S. Korea faces challenges due to U.S. growing push for joint pressure on China

Korean President Yoon Suk Yeol, right, Japanese Prime Minister Fumio Kishida, center, and U.S. President Joe Biden meet on the sidelines of the Group of Seven (G7) Summit in Hiroshima, Japan, on May 21. [Photo by Lee Seung-hwan]

Following his signing of an executive order imposing restrictions on U.S. capital investment in China’s advanced technology sector on Wednesday (local time), President Joe Biden is expected to call for joint pressure on China during the upcoming Aug. 18 trilateral summit with South Korea and Japan, key allies in the Indo-Pacific region. It is expected that the Korean government will inevitably participate in some capacity in response to these developments.

In a G7 summit held in Hiroshima, Japan, in May, the U.S. government advocated for the creation of a joint platform among G7 countries to exert economic pressure on China. While the specifics of this platform were not fully disclosed at the time, it is known that the U.S. was considering a form of collective economic security that would allow nations to support each other in cases of unfair economic pressure. President Yoon Suk Yeol, who was invited to the G7 summit, observed the consensus among the leaders regarding this matter. With the U.S. and Japan, both G7 members, aligning on a joint approach to apply economic pressure on China, it appears challenging for South Korea, which aims for G8 status, to diverge from this course. Nonetheless, considering South Korea’s experience with China’s economic retaliation during the THAAD crisis in 2016, a coordinated approach against China’s economic pressure while accounting for is expected.

However, having experienced China’s economic retaliation following the THAAD debacle in 2016, South Korea needs to ensure a united front against Chinese economic pressure, but demand an adjustment of the responses to reflect South Korea’s unique geopolitical circumstances.

Given these circumstances, even if discussions about a joint response to China’s economic pressure take place during the upcoming trilateral summit, it is unlikely that the joint statement will explicitly reveal plans for intensified pressure on China. Overall, the Korean government’s policy is to discuss the matter, but to be flexible in its response, considering the significance of companies operating in China and the intricacies of South Korea-China trade relations.

The U.S. government emphasizes that its policy of regulating capital investment in China’s advanced tech firms stems from national security concerns. This policy aims to limit capital investment in industries such as semiconductors, chip design, quantum computing, and artificial intelligence to prevent these technologies from being used for military purposes. Unlike the scorched-earth approach taken by the Trump administration towards China in the past, the Biden administration appears to be pursuing a more targeted strategy known as “small yard, high fence,” meaning tailored sanctions against specific entities.

While the exact details have yet to be disclosed, sources such as Bloomberg interpret the initial comprehensive investment restrictions as having been narrowed down to target venture and startup companies. The U.S. Treasury has entered a phase of gathering public opinions for formulating the final detailed guidelines, while warning against overly broad interpretations.

Nevertheless, China’s Foreign Ministry rebuked the U.S., alleging that the U.S. had grossly violated market economy and fair competition principles, going against globalization by decoupling from China. The ministry urged the U.S. to honor President Biden’s promise not to decouple from China or undermine China’s economic development.