First skirmishes in a trade war?

Jeremy GoldkornJanuary 23, 2018

The New York Times reports (paywall) that American president Trump has “slapped steep tariffs on imports of washing machines and solar energy cells and panels,” perhaps the first move in his long-promised campaign to eliminate cheap imports.
•“Both China and South Korea harshly criticized the move, with both suggesting they could take their complaints to the World Trade Organization,” says the Times.
•The solar tariffs “will rattle an industry that drew in $161 billion of investment globally last year and is dominated by companies in China,” according to Bloomberg.
•Some Chinese companies may be happy about the news: China Money Network says that Suniva, “which widely advertises its products as ‘made in America,’ was one of two U.S.-based solar panel makers to successfully petition the Trump administration to impose the tariffs.” Suniva is 63 percent owned by Chinese conglomerate Shunfeng International Clean Energy.
•Not all American solar companies are happy: one U.S. solar executive tweeted: “We are devastated to learn Trump has imposed a 30% tariff on solar panels virtually killing the solar industry. Solar employs more people than coal and oil combined. Today’s decision will cause the loss of roughly 23,000 American jobs this year.”
•“China has plenty of options to retaliate” against Trump’s tariffs, says Bloomberg, namechecking Boeing, Apple, and soybean imports.
•The soybean market is already jittery after the tariff announcement, per Bloomberg. China’s is the hungriest buyer of American soybeans.
•There has been a “communication breakdown” between American and Chinese officials, which “risks escalating” the trade row, according to the South China Morning Post, however the article says the Davos summit this week may offer “a chance for the two sides to find common ground.”

Source: SubChina “First skirmishes in a trade war?”

Note: This is SubChina’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


The Arctic Silk Road

As the Arctic is melting, China may have a shipping route to Europe through the Arctic that is much shorter than through the Indian Ocean. According to Russian experts’ estimate, if the arctic shortcut shipping route referred to by them as “Silk Road on Ice” is fully utilized by 2020, global commercial shipment costs will be reduced by $50 to $120 billion a year.

Russia has to build port facilities for supplies and maintenance to facilitate and profit from the shipping. For that it needs Chinese investment. In addition, Russia needs Chinese labor for the construction of the facilities as Russia lacks labor due to its shrinking population.

In addition, Russia can provide indispensable air protection for Chinese ships along its Arctic coast. China is certainly willing to pay for use of the facilities and the air protection as the Arctic route will enable China to save lots of fuel and time. Unlike the route through the Indian Ocean, due to Russian protection, the Arctic route cannot be cut by US navy.

Not only China but also Japan and Korea will pay Russia for the use of Russian port, supply, maintenance and salvage services for the use of the Arctic route. In addition, the route will also be very useful for Russia’s export of oil and LPG extracted in Siberia. Japan and South Korea will be major importer of Russian oil and LPG through the Arctic Ocean.

Seeing the prospects of windfall from Arctic shipping, Russian has been busy making preparations for that. At a meeting of the social committee of Russian Defense Ministry on December 25, 2017, Defense Minister Gen. Shoygu announced that Russia had completed its large-scale construction of military infrastructures in Arctic region. According to him, no other countries have ever been able to build large-scale and perfectly equipped facilities in Arctic region in the history of the development the region.

Gen. Shoygu said that Russian military has cleaned up an Arctic area of 110,000 square kilometers by removing 16,000 tons of waste. Previously, Gen. Shoygu said that the military infrastructures Russia had built would facilitate control of the Arctic shipping route and ensure the safety of Russia’s economic activities in Arctic region. Russia has set up an Arctic strategic headquarters in charge of all Russian troops deployed there. Moreover, in order to turn the Arctic into it lake, Russia has a plan to restore all the 13 air bases left by the Soviet Union in Arctic region.

China and Russia will establish the Arctic Silk Road through win-win cooperation, which will be joined by Japan and South Korea because it is so attractive.

Article by Chan Kai Yee

South Korean firms flock to Beijing hoping summit will hasten thaw with China

File photo: South Korea’s President Moon Jae-in attends the APEC Economic Leaders’ Meeting in Danang, Vietnam November 11, 2017. REUTERS/Jorge Silva

Joyce Lee, Christine Kim December 13, 2017

SEOUL (Reuters) – Hoping a thaw in relations with China will reopen opportunities after a diplomatic spat earlier this year cost many of them business, some 300 South Korean executives joined President Moon Jae-in for the start of his four-day trip to China on Wednesday.

The delegation was the largest to accompany a South Korean leader abroad, and reflected the value the firms placed on mending ties with their country’s biggest trading partner.

Trade and business exchanges between the two countries froze earlier this year after South Korea deployed U.S.-made Terminal High Altitude Area Defense (THAAD) anti-missile system regardless of vehement objections from Beijing.

Among those who traveled were executives from some of the firms hit hardest by the backlash, including Lotte Group and cosmetics and entertainment firms such as Amorepacific and S.M. Entertainment.

Addressing around 500 Chinese and South Korean businessmen at a forum in Beijing, Moon stressed the need to “build a systemic foundation for a stable economic cooperation”.

Moon said he expects to sign a memorandum with President Xi Jinping at a summit on Thursday, a step toward follow-up negotiations of the South Korea-China Free Trade Agreement (FTA) concerning services and investments.

“This is expected to expand the entry of both countries’ companies into service industries, and revitalize mutual investments,” he said.


The THAAD disagreement knocked about 0.4 percentage points off expected economic growth in South Korea this year and resulted in lost revenues of around $6.5 billion from Chinese tourists in the first nine months of the year, as the number of visitors fell by half.

Anti-South Korean sentiment also battered firms’ sales of entertainment, cosmetics and cars in China.

Multiple officials from South Korea’s largest companies told Reuters they hoped that Moon’s visit to China would mark the next step toward improving ties after the two governments reached an initial agreement in late October to move past the dispute.

Still, they were doubtful whether a sudden turnaround in business relations would be achieved over the coming days.

“If you look at earlier cases, it takes several, gradual steps for unspoken reprisals to be eased,” said an official from a Korean firm accompanying Moon who declined to be identified as the matter was sensitive.

“We’re hoping this is a key step.”

Reuters spoke to around 20 of the South Korean firms represented in the delegation, and none had any fresh investment or business deal announcements planned.

Instead, an official at game developer Wemade Entertainment Co Ltd, whose CEO attended the forum, said executives would be looking to reopen dialogue with Chinese counterparts.

“Rather than having a specific agenda, we are hoping for a space to discuss various matters,” the official said.


In late November, China allowed travel agencies in Beijing and Shandong to resume some sales of group tours to South Korea, but tour agencies were told not to include South Korean retail-to-chemicals giant Lotte Group in travel packages.

Lotte, which provided the land where the THAAD system was installed, was hardest hit in the diplomatic standoff.

Its chain of hypermarkets and supermarkets in China were largely shuttered, and it is expected to sell the stores for a fraction of what it invested.

The conglomerate previously said it planned to sell the stores by the end of this year, but the talks have been in “a stalemate,” a Lotte Group official said, declining to be identified due to the sensitivities.

Still, the official hoped the summit would ease the way for the planned sales of hypermarkets in China and lead to a full lifting of group tour bans.

“We have big hopes about the summit,” the official said.

Reporting by Joyce Lee and Christine Kim; Additional reporting by Hyunjoo Jin, Heekyong Yang, Yuna Park and Jane Chung; Editing by Simon Cameron-Moore

Source: Reuters “South Korean firms flock to Beijing hoping summit will hasten thaw with China”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

South Korea Swings Closer To Beijing


Since an unexpected détente between Beijing and Seoul at the end of October, South Korea has continued to seek closer relations with China. Here’s the latest:

  • South Korean President Moon Jae-in has agreed to visit Beijing in December, Bloomberg reports, noting that Japanese Prime Minister Shinzo Abe’s proposal to also meet with President Xi Jinping was left unanswered. Moon and Xi met on the sidelines of the Asia-Pacific Economic Cooperation summit in Danang, Vietnam.
  • The “two countries will strengthen strategic talks on all levels” and “quickly normalize bilateral exchanges in all sectors,” according to a South Korean presidential spokesman, per Reuters.
  • Moon and Xi also “agreed on the need to manage the security situation on the Korean peninsula in a stable way” after Donald Trump and Kim Jong-un “exchanged war-like threats and insults,” raising tensions last month, Reuters reports.
  • The South Korean military may also be pivoting toward Beijing, the Nikkei Asian Review finds (paywall), as it “rejected a U.S. proposal to conduct a trilateral military exercise that would have included participation from Japan…possibly out of concern for relations with China.”
  • Moon hopes that the 2018 Winter Olympics in South Korea can be the “peace olympics,” Nikkei further notes (paywall), and has invited Xi to attend. He “aims to have Chinese President Xi Jinping attend the opening ceremony of the Games — now less than 100 days away — and use this as leverage to persuade North Korea to participate.”
  • A Chinese marketing campaign featuring a South Korean actress further indicates the warming of relations, Reuters reports.

Source: SubChina “South Korea Swings Closer To Beijing”

Note: This is SubChina’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

US-Japan-South Korea Mini NATO Impossible, China Does Not Fear

SCMP’s article “Why South Korea’s promises on THAAD and a US-Japan alliance are so important to China” today on China’s fear of a ‘mini Nato’ of the US, Japan and South Korea shows the media’s ignorance of East Asian situation.

South Korea has to deploy the THAAD to strengthen its missile defense against North Korea’s threat of nuclear weapons and missiles. China shall make allowance for that even though the missile defense to some extent weakens China’s second-strike capabilities.

That is why China agrees to ease one-year’s tension when South Korea has made the three promises described in SCMP’s article. China simply finds the promises convenient steps to go down from its hardline high ground.

The most important factor is that South Korea may become a very important member of China and Russia’s Asian Union.

As for the so-called mini NATO, China simply does not fear it. The entire Japan is within the range of China’s a thousand medium-range ballistic missiles. US aircraft carriers cannot go near China due to China’s saturate attack of anti-ship ballistic and cruise missiles. US F-22s cannot obtain air supremacy from China’s J-20s. Moreover, they have the weakness of the necessity of aerial refueling and their airfields are within the range of China’s ballistic missiles and H-6K bombers.

Can South Korea help the US and Japan if it joins the “mini NATO”?

South Korea will not give them any help but wants them to protect it because if there is a war between the so-called “mini NATO” and China, South Korea will become their burden as it needs their protection against the attack of North Korea’s huge army supported by China’s dominant air force.

Moreover, a NATO to Russia’s west is enough threat to Russia. Will Russia allow a “mini NATO” to its east? Russia will certainly join its de facto ally China in fighting the “mini NATO”.

China simply does not fear the so-called “mini NATO” as it is strong enough itself and has useful allies.

In addition, China does not fear it as such a military organization is simply impossible.

South Korea remains Japan’s latent bitter enemy due to the 50 years of Japanese cruel colonization in the past. Now, Japan is its major competitor in its largest market China. Its economic relations with China are very important. Unlike Japan, it has a free trade agreement with China while Japan, though has an earnest desire to contain China, is courting China in order to have such an advantageous agreement (see my post “Can Abe Succeed in Exploiting China’s Huge Market While Containing China” on November 4).

When all Western leaders were unwilling to be China’s guests to China’s military parade marking the 70th anniversary of the victory of World War II, South Korean President Park Geun Hye was conspicuously present. China’s victory in World War II was mainly the victory against Japan. President Park’s presence was obviously favorable to China and unfavorable to Japan.

Only those who are living in their dreams may imagine that South Korea will join the US and Japan in a “mini NATO” directed at China.

Comment by Chan Kai Yee on SCMP’s article, full text of which can be viewed at

Can Abe Succeed in Exploiting China’s Huge Market While Containing China

As the grandchild of a war criminal who narrowly escaped punishment of his war crime, China’s rise is Japanese Prime Minister Shinzo Abe’s nightmare. Abe is certainly anxious to contain China.

He visited Trump right before and after US President Donald Trump’s inauguration to try hard to persuade Trump in vain not to scrap Obama’s Trans-Pacific Partnership (TPP) aimed at containing China economically.

He then tried hard to maintain TPP without US participation but lacked the economic strength and political influence to succeed in doing so.

TPP is hopeless now, but Abe is still full of hope that according to SCMP’s report “Japan ‘pushes for summit’ with China and South Korea this year”, when Trump visited Japan a few days later, he is going to “discuss a trade and investment framework for the Indo-Pacific region” obviously in order to join the US in countering China’s Belt and Road initiative.

Obama’s pivot to Asia failed in containing China, but there is still hope for Abe. He will join the United States in “considering security and economic strategies for much of the region, including India and Australia, to counter China’s growing military and economic influence,” according to SCMP.

However, Abe has promised Japanese people that he will lift Japanese economy from its doldrums. His hope lies on China’s growing huge market. That is why SCMP says in the report that Japan wants to resume top-level talks with China and South Korea for the establishment of ASEAN + 3 free trade area before the end of this year.

SCMP says, “A Japanese diplomatic source said Abe could invite Xi for a state visit next year if the three leaders met in Japan by the end of this year for the trilateral summit.”

China certainly wants Japan to join its Asian Union but Xi certainly is not anxious to visit Japan given Abe’s activities to contain China.

SCMP says in its report, “Cheng Yonghua, China’s ambassador to Japan, said China was ‘actively considering’ the possibility of holding the trilateral summit and of high-level exchanges between China and Japan. But he also warned that ‘sensitive and complicated factors’ persisted in bilateral relations.”

China already has free trade area agreements with ASEAN and South Korea, it does not want free trade area with Japan as anxiously as Abe does, ASEAN + 3.

As Chinese leader is not less shrewd, it seems that Abe’s desire to both contain and benefit from China may be but his wishful thinking.

Comment by Chan Kai Yee on SCMP’s report, full text of which can be found at

China Shall Be Resourceful and Flexible instead of Blindly Hardline

In its report “The Party ‘will no longer back down on many issues’” today, SupChina quotes Deng Yuwen 邓聿文, a former deputy editor of the Central Party School’s journal, as saying in Deng’s article in the South China Morning Post titled “In Xi’s new era, Chinese diplomacy will be a display of hard power”, “The way the Party sees it, a hardline approach will not only protect the country’s interests, but also meet the people’s expectations of how a great power should behave”.

The report says, “Deng concludes that “the Communist Party will no longer back down on many issues,’ and that the international community should be prepared to face a “strong” China.”

That obviously contradicts what SupChina says in its report “South Korea and China make nice” today that I reblogged earlier. China has indeed backed down on the issue of THAAD and is now making efforts to improve its relations with South Korea.

China has its strategic diplomatic goal. In attaining that goal, it must be resourceful and flexible as each and every of its diplomatic moves must serve that goal.

South Korea is an important part of the Asian Union China wants to establish on the basis of Russia- and China-led Shanghai Cooperation Organization.

If China can remove the threat of North Korea, it can easily win over South Korea as Asia, especially China, is much more important than the US for South Korea’s economy. Moreover, there is the threat that Trump may scrap the free trade agreement between the US and South Korea for his “America first”.

Comment by Chan Kai Yee on SupChina’s report, full text of which can be viewed at