South Korea free trade agreement (FTA) to complement China’s regional and ASEAN-focused FTA efforts.

The torrid growth in Sino-Korean bilateral trade relations has slowed by half to the 20 percent range in the first part of 2005 after expanding by almost 40 percent to $79.3 billion in 2004. Nonetheless, South Korean firms are working with their government to lobby for expanded access to China’s domestic market in key sectors. This quarter, the focus included the Chinese energy, insurance, and automobile sectors, cooperation in nanotechnology research, and facilitation of Korean expanded cultural exports to China. A bevy of South Korean ministers, CEOs, and opinion leaders flocked to Beijing – including separate visits by the prime minister and the Grand National Party (GNP) opposition leader – to meet Chinese counterparts and to lobby for expanded Sino-South Korean economic cooperation.  Presidents Hu Jintao and Roh Moo-hyun met briefly on the sidelines of a ceremony commemorating the end of World War II in Moscow, and Foreign Ministers Ban Ki-moon and Li Zhaoxing also met on the side of an Asia-Europe Meeting (ASEM) in Kyoto for consultations on the North Korean nuclear issue, including a “balanced” rebuke to both the U.S. and DPRK for exchanging vituperative rhetoric instead of face-to-face negotiations.

The Sino-Korean contact that did not take place this quarter was an anticipated call by PRC President Hu Jintao on the Dear Leader in Pyongyang. Despite extensive China-DPRK diplomatic activity in early April, including a visit to Beijing by Kim Jong-il’s trusted advisor Vice Minister Kang Sok-ju, the Chinese made no apparent progress in securing the DPRK’s participation in the Six-Party Talks. (The talks marked the first anniversary of their suspension in June.)  While Washington tried to turn up the heat on Beijing to turn up the heat on Pyongyang, Chinese diplomats blew hot and cold in public comments about when and whether North Korea would return to the talks.  Following a mid-May jolt from The New York Times, which reported that the U.S. intelligence community was debating an imminent North Korean nuclear test, Chinese and South Korean officials downplayed the possibility of a test and treated the reports with skepticism.

With North Korea’s Feb. 10 announcement that it would indefinitely suspend its participation in the Six-Party Talks, a series of intensive bilateral and multilateral consultations regarding the North Korean nuclear weapons program took center stage this quarter. China’s diplomacy with both Koreas intensified accordingly. PRC-DPRK diplomacy reached the highest levels, with an exchange of messages between President Hu Jintao and Central Defense Commission Chairman Kim Jong-il and the scheduling of a visit by Hu to the DPRK for later this year through an invitation conveyed by DPRK Prime Minister Pak Pong-ju during his March visit to Beijing.

There was a simultaneous intensification of diplomatic contact between Beijing and Seoul, with South Korea and all other parties looking to Beijing to find a way to reverse the DPRK position on the Six-Party Talks.  These intensive consultations took place at the same time that a series of diplomatic setbacks occurred in the PRC-South Korean relationship, including the forcible shutdown of a press conference on North Korean refugees that South Korean National Assemblymen tried to hold at a Beijing hotel, the repatriation to North Korea of a South Korean prisoner of war, and increasing signs of bilateral economic tensions.

Beijing’s long-term strategy of hedging its bets on the Korean Peninsula through a vibrant relationship with South Korea appeared to be paying handsome dividends as South Korean President Roh Moo-hyun, in response to rising bilateral tensions with Japan, suggested that South Korea may step outside the constraints of the U.S.-ROK alliance to play a strategic balancing role in the region.  In short, no parties in the regional nuclear poker game in Northeast Asia actually had to show their cards this quarter, but North Korea raised the stakes and every other party matched North Korea’s bet and remained in the game; it remains to be seen who is bluffing and who holds a winning hand.

The second half of the year brought no opportunity for a fourth round of Six-Party Talks.  The focal point for Chinese diplomatic efforts this quarter was the visit of North Korea’s number two, President Kim Yong-nam, who met with all of China’s senior leaders – with apparently inconclusive results.  ROK President Roh Moo-hyun also met with PRC President Hu Jintao in Santiago in November and with Premier Wen Jiabao in Ventiane in December to press the case for continued six-party diplomacy with North Korea, but to no avail in the absence of cooperation from the DPRK.

The refugee issue has taken on a higher profile as outside parties increasingly single out China for failing to recognize and provide humanitarian treatment to North Korean refugees crossing into China.  Tensions surrounding the North Korean refugee issue have escalated with the passage in the U.S. Congress of the North Korean Human Rights Act, a near doubling of refugee arrivals in South Korea to almost 2,000 in 2004, and more aggressive Chinese efforts to intimidate and deter third-party brokers who assist North Korean refugee efforts, including the embassies that have provided safe passage to North Korean refugees.  The trade relationship between China and South Korea is becoming increasingly complex, as China poses greater competition for South Korean products in third-country markets and was one of nine parties pressing to open South Korea’s rice market as required by WTO regulations.  Nonetheless, South Korean exports to China remain the primary reason the South Korean economy did not experience a recession in the second half of 2004.

The debate over the history of the relationship between Korea and China dramatically took center stage this quarter – not as part of the official commemoration of the 12^th anniversary of normalization between the Republic of Korea and the People’s Republic of China in August – but as part of an escalating dispute between Seoul and Beijing over the origins and legacy of the Goguryeo kingdom (37 B.C. to 668 A.D.).  PRC claims that Goguryeo is part of China’s history and a decision by the PRC Ministry of Foreign Affairs to excise all references to the history of Korea prior to 1948 engendered a caustic public reaction in Seoul.  The first major political dispute to arise between Seoul and Beijing since the decision to normalize in 1992 (aside from the “garlic wars” trade dispute of 2002; see Comparative Connections, October 2002) led to a number of high-level exchanges designed to calm the situation while continuing to coordinate efforts to keep alive six-party talks.

Despite continued benefits from the “Korean Wave” in China in various sectors, the sensitive South Korean reaction to the Goguryeo history dispute also reflects increasing worries in Seoul on the economic front:  twelve years of dramatic double-digit growth in trade and investment between the two countries has resulted in increasing South Korean dependence on exports to China both through trade and as a destination for South Korean investment.  However, Chinese firms are rapidly closing the technological gap with South Korea not only in low-end manufacturing but also in sectors such as IT, automobiles, and high-tech sectors that represent the core of South Korea’s export trade earnings.

The wheels of dialogue continue to spin between China and the Korean Peninsula, thanks to Beijing’s generous quarterly hospitality to participants in the six-party talks.  China’s efforts kindly assure that we at Comparative Connections always have something to write. The talks occurred on schedule following assurances of North Korea’s top leader himself during his visit to Beijing that the talks could be a desirable vehicle for addressing the dispute over North Korea’s nuclear weapons program.  Kim Jong-il’s third visit in four years to Beijing breathed new life into the dialogue (combined with his consultations with Prime Minister Koizumi Junichiro in Pyongyang) and provided at least some impetus for another round of talks – and an actual U.S. proposal to settle the crisis – during the last week in June. Beijing’s shuttle diplomacy with Pyongyang and Washington has yielded enough progress to say that diplomacy has not failed yet.  Meanwhile, the protracted nuclear crisis remains the primary focal point of China’s diplomacy toward the Korean Peninsula.

Aside from six-party talks, the stellar growth of the China-South Korean economic relationship has slowed as Beijing tries to rein in its own economy, inducing the first “China shock” in the Korean equity market and underscoring Korea’s dependence on exports to China as the primary driver for the country’s current economic growth.  The usual negative aspects of the relationship – refugees, spoiled food imports, cross-Strait tensions – were also on display this quarter.  There are an increasing number of regional economic and other consultations between China, Japan, and South Korea in various forums – from the Asian Development Bank, to energy security cooperation, to a gathering of foreign ministers.  These contacts – quite aside from South Korea’s own vision of itself as a regional hub in Northeast Asia – suggest potentially significant changes are in the works that may open up new forms of regional cooperation in Northeast Asia.

China’s hosting of the second round of six-party talks in Beijing at the end of February marked the high point of China’s Korea diplomacy in the first quarter, stimulating a flurry of follow-up diplomatic contacts and shuttle diplomacy involving China and the two Koreas.  PRC Foreign Minister Li Zhaoxing made his first visit to Pyongyang on March 25-27, further extending high-level contacts with the top DPRK leadership that now seem to occur about once per quarter. The ROK’s newly appointed Foreign Minister Ban Ki-moon visited Beijing on the heels of Li’s visit to Pyongyang in an exchange that has enmeshed the PRC as a critical intermediary in peninsular affairs, which is part of China’s more assertive mediating role in the six-party talks.  But to what end will China play this more active role?

In the meantime, an extended squall over competing interpretations of the historical significance and attachments of the Koguryo kingdom has heated up amid competing attempts by China and the DPRK (backed by South Korean scholarship and the ROK government) to claim the kingdom as part of its history. And competition over raw materials is introducing a new element of competition between South Korea and the PRC over procurement and import of raw materials such as iron ore and other primary items that fuel economic growth in both countries. Despite South Korea’s increasing dependence on expanded exports to China for growth, China is competing with South Korea as both an export competitor and an importer of raw materials in third-country markets.

With APEC and ASEAN Plus Three holding their annual meetings in October or November, the last quarter of the year has become a period when one can expect more intensive high-level exchanges than usual across the region.  Add a boost in diplomatic business surrounding planning for six-party talks, a post-SARS bump, and a 40 percent rise in bilateral ROK-PRC trade and 2003 becomes a banner year for China-ROK high-level exchanges and trade relations. Booming economic growth in the PRC has driven and in some cases overtaken the Korean economy, benefiting South Korean exports in the short run. As a result, China has become the de facto regional hub for Northeast Asian and Korean trade despite Korea’s aspirations to play that role.

The quarter also saw the emergence of a number of areas in which individuals or groups got caught on the wrong side – or the dark side – of the burgeoning trade relationship, or were just in the wrong place at the wrong time.  Many of these incidents raise questions about whether the bureaucrats of the two countries are capable of managing diplomatic hot potatoes and protecting the vulnerable or disadvantaged while going after cheaters and swindlers.  Even history became contested as Beijing began to rewrite history in a bid to challenge Korean historical claims.

The quarter started with the first ever meeting between South Korean President Roh Moo-hyun and PRC President Hu Jintao in Beijing, and unfolded with the most assertive Chinese mediating efforts yet to deal with North Korean nuclear tensions, including the hosting of an unprecedented six-party multilateral dialogue that included North Korea, the United States, Russia, Japan, and South Korea in late August.  The PRC utilized its long-standing relationships with Pyongyang to maximum effect in an attempt to get North Korea to come to the negotiating table. Intensive China-South Korean consultations included a visit to South Korea by the head of China’s Supreme People’s Assembly Wu Bangguo and several meetings between the South Korean and Chinese foreign ministers to discuss next steps in capping tensions between North Korea and the United States over the North Korean nuclear development effort.

The only thing more intense than China-Korean political consultations over the North Korean nuclear issue is the continuing boom in China-South Korean trade, which has averaged over 20 percent growth year-on-year.  This quarter may well mark the point at which the PRC emerges as South Korea’s number one trading partner, surpassing the trade volume of the United States for the first time.  South Korean investment and export growth continues apace, but as South Korean industry moves its manufacturing to China, Roh administration’s initiative to turn South Korea into the economic hub of Northeast Asia also appears to be ringing hollow.

This quarter marked a period of transition and tumult in China-Korea relations.  Beijing revealed its own diplomatic initiative to settle the North Korean nuclear problem with a surprise announcement that it would host representatives from Pyongyang and Washington in multilateral talks.  But that effort was set back by an embarrassing North Korean threat during the talks, warning that it had nuclear weapons and might test them in the near future.  The economic and health threat from severe acute respiratory syndrome (SARS) was a major concern at the beginning of the quarter, but dissipated by the end of the quarter with little apparent lasting effect.  South Korea’s new Foreign Minister Yoon Young-kwan took his first trip to Beijing in April to meet newly installed counterpart Li Zhaoxing for the first of several meetings.  The dates are now set for President Roh to follow in early July.

Despite the apparent volatility of events this quarter, however, there has been little apparent change either in the seriousness of the North Korean nuclear issue or in continued bullish prospects for buoyant China-Korean economic relations.  Still, one can’t help but feel that more volatility is on its way, and that tensions with North Korea will rise as events unfold in the second half of the year.

“Regime change” has been the order of the day not only in Iraq, but also (in more orderly form) in China and South Korea this quarter.  “Axis of evil” charter member Kim Jong-il appears as intransigent and entrenched as ever, however.  This is the case despite North Korea’s withdrawal from the Nuclear Non-Proliferation Treaty (NPT) and escalation by Pyongyang of an apparent nuclear “breakout” strategy.  The Chinese “fourth generation” leadership under new President Hu Jintao is committed to perpetuating a stable atmosphere for economic development, and should welcome the vision of economic regional cooperation in Northeast Asia espoused by their counterparts in South Korea under newly-elected President Roh Moo-hyun. Burgeoning bilateral trade and investment anchors the China-South Korea economic relationship and underscores mutual interests in a diplomatic approach to North Korea that peacefully bounds North Korean nuclear threats and introduces gradual economic reforms to the North.

North Korea remains an economic and political drag on Beijing, but Pyongyang’s nuclear escalation means that China can no longer afford to ignore this problem.  U.S. President George W. Bush himself has made numerous calls in the past three months to China’s leadership to discuss North Korea’s escalatory maneuvers on the nuclear front.  Dealing with Pyongyang’s rapid steps toward an unambiguous nuclear weapons capacity was one of the first issues that Bush raised in his congratulatory call to China’s new president, Hu Jintao. Those calls are placing pressure on China to use its leverage to bound North Korea’s nuclear efforts, creating an unprecedented new dilemma (and opportunity?) for Beijing: should it lean toward Washington or Seoul in shaping its policies toward Pyongyang?  This quarter we focus primarily on recent developments in the China-North Korea relationship, and whether the People’s Republic of China can use its leverage to effectively check North Korea’s nuclear weapons.

The last quarter of 2002 closed with a rush by Korean automobile manufacturers to invest in the People’s Republic of China as a strategy for capturing market share in a country projected to emerge as the world’s largest automobile market within two decades. China’s economic emergence has become a primary driver for Korea’s own economic reforms and strategy as China is increasingly both a source of growth and a stiff competitor, eroding Korean market share in third country markets and some key manufacturing sectors.

By placing North Korea’s designated director of a newly established Sinuiju economic zone under arrest, Beijing also made clear that it could put the brakes on North Korea’s economic reforms absent prior consultation by North Korea’s leadership with Beijing.  Likewise, China’s economic leverage and potential influence on the response to North Korea’s nuclear weapons production efforts became a potentially decisive focal point in shaping the contours of a strategy on which the Bush administration and South Korea’s President-elect Roh Moo-hyun have clearly stated differences.

Although top-level consultations between China and South Korea continued this quarter through the Asia-Pacific Economic Cooperation (APEC) forum, ASEAN Plus Three, and bilateral exchanges, it remains to be seen how newly selected leadership in Beijing and Seoul will position itself to manage a maturing and complex China-Korea diplomatic relationship – a relationship that may play an increasingly critical role as part of a likely re-ordering of regional ties in the future.

The People’s Republic of China (PRC) and Republic of Korea (ROK) celebrated a decade of normal relations on Aug. 24, with mutual commemorative events and academic workshops to mark the event. There is much to celebrate. With a bilateral trade relationship that has grown from $3 billion in 1991 to over $30 billion per year in 2001 and social, cultural, and political ties that have grown robustly in only a decade, this burgeoning relationship is dramatic evidence of how the end of the Cold War has allowed the development of new relationships in Northeast Asia. China has become South Korea’s largest destination for foreign investment and for outward-bound South Korean tourists and has surpassed Japan as South Korea’s number-two trading partner. The “Korean wave” in China marks South Korea’s capacity to make a notable contribution to China’s consumer culture and South Korea remains a model – and benchmark – for managing China’s own economic development and political liberalization process.

However, the gathering dark clouds posed by the North Korean refugee issue, illegal drug imports, migrant workers, “yellow dust,” and occasional squalls driven by China’s direct challenge to Korea’s global economic competitiveness are now being directly felt. It is time to post a warning to South Korea of impending damage from a Chinese economic typhoon that could be at least as unsettling to the economic and political landscape in Northeast Asia as Typhoon Rusa, the worst typhoon to hit the Korean Peninsula in four decades, leaving considerable damage in its wake.

The April 15 crash of a China Air flight from Beijing to Pusan in which 129 of 166 passengers died provided a tragic omen for a tumultuous quarter in the relationship between Seoul and Beijing.  World Cup euphoria in Seoul and disappointment for a Chinese team that got shut out in three straight matches during its first World Cup appearance somewhat overshadowed a diplomatic imbroglio in Beijing over a steady flow of North Korean refugees seeking asylum in foreign embassies and consulates.  The diplomatic standoff over the refugees that had arrived in the South Korean compound may mark a turn to a more complex and contentious relationship between Seoul and Beijing as the two countries celebrate the 10th anniversary of diplomatic normalization.

The level of public awareness of both good and bad aspects of the relationship continues to broaden through exports of pop culture, private sector, and citizen-led exchanges and dramatic footage of one North Korean refugee being forcibly dragged from the South Korean compound by Chinese public security officials.  Governments struggle to construct the diplomatic and political infrastructure necessary to bear the weight of increasingly intensive interactions in a wide range of areas: foreign ministers met on the sidelines of the Asian Cooperation Dialogue (ACD) in June to discuss the diplomatic standoff over North Korean refugees in the South Korean compound and coordinated efforts to respond to the spring “yellow dust” syndrome got high-level attention. The two governments continued to support increased economic coordination, including the signing of currency swap agreements worth $2 billion designed to forestall a repeat of the Asian financial crisis.  Despite a more balanced view in recent months of China as a neighbor who may challenge basic South Korean interests, the underlying force in the relationship remains a widespread perception of China as an irresistible business opportunity and of South Korea as an economic model and significant investor in China’s economic growth.

The dramatic entry of 25 North Korean refugees into the Spanish Embassy in Beijing – an event staged by a network of international North Korean human-rights activists – has highlighted the plight of North Korean refugees, put at risk an informal network of primarily South Korean nongovernmental organizations (NGOs) that had assisted North Korean refugees to come to Seoul with tacit approval from the Chinese government, and presented the governments in Beijing and Seoul with a knotty issue they have repeatedly tried to avoid.  Although the trade relationship continues to develop at a breakneck pace with South Korean efforts to crack China’s telecommunications and Internet services sectors, China’s exports to South Korea these days are not so impressive: North Korean refugees, drugs, illegal migrants, and an increasingly serious “yellow dust” of spring, which interrupted Korean daily life due to high levels of poisonous particles from the Gobi Desert in Inner Mongolia. (No wonder Beijing faces a chronic trade deficit with Seoul!)

Perhaps most striking this quarter is that despite a visit to China by National Assembly Speaker Lee Man-sup in January and a two-day visit to Beijing by ROK Foreign Minister Choi Sung-hong to discuss South Korea’s latest diplomacy with the North and to manage growing concerns regarding PRC management of North Korean refugee issues, the real action in the relationship this quarter has been driven by NGOs and business interests.  The two governments are struggling simply to keep up with events on the eve of the 10th anniversary of Sino-ROK normalization.

The fourth quarter always brings a heavy diplomatic schedule of high-level bilateral Sino-Korean exchanges in conjunction with the annual Asia Pacific Economic Cooperation (APEC) and ASEAN Plus Three meetings. These exchanges were overshadowed by an event that did not even occur in Asia: China’s official entry into the World Trade Organization (WTO) in Doha, Qatar, after 15 years of negotiations.  Widespread expectations are that China’s WTO entry will revolutionize China’s economic relations with the world and will powerfully transform Sino-Korean trade and investment relations, although not always in positive ways.

More remarkable testimony to the significance of that event for the Sino-ROK relationship, however, is that shocking consular developments between China and the ROK – including China’s execution of an ROK citizen on drug smuggling charges without adequate representation provided by the ROK government; the discovery of over 60 illegal Chinese stowaways, including 25 dead, in a failed attempt at illegal entry into South Korea via a local fishing boat; and an ROK Constitutional Court ruling overturning a Korean law that selectively provided special rights to overseas Koreans that the Chinese government views as threatening to state sovereignty – hardly made ripples given the tidal wave of expectations for Sino-ROK economic relations.  In addition, South Korean naval ships made their first port call to the Chinese mainland, and Defense Minister Kim Dong-shin met with his counterpart in Beijing during a week-long visit to expand Sino-ROK military exchanges in December.

Sino-DPRK trade volumes also grew exponentially, almost doubling during the first half of 2001, but that relationship remains insignificant in comparison with the over $31 billion Sino-ROK trade volume in 2001, which allowed China to surpass Japan as South Korea’s second largest trade partner.  China also surpassed the United States as the largest site of foreign direct investment from South Korea in 2001. The true significance of recent crises in Sino-ROK consular relations is that they were so quickly resolved, with virtually no political impact on the burgeoning Sino-South Korean economic relationship.

After almost one year of intensive expansion in the Sino-South Korean economic and political relationship, this quarter there was a breather and old themes re-emerged. ChinesePresident Jiang Zemin visited Pyongyang for the first time in over a decade to re-consolidate relations with the DPRK and to repay two successive visits by North Korean Chairman Kim Jong-il to Beijing in May of 2000 and to Shanghai in January of this year.  Although Jiang’s trip was overshadowed by Chairman Kim’s anachronistic three-week pilgrimage to Moscow in August, the visit re-solidified the DPRK-PRC relationship and re-confirmed Chinese commitments to assist the DPRK economically. It was also an indirect catalyst for renewed inter-Korean dialogue.

On the Sino-South Korean economic front, this quarter provided an important opportunity to assess the long-term future of the economic relationship. South Korean business redoubled its rush to take advantage of its proximity to the only island of sustained growth in the global economy.  However, this quarter also saw the public emergence of second thoughts among South Korean researchers who began to see clouds on the horizon, mainly in the form of China’s rising competitiveness, which threatens to become a force that could eventually overtake South Korean competitiveness in key sectors of the global market.  The dark side of rapid growth in Sino-South Korean ties was evident in the form of increased drug smuggling from China, illegal entries by an increasing number of ethnic Korean Chinese using fake Korean passports, frustrations over perceived unequal treatment of ethnic Korean Chinese when they returned to Korea, and continuing under-the-surface tensions on how to manage North Korean refugees.