China is considering steps such as limiting imports of South Korean goods and services as it seeks to apply pressure on Seoul not to deploy a US missile shield system, according to people familiar with the matter.
Authorities were also considering the suspension of some investments and acquisitions in South Korea, said the people, who asked not to be identified because the discussions were private. China was also assessing the impact of steps already taken on visas and in the entertainment and tourism sectors, they said.
Beijing had yet to decide what, or whether, additional measures should be taken, the people said. The ministries of foreign affairs, commerce and industry and information technology did not immediately respond to requests for comment. The foreign ministry has previously said it strongly urged South Korea and the United States to reverse their decision on the deployment of the Terminal High-Altitude Area Defence system, known as THAAD.
The nations have been at odds ever since South Korea agreed to deploy the missile defence system on its soil. Relations that only recently were hailed by both countries as the best in history have soured, with China’s planned review of trade and investment ties highlighting the potential economic fallout from the THAAD deployment.
Another step authorities are considering is the exclusion of South Korean makers of batteries for electric vehicles from a list of suppliers that meet China’s technical standards, according to the people. Samsung SDI and LG Chem are among foreign battery makers not on that list.
Chinese automakers such as Anhui Jianghuai Automobile have stopped producing cars that use Samsung batteries over concerns they may be stuck with unsold stock if those models are disqualified from government subsidies because their battery suppliers do not qualify. Samsung SDI dropped as much as 2 per cent on Friday, its biggest intraday drop in two weeks. The foreign ministry has argued that the THAAD’s powerful radars threaten national security, warning about taking “necessary measures to safeguard” its interests. This view has been compounded by South Korea showing willingness to share information collected from the system with Japan.
Against the backdrop of the tensions, North Asian buyout firm MBK Partners has delayed by a week the final bid deadline in its sale of ING Life Insurance Korea, according to people with knowledge of the matter. Some Chinese suitors needed more time to work on the terms of their offers, the people said, asking not to be identified because the talks were private. Binding bids for MBK’s controlling stake in the business, which could fetch about US$3 billion, had been due on Friday, the people said. A spokesman for MBK did not immediately return questions seeking comment.
Shares of some South Korean companies that rely on Chinese demand have fluctuated amid strained diplomatic relations between the two nations.
The Korea International Trade Association, an influential business lobby group, has identified 26 measures already imposed by China that hurt its members.
This is not the first instance in which Chinese trade policies have been intertwined with diplomatic disputes.
In 2010, the nation limited exports of rare-earth metals to Japan amid a territorial dispute. Exports of bananas and other fruit from the Philippines to China were disrupted in 2012 as the two countries became embroiled in claims in the South China Sea.