Following the decision to deploy the Terminal High Altitude Area Defense (THAAD) in South Korea, China and Seoul have engaged in a round of tit-for-tat economic retaliation.
South Korea's Lotte Group was the first to feel the impact, with the Chinese authorities conducting fire inspections, facility inspections and tax investigations at Lotte's 120 retail stores in China since December.
In addition, the group's plan to invest in a large shopping mall and a theme park in Shenyang has been halted by the local government. The company's duty-free shops at airports and malls have also been boycotted by Chinese consumers, who contribute 70 percent of the shops' revenue.
The Chinese government also plans to cut tourism from China to South Korea by at least 20 percent this year.
However, such economic retaliation has failed to slow down South Korea's deployment of THAAD, which is now expected to be operational as early as April.
South Korean consumers, on the other hand, are calling for a boycott of Chinese travel and beer. Seoul has also complained to the World Trade Organization about China's actions.
Although such developments may give the impression that bilateral tensions are on the rise, financial markets in the two countries are more sanguine. The Korea Composite Stock Price Index has increased by more than 8 percent from the end of last year to late March, while the SSE Composite Index has risen by 6.6 percent.
U.S. Secretary of State Rex W. Tillerson visited East Asia in March and met with Chinese President Xi Jinping on March 19. Tillerson's trip showed that all sides, including Beijing, recognize the necessity of THAAD in safeguarding South Korea and Japan from North Korea's nuclear threats.
However, the introduction of THAAD also places Xi under immense pressure, as a result of which he had to make a grand gesture to appease the People's Liberation Army and economic retaliation was the best option because it is relatively harmless and can be easily dealt with.
If we believe the relationship between China and South Korea will continue to deteriorate, we are embracing a narrow vision which will be proven wrong.
Taiwan needs to understand that the U.S-China relationship is guided by the principles of "nonconflict, nonconfrontation, mutual respect and win-win cooperation." Taiwan cannot provoke nor choose sides. Only by understanding this can we identify trends in the diplomacy and economic development of big countries, avoid betting on the wrong side and expand opportunities for the economic development of Taiwan. (Editorial abstract - March 22, 2017) (Summarized by Christie Chen) AW/