Through a top-level meeting with North Korea, China is signaling it will not be a bystander in the evolving dynamics on the Korean Peninsula. China may have an opening to restore its long-frosty relations with South Korea by extending outreach on trade measures. Both North Korea and South Korea have an interest in including China to some extent in their evolving diplomatic dynamic.
The dynamic on the Korean Peninsula is changing and China is working quickly to restore its position by reshaping its strained relations with both North and South Korea. Following days of heightened speculation about who was aboard a mystery train that traveled from Pyongyang to Beijing, China confirmed on March 28 that it hosted North Korean leader Kim Jong Un this week. It was Kim's first trip outside North Korea since he came into power in 2011, and his visit to Beijing reinforced the perception that the North Korean leader would visit China before meeting with any other foreign leader. With a banquet for Kim in the Great Hall of the People and lavish words in state media, Chinese President Xi Jinping reminded those involved in the fluid situation on the Korean Peninsula that, tensions aside, Sino-North Korean relations are still strong and that Beijing will not watch as a mere bystander while Kim meets with South Korean President Moon Jae In on April 27 and with U.S. President Donald Trump before the end of May. China is showing that it has a say in any deal that could affect the future of the Korean Peninsula and the region.
The Big Picture
In Stratfor's 2018 Second-Quarter Forecast, we noted the centrality of the emerging North-South Korea diplomatic push. With the United States now signaling that it too will take a prominent role in the region's diplomacy, China has asserted its position in the dynamic as well.
China Sees an Opening
Its demonstration of Chinese-North Korean relations doesn't overshadow Beijing's outreach to South Korea, however. Shortly after the Xi-Kim meeting, China announced that one of its top diplomats, Yang Jiechi, would visit South Korea on March 29 to act as Xi's special representative to brief Moon and other South Korean officials about the Chinese leader's talks with Kim. While China has maintained the informal economic boycotts that it imposed against South Korea last July over Seoul's decision to deploy the U.S. Terminal High-Altitude Area Defense (THAAD) anti-missile system, the countries quietly have been talking to advance their free trade agreement to cover the services and investment sectors. South Korea has been under U.S. pressure on trade and this week agreed to make some concessions as the two sides negotiate an amended U.S.-Korea Free Trade Agreement. At the same time, South Korea is bogged down by a slowing economy while the United States wants it to increase the amount it pays toward keeping U.S. troops deployed in South Korea. Seoul also has been relatively inactive setting up THAAD because of disputes with Washington over operational costs. China may see an opportunity to reset its relations with South Korea.
History and geopolitical proximity give China strong influence over the Korean Peninsula. China regarded the Korean Peninsula both as a defensive barrier and a constant source of security concerns. Together, these factors formed China's fundamental interest in keeping a stable and neutralized buffer at its doorstep. But such an imperative has constantly turned China's influence into a liability, enabling North Korea to maneuver under China's shield and allowing foreign countries to pressure China to try to shape the behavior of North Korea. This has been a constant theme and has played out most vividly in the latest crisis on the Korean Peninsula.
China's bottom line on North Korea's nuclear pursuits is that, unlike the United States, it can tolerate a nuclearized North Korea as long as it doesn't lead to instability on its borders and as long as it can hedge against the United States advancing its defensive posture in the region. As North Korea kept advancing its nuclear program, Beijing saw its interests increasingly compromised by an intractable North Korean government and growing U.S. defensive posturing. In particular, with the Trump administration's talk of a military strike against North Korea and with the United States applying pressure on Beijing to comply with additional sanctions, China was caught between two undesirable outcomes: a military conflict or agreeing to inflict significant economic stress on North Korea, both of which could lead to instability on its doorstep.
Beijing Shifts Its Position
China has agreed to some sanctions against North Korea but has resisted tougher ones — such as cutting off oil and natural gas supplies or allowing U.S.-led interdictions of vessels bound for North Korea — out of fear of fueling instability. Thus, Washington has continued to pressure China on trade and other fronts. Even so, China's approach has antagonized North Korea. Between Washington's continued pressure and the pressure posed by North Korea's continued nuclear advancements, China has found itself increasingly sidelined on the Korean Peninsula. After failing to persuade both sides to adopt a "dual-freeze" — in which the North would suspend its nuclear and missile activities while the United States would pause its military exercises with the South — China has shifted its position and is now calling for direct talks rather than for multilateral dialogue. The underlying logic is that only a direct dialogue between the United States and North Korea can manage the crisis.
For Beijing, direct U.S.-North Korea talks could defuse military tensions and protect China from the threats of secondary sanctions.
Trump's agreement on March 8 to meet Kim this spring has quickly transformed the previous stalemate on the Korean Peninsula into a state of flux. For Beijing, direct U.S.-North Korea talks could defuse military tensions and protect China from the threats of secondary sanctions. From this perspective, Beijing has every reason to make sure the U.S.-North Korea summit doesn't fail completely. For China, it would be a best-case scenario for the talks to lead to a denuclearization process that in the short term allows it to challenge the U.S. and South Korean justification to deploy THAAD and that in the long term prevents a nuclear-capable (and potentially unified) Korean Peninsula. An opposite result is North Korea returns to its nuclear path and the United States resumes its military threats and sanctions pressure.
Nonetheless, the fact the United States and North Korea are moving quickly toward direct talks between Kim and Trump is stoking anxiety in China over maybe another set of challenges. As much as it fears being sidelined, Beijing is deeply concerned that direct dialogue could lead to unwanted outcomes: North Korea could ally itself with the United States or the talks involving the two Koreas and the United States could lead to a long-term settlement and the eventual unification of the Korean Peninsula under a U.S. security guarantee. These scenarios equally challenge Beijing's desire to keep a neutralized buffer.
Of course, we are a thousand miles away from any achievement in the U.S.-North Korea dialogue, let alone any potential settlement on the Korean Peninsula. After all, there are enormous trust gaps between North Korea and the United States and logistic challenges to overcome. The perception that North Korea is using the talks to buy time while it achieves nuclear deterrence and the U.S. insistence on denuclearization mean the dialogue has a high probability of simply protracting irreconcilable differences, if not returning the region to its previous tense state. Likewise, none of the envisaged scenarios likely will take shape, at least not in any short term. Still, Beijing needs to make sure it plays a role in the region's rapidly shifting dynamic. China can ill afford to confront both Koreas, nor can it be completely alienated from the Korean Peninsula.
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