Korean unification: a rising cost for Beijing

Recently, I argued that China has a strong security interest in delaying Korean unification. At a Korean National Defense University (KNDU) panel event earlier this month, on which I sat, there was near unanimity that China gains both geopolitical advantage as well as regime security by keeping the robust democracies (and militaries) of South Korea, Japan, and the US several hundred miles further back from its border.

But there are costs too. And there is a growing body of evidence that these costs, particularly to China’s reputation, are provoking a ‘track II’ debate on whether to cut North Korea loose. The following are excerpts from my longer KNDU paper on this. Please email me if you would like the full version.

1. Economics and unification: Indeterminate Chinese interests

China enjoys a unique economic relationship with North Korea. Because North Korea is under heavy sanction, both bilateral and multilateral, China captures monopoly/monopsony rents as the only serious trading partner for the DPRK. That is, Chinese firms operating in North Korea, trading with it, banking with it, and so on, can demand cut-rate prices for North Korean goods because Pyongyang has few other buyers of its products, and charge high prices for its own goods. In this context, it is often noted that China does not enforce UN sanctions particularly well and that burgeoning economic interaction with North Korea aids the revival of China’s ‘rustbelt’ northeast. China’s trade with North Korea has boomed with the imposition of international sanctions over the last decade, while North Korean trade has almost completely shrunk to exchange with just China. It is reasonable to assume that China would not easily sacrifice this rentier-like relationship.

But South Korea too has built robust ties with China’s economy since the normalisation of PRC-ROK ties in 1992. Despite North Korea’s intense focus on the economic relationship with China, the DRPK’s GDP is so small that the South Korean-Chinese economic relationship dwarfs that between North Korea and China. By way of example, in 2012, the UN estimates that South Korea was China’s fourth-largest export target (4.28% of all exports) and second-largest importer (10.07%). By contrast, the DPRK represents just 0.17% of Chinese exports and 0.15% of imports. North Korea may be dependent on China but certainly not vice versa.

2. China’s prestige interests in Korean unification

China’s security and economic cost-benefit ratios can be somewhat quantitatively measured. Exports and soldiers can be counted. Harder to judge are the ‘audience costs‘ China pays in supporting North Korea. Do other states fear or disapprove of China more because it assists the widely feared and disliked North Korea? China already has a global image problem. It is feared and grudgingly respected but not liked by would-be peers such as the US, EU and Japan. For all its strength, the PRC has no major allies. Routinely excusing or covering for North Korea, one of the most reviled states in the world, almost certainly tars China as well. Scott Snyder has similarly suggested that China pays ‘skyrocketing reputational costs‘ for its support of North Korea, particularly after 2010’s tepid response to the Cheonan sinking and Yeonpyeong shelling.

Other Chinese disputes, such as in the East and South China Seas, are somewhat defensible before global public opinion. Outsiders who know little about Senkaku or the Spratlys may be inclined to condemn both sides equally for such traditional conflicts of state interest. But China’s support of North Korea cannot be ‘normalised’ or obfuscated in this way. North Korea is so widely seen as awful that its behaviour inevitably tars its Chinese patron too.

Full article: Korean unification: a rising cost for Beijing (Business Spectator)

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