Tensions Rise Between China and South Korea

In 1991 when the United States was preparing to lead a coalition into Kuwait, Sadaam Hussein was firing Scud missiles into Israel in an effort to provoke retaliation and united the Arab world behind him. He failed to do so, but did cause significant destruction in Israel and spurred the United States to begin a program now known as THAAD, or Terminal High Altitude Area Defense. By 1999, Lockheed Martin had successfully intercepted a ballistic missile.

During 2013, South Korea began to take an interest in the program as a means of protecting itself and deterring potential attacks from North Korea. Seemingly innocuous, China has been extremely vocal in expressing its displeasure with the program. The controversy seems to be surrounding the fact that the program can operate with two different radar configurations – identical hardware overlaid with different software. The United States and South Korea insist that the configuration to be used in Korea would only have sufficient range to be used as a defensive shield against North Korean aggression. What worries China is that with different software the system could be reconfigured in a matter of hours to provide early warning to the United States on any Chinese missile launch from deep within China. This information could then be relayed to the United States missile defense system to intercept any threat.

South Korean company The Lotte Group is bearing a significant amount of the Chinese displeasure. The Lotte Group is among the South Korean Chaebol’s that have interests spanning a vast number of industries including confections, supermarkets, movie theaters, hotels, chemicals, car rentals, insurance, credit cards, and amusement parks. The company owned a golf course on land that the South Korean military felt was ideal for locating the THAAD missiles and an agreement was made to swap land between the company and the military. It has been reported that several Chinese locations of Lotte stores in China have been raided and the Chinese website of The Lotte Group was temporarily unavailable. The Lotte Group also owns a large Korean duty-free business in which 70% of sales are to Chinese tourists.

More broadly, South Korea exports $125 billion of goods and services annually to China, its largest trading partner. That amounts to 9% of South Korean GDP and 24% of South Korean exports. In comparison, the $66 billion of exports that South Korea makes to the United States is equal to about 5% of South Korea’s GDP and 13% of exports. Additionally, about 8 million Chinese tourists visit South Korea each year which accounts for about half of all tourists to the country.

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