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Strategic Clarity: Reassessing the Value of China to Korea
Photo: Zhai Jianlan/Xinhua/Getty Images
The Lee Jae Myung government has pursued a nuanced strategy with China, one that evades regional security issues (e.g., Taiwan and the South China Sea), while maintaining “neighborly” relations and acknowledging the importance of soliciting Chinese cooperation on issues ranging from North Korea to stable supplies of critical minerals. Lee carefully balances this policy with a deepening military and economic alliance with the United States, spanning new frontiers as diverse as AI, shipbuilding, and aerospace, all the while maintaining that the policies toward the two big powers can pursue “a symphony of harmony created by the blending of different voices,” as he once expressed at the Asia-Pacific Economic Cooperation (APEC) Gyeongju Summit.
This diplomatic balancing act is ill-advised and potentially dangerous. As Chinese President Xi Jinping is feted by the North Korean leader Kim Jong-un at next week’s summit in Pyongyang, South Korea should fundamentally reassess its strategic equities with China. Seoul has toyed with various formulations of “strategic ambiguity” between the United States and China. These include positioning South Korea (1) “as a balancer,” theorized by Roh Moo-hyun; (2) as the “middle power bridge” between the two powers; and (3) as an advocate of anmi gyeongjung (security with the United States, economy with China). However, it needs to move to strategic clarity.
Over the past three decades, China-South Korea relations have undergone a fundamental transformation from complementary to competitive interests across economic and geopolitical dimensions. Koreans recall being targeted by Chinese economic coercion in 2016, something unimaginable when the economic relationship first blossomed in the 1980s. Moreover, the magnitude of North Korea’s nuclear arsenal today is in no small part a reflection of China’s unhelpfulness in addressing the threat. The sooner Seoul moves away from traditional strategic ambiguity with Beijing to a posture of strategic clarity, the better.
Economy: From Vertical Complementarity to Horizontal Competition
Upon normalization in 1992, China-South Korea relations were characterized by vertical complementarity. China’s labor- and raw material–intensive growth model served as a strong complement to South Korea’s capital- and technology-intensive economy, creating nearly limitless opportunities for South Korean investment in China. This engendered a processing trade model in which South Korean capital and intermediate goods flowed into China for assembly and were then exported as manufactured goods, steel, chips, and electronics. Annual bilateral trade increased nearly fivefold in the immediate aftermath of normalization, from around $6.4 billion in 1992 to $31.2 billion in 2000. Annualized South Korean foreign direct investment (FDI) into China increased nearly twentyfold from roughly $200 million to over $4 billion.
However, within a span of three decades, all of these touchstones of the economic relationship between China and South Korea changed, in large part due to China’s rapid economic development, such that the two countries are now engaged in direct competition in virtually all major sectors, including semiconductors, electronics, electric vehicles (EVs), batteries, and high-value ships. From the 1990s through the 2000s, moreover, many South Korean companies involved in joint ventures with Chinese firms were victimized by China’s industrial espionage, intellectual property (IP) theft, and dumping practices. China’s efforts are aimed at misappropriating technology and then undercutting South Korean competitors across industries ranging from tires to high-end electronics.
The new element of the economic relationship is China’s use of economic coercion, wherein China exploits trade dependencies of its partners to affect the sovereign political choices of target states or firms. While not on the radar in the 1990s, China’s economic coercion came to the fore in 2016–2017 with the emplacement of the U.S. Terminal High Altitude Area Defense (THAAD) battery in South Korea. Beijing inflicted considerable economic pain on South Korean companies as punishment for the deployment, totaling over $15 billion in gross lost revenue, and it also tried to undercut South Korea’s 2018 PyeongChang Winter Olympics by stopping the annual flow of 4.5 million Chinese tourists to South Korea. More recently, China imposed sanctions on five U.S. subsidiaries of Hanwha Shipping following the August 2025 announcement of the U.S.-South Korea shipbuilding deal, harkening back to the THAAD episode. Going forward, the shadow of economic bullying hangs over South Korea as it imports roughly 50 percent of its rare earth minerals from China. Beijing could cut off any of these resources, paralyzing Seoul’s economy, as it has done on multiple occasions (2021, 2023, 2024, and 2025–2026) with the chemical compound urea, stifling transport and farming sectors in South Korea.
North Korea: From Cross-Recognition to “Aggressively Unhelpful”
Following South Korea-China normalization in 1992, Beijing established a cross-recognition formula (i.e., major power relations with both Koreas) which heightened its potential to play a key role in inter-Korean relations. Given Beijing’s economic and political influence over Pyongyang, South Korea hoped that China could play a constructive role in realizing North Korea’s denuclearization and even in potential unification, as Koreans watched the Cold War barriers collapsing.
However, developments over the past 30 years have dashed these expectations. As former national intelligence officer for North Korea, Sydney Seiler, has observed, China has gone from being “passively helpful” to “aggressively unhelpful” on North Korea. Beijing did not choose to play a productive role in promoting inter-Korean relations, preferring instead to dogmatically back its communist brethren even after Pyongyang’s overtly aggressive actions like the 2010 Cheonan sinking, killing 46 South Korean sailors, and the shelling of Yeonpyeong Island.
Regarding denuclearization, the results speak for themselves: North Korea now possesses 50 nuclear bombs, with sufficient fissile material to potentially reach nearly 100, as well as six nuclear tests, 20 different delivery systems, and over 300 missile demonstrations. Any positive role China played in the six-party talks two decades ago has now been replaced by its de facto acceptance of North Korea’s nuclear weapons status and noncompliance with the UN sanctions regime against North Korean proliferation and human rights abuses.
Moreover, South Korea now faces compounding threats of China’s own expanding nuclear arsenal and China’s inaction regarding the rapid growth of North Korea-Russian cooperation in the war against Ukraine. Although Beijing also appears concerned about the growing alignment between Pyongyang and Moscow, it has shown no effort to modulate, regulate, or attenuate that link.
Finally, although China pays lip service to supporting the peaceful unification of the Korean Peninsula, its actions translate into clear support for the status quo. When Kim Jong-il died in 2011, Beijing acted immediately with material and diplomatic support to preserve regime stability through the power transition to Kim Jong-un. With North Korea now completely disavowing unification as a national goal, China will probably make official what has always been an unofficial policy opposing unification under South Korean auspices.
The Grey Zone: “Creeping Sovereignty”
Adding to the need for South Korea to reassess its China stakes is the new challenge of China’s gray-zone maritime activities in the Yellow Sea. Negotiated in 2001, the jointly managed provisional measures zone (PMZ) in this body of water represents the overlap between the two exclusive economic zone (EEZ) claims that prevented the negotiation of permanent maritime borders. The PMZ Agreement allows both states to fish in the zone, prevents either state from asserting full sovereignty claims, and prohibits either party from unilaterally installing permanent structures or exploiting subsea resources in the zone.
Despite the agreement, China has unilaterally deployed 13 buoys in and around the zone, along with two aquaculture cages, and until recently, a six-story observation platform, without consulting South Korea. Efforts by South Korean vessels to monitor Chinese activities have been intercepted by the China Coast Guard 27 times in 135 attempts since 2020. Since 2025, automatic identification system data currently being analyzed by CSIS shows at least 18 standoffs between South Korean government vessels and the China Coast Guard at the Chinese structures. In 2013, China also unilaterally declared an air defense identification zone (ADIZ) in the East China Sea that required advance notification by foreign aircraft entering the designated airspace. The newly declared Chinese ADIZ infringed on a South Korean island (Socotra Rock or Ieodo) and overlapped with its claims, leading to Seoul’s scrambling of fighters to counter Chinese as well as joint Chinese-Russian strategic bombers and fighters flying deep into South Korean airspace. Given the precedent of Chinese gray-zone activities in the South China Sea and the East China Sea, China’s “creeping sovereignty” behavior in the Yellow Sea raises new and serious threats to South Korea.
Strategic Clarity
South Korea’s strategic ambiguity regarding China should be replaced by a strategy of strategic clarity that acknowledges the competitive relationship with Beijing and that takes as its foundational edict a strong alliance with the United States as well as trilateral ties with Japan. If Seoul tries to deal with Beijing alone, it will be treated like a small province by Zhongnanhai. Seoul is best positioned to contend with Beijing when backed by strong ties with Washington and Tokyo.
The private sector in South Korea seems to have already internalized this message. While foreign policy officials continue to engage in tactical, rhetorical balancing between the United States and China, South Korean companies have chosen strategic clarity, as evidenced by their investments in the United States in critical and cutting-edge industries, which far outpace their investments in China. The United States is now the top destination for South Korean outbound FDI, constituting more than 33 percent of the total, while China’s share of South Korean FDI has fallen to barely over 10 percent. While South Korea is building cutting-edge foundry fabrication plants for the AI and aerospace sectors in the United States, it is only maintaining (and not growing) legacy memory chip plants in China. While South Korea is scaling back EV battery production in China (undercut by subsidized Chinese competitors), it is building major new production facilities in Georgia, Michigan, and Alabama. And while South Korean car makers are selling off legacy assembly plants in China, they are building massive car production “meta-plants” in the United States. Table 1 identifies some of these major new investments.
Yesun Kim
Former Research Intern, Korea Chair
In addition to the private sector, the South Korean citizens seem to have internalized the same strategic choices. The combination of economic competition, IP theft, and economic coercion over THAAD in 2016–2017 appears to have engendered a fundamental shift in popular views of China. Before 2017, South Koreans holding unfavorable views toward China hovered around 50 percent, rising to 61 percent a year after THAAD retaliation, and as high as 70–81 percent in the following years, making China the most disliked country among South Koreans (outpacing Japan).
A policy of strategic clarity against China has become more amenable given recent changes in the U.S.-South Korea alliance. Strategic flexibility (i.e., the use of U.S. military assets on the Korean Peninsula for regional contingencies) is no longer a contentious issue resisted by South Koreans. This is because thinking surrounding the implications of a Taiwan contingency for South Korean security is evolving. Even though President Lee once quipped that Taiwan’s defense was not South Korea’s problem, Korean security experts increasingly view the Taiwan Strait and the Korean Peninsula not as decoupled theaters, but as interconnected, dual contingencies shaped by the notion of opportunistic aggression by China and North Korea. Undeniably, the current weaponization of the Strait of Hormuz has also heightened appreciation of the value of keeping the Taiwan Strait open to international commerce. In this context, the pursuit of autonomy (jajupa) is a less viable strategy for managing China, and a strong alliance posture (dongmaengpa) offers a more effective approach.
Trilateral Piece in the China Challenge
U.S.-Japan-South Korea trilateral cooperation will play a central role in the policy of strategic clarity as Beijing tends to avoid simultaneously coercing both Tokyo and Seoul for fear of strengthening the trilateral partnership. However, Tokyo and Seoul have yet to advance from “passive willingness” toward proactive ownership of the trilateral cooperation framework.
Despite improved Japan-South Korea relations, including bilateral summits of the two leaders visiting each other’s hometowns, there has been little effort to advance the framework established at the historic 2023 Camp David Summit. There are two closing recommendations in this regard:
- Issue a Bilateral Security Declaration: Japanese and South Korean leaders should capitalize on this positive moment in bilateral relations to produce a bilateral security declaration. This would not be the equivalent of a mutual defense treaty; rather, it would be a political declaration of common values and security interests in a host of areas, including counterproliferation, maritime security, contingency planning, counterterrorism, and intelligence-sharing, along the lines of the first bilateral security declaration between Japan and Australia in 2007.
- Jointly Condemn Chinese Coercion: The United States, South Korea, and Japan should jointly call out Chinese acts of coercion against any member of the group. It has been a missed opportunity, for example, that neither the United States nor the South Korean presidents, in summits with each other or with Japan, have publicly condemned the economic coercion being carried out by China against the Takaichi government for the prime minister’s statements in support of Taiwan’s defense. Deterring Chinese aggression against Taiwan is entirely in the interests of Washington and Seoul, and the abandonment of Tokyo in its current spat only bolsters confidence in Beijing that it can decouple the allies. This weakens deterrence. Some may counter that Trump and Lee have no incentive to needlessly put themselves in China’s crosshairs on Takaichi’s behalf, but such coercion is almost certainly coming to Seoul in response to the U.S.-South Korea newly negotiated deals on shipbuilding and nuclear submarines. When President Lee explained to President Xi at their January 2026 summit why South Korea pursued these agreements with its ally, Xi ominously warned that South Korea “should firmly stand on the right side of history,” and that Seoul should “make correct strategic choices.” Indeed, as soon as the pressure comes off Japan, China is likely to set its sights on Korea, as was the case with THAAD, unless the three allies deter and, if necessary, retaliate against China’s coercion. retaliate against China’s coercion.
The images of President Xi and North Korean leader Kim toasting glasses in Pyongyang next week should not be contorted to mean that Beijing is somehow carrying South Korea’s water in its engagements. It is not foreseeable that China will abandon North Korea, support democratic unification of the peninsula, or abandon the objective of weakening of South Korea’s position to be subservient to China. What was once a relationship of complementarity is now one of competition. For the Lee government not to recognize and adapt to this reality would be a strategic mistake.
Victor Cha is president of the Geopolitics and Foreign Policy Department and Korea Chair at the Center for Strategic and International Studies (CSIS) in Washington, D.C. and professor of government at Georgetown University. Yesun Kim is a former research intern with the Korea Chair at CSIS and graduate student at Georgetown.
The authors appreciate the assistance of Madison Bruno, Hunter Macdonald, Phillip Meylan, and Julia Huh in publishing this commentary.
This commentary is made possible by general support to CSIS. No direct sponsorship contributed to this commentary.