China, South Korea agree to mend ties
after THAAD standoff
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[October 31, 2017]
By Christine Kim and Ben Blanchard
SEOUL/BEIJING (Reuters) - Seoul and Beijing
on Tuesday agreed to move beyond a year-long stand-off over the
deployment of a U.S. anti-missile system in South Korea, a dispute that
has been devastating to South Korean businesses that rely on Chinese
The unexpected detente comes just days before U.S. President Donald
Trump begins a trip to Asia, where the North Korean nuclear crisis will
take center stage, and helped propel South Korean stocks to a record
The installation of the U.S. Terminal High Altitude Area Defense (THAAD)
system had angered China, with South Korea's tourism, cosmetics and
entertainment industries bearing the brunt of a Chinese backlash,
although Beijing has never specifically linked that to the THAAD
Beijing worries the THAAD system's powerful radar can penetrate into
"Both sides shared the view that the strengthening of exchange and
cooperation between Korea and China serves their common interests and
agreed to expeditiously bring exchange and cooperation in all areas back
on a normal development track," South Korea's foreign ministry said in a
Before the THAAD dispute, bilateral relations flourished, despite
Beijing's historic alliance with North Korea and Seoul's close ties with
Washington, which includes hosting 28,500 U.S. troops. China is South
Korea's biggest trading partner.
"At this critical moment all stakeholders should be working together to
address the North Korea nuclear challenge instead of creating problems
for others," said Wang Dong, associate professor of international
studies at China's Peking University.
"This sends a very positive signal that Beijing and Seoul are determined
to improve their relations."
As part of the agreement, South Korean President Moon Jae-in will meet
Chinese President Xi Jinping on the sidelines of the summit of
Asia-Pacific Economic Cooperation (APEC) countries in Vietnam on Nov.
South Korea recognized China's concerns over THAAD and made it clear the
deployment was not aimed at any third country and did not harm China's
strategic security interests, China's foreign ministry said.
China reiterated its opposition to the deployment of THAAD, but noted
South Korea's position and hoped South Korea could appropriately handle
the issue, it added.
"China's position on the THAAD issue is clear, consistent and has not
changed," Chinese Foreign Ministry spokeswoman Hua Chunying told a daily
briefing in Beijing.
The thaw is a big relief for South Korean tourism and retail firms as
well as K-pop stars and makers of films and soap operas, which had found
themselves unofficially unwelcome in China over the past year.
In South Korea, a halving of inbound Chinese tourists in the first nine
months of the year cost the economy $6.5 billion in lost revenue based
on the average spending of Chinese visitors in 2016, data from the Korea
Tourism Organization shows.
The spat knocked about 0.4 percentage points off this year's expected
economic growth, according to the Bank of Korea, which now forecasts an
expansion of 3 percent.
The sprawling Lotte Group, which provided the land where the THAAD
battery was installed and is a major operator of hotels and duty free
stores, has been hardest hit. It faces a costly overhaul and is expected
to sell its Chinese hypermarket stores for a fraction of what it
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Terminal High Altitude Area Defense (THAAD) interceptors are seen as
they arrive at Seongju, South Korea, September 7, 2017. Lee
Jong-hyeon/News1 via REUTERS
A spokesman for holding company Lotte Corp expressed hope that South
Korean firms' activity in China would improve following the
An official at Seoul's presidential Blue House, who declined to be
named given the sensitivity of the matter, said improvements for
South Korean companies would come slowly.
Shares in South Korean tourism and retail companies rallied
nonetheless, with Asiana Airlines gaining 3.6 percent and Lotte
Shopping up 7.14 percent. The benchmark Kospi index hit a record for
a third straight day, gaining 0.9 percent.
China has grown increasingly angry with North Korea's ongoing
pursuit of nuclear weapons and ballistic missiles in defiance of
United Nations sanctions, even as it chafes at U.S. pressure to rein
in its isolated ally.
NORTH KOREA TENSIONS
The recent deterioration in ties between China and North Korea may
have contributed to Tuesday's agreement, the Blue House official
Pyongyang has undertaken an unprecedented missile testing program in
recent months, as well as its biggest nuclear test yet in early
September, as it seeks to develop a powerful nuclear weapon capable
of reaching the United States.
The head of NATO on Tuesday urged all United Nations members to
fully and transparently implement sanctions against North Korea.
"North Korea's ballistic and nuclear tests are an affront to the
United Nations Security Council," NATO Secretary General Jens
Stoltenberg said in Tokyo, where he met Japanese Prime Minister
Separately, a South Korean lawmaker said North Korea probably stole
South Korean warship blueprints after hacking into a local
shipbuilder's database last April.
Expectations had been growing for a warming in the frosty bilateral
ties following this month's conclave of China's Communist Party,
during which Xi cemented his status as China's most powerful leader
after Mao Zedong.
Earlier this month, South Korea and China agreed to renew a $56
billion currency swap agreement, while Chinese airlines are
reportedly planning to restore flight routes to South Korea that had
been cut during the spat.
Tuesday's agreement came after high-level talks led by Nam Gwan-pyo,
deputy director of national security of the Blue House, and Kong
Xuanyou, assistant foreign minister of China and the country's
special envoy for North Korea-related matters.
(Reporting by Christine Kim and Hyonhee Shin in SEOUL and Ben
Blanchard in BEIJING, with additional reporting by Dahee Kim and
Joyce Lee; Writing by Tony Munroe; Editing by Lincoln Feast and Ian
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