Tuesday, April 14, 2009

South Korea strategies to counter China’s growing influence is futile

By China Watcher

A recent report by the Ministry of Strategy and Finance from South Korea suggested that the country needs to counter China’s growing influence in the world but did not provide any strategic measures, leaving it to the economic experts in the small but “fiercely patriotic” country of about 50 million people to decide on the next course of action.

The so-called strategic “thinkers” said that China’s growing economic might and influence will turn the world’s crisis into an opportunity for themselves thus depriving small export oriented nations like South Korea of similar lucrative markets to sell its manufactured goods. The report pointed out that China has been beefing up the "Beijing Consensus" through signing currency swap deals with Asian and Latin American nations, expanding assistance to developing countries in Africa and Southeast Asia, and increasing investment in natural resources in Latin America. Currency swap deals worth about US$91 billion have been concluded to date. The initiative is one of the efforts of the Chinese government to reduce the reliance on the US dollar as the main global trading and investment currency.

Though China is a direct competitor for markets for manufactured goods throughout the world, it it is also presently South Korea’s largest export market. According to the South Korea’s statistical data, trade volume with China stood at USD168 billion in 2008 and constituted about a fifth of its total trade volume.

China with its huge foreign reserves of US$1.9 trillion and its large appetite for natural resources would provide them with stronger leverages to negotiate with resourced rich countries. As a influential permanent UN Security Council member like the US, it can also use its diplomatic links to support its many international deals especially with developing nations.

Personally, I think there are only two feasible options. The first is to work with the European Union (EU), the US and maybe, to a certain extent with Japan as an informal conglomerate to COUNTER China’s economic growth and influence throughout the world using agreed quotas and other non-free trade protective mechanisms like tariff and trade barriers. The protective shield is already being used actively by EU in its trade with China. The second would be to work with China jointly like the ASEAN trade initiative to increase intra-trade among them, and to complement the production of goods in countries where there are noticeable comparative advantage. As to the sharing of limited resources, China could use its strong purchasing power and large warehouses to distribute it among the signatories of the Asian grouping including South Korea to secure the lowest possible cost.

The second option which is non-confrontational and a win-win scenario would be the best bet, and I am sure the Koreans would know which one to pick for the prosperity of its people in the next 10 to 20 years.

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