Moon Jae-in, South Korea’s president, speaks during a news conference with U.S.(Photographer: SeongJoon Cho/Bloomberg)

China Reaps Reward of Softer Approach as Moon Heads to Beijing

(Bloomberg) -- As Chinese President Xi Jinping welcomes South Korea’s Moon Jae-in to Beijing, he’ll be showing off the gains of a foreign policy shift that has seen China tamp down several disputes with its neighbors.

Moon left Seoul for first trip to China as president Wednesday, six weeks after China lifted an economic embargo against South Korea over its deployment of a U.S. missile-defense system. The standoff, which hurt sales of everything from cosmetics to K-pop between two of Asia’s biggest economies, ended with Moon promising to respect China’s missile-shield concerns and pursue a “balanced diplomacy” with Beijing and Washington.

The resolution was one of several Chinese diplomatic thaws in recent weeks, as Beijing worked to quiet South China Sea disputes, and mend ties with Singapore and Japan. Such moves help China capitalize on lingering uncertainty over U.S. commitment in the region as President Donald Trump questions Asian trade deals and prioritizes North Korea’s nuclear missile threat over territorial spats.

They may also serve a more personal goal for Xi, who in October pledged China’s return to “the center of the world stage” at a leadership meeting that positioned him to rule for decades. China’s efforts to assert its new might during Xi’s first term -- including building military outposts in the South China Sea -- had stoked suspicions about its intentions.

‘Strategic Opportunity’

“Xi has realized that China’s rapid growth and behavior has scared a lot of people in the region,” said Michael Kovrig, senior adviser for Northeast Asia at the International Crisis Group and a former Canadian diplomat stationed in Beijing. “Xi sees there is a strategic opportunity of Donald Trump having taken America in a different direction and seeing that void, that has probably led him to ramp up that policy further.”

China’s decision to stop punishing South Korea -- one of the U.S.’s closest allies -- for its deployment of Terminal High Altitude Area Defense, or Thaad, missile shield illustrates the shift. After Seoul decided last year to accept the system, China ordered travel agencies to stop selling South Korea tour packages and launched fire-safety inspections that forced Lotte Group to suspend operations at 99 hypermarkets in China.

But the argument that Thaad was an early component to build a U.S. missile shield around China failed to resonate as North Korea lobbed test missiles into the waters of North Asia. The sanctions “made China look like an insensitive bully,” Kovrig said.

Consensus Reached

China lifted the embargo without securing Thaad’s withdrawal. The South Korean won has strengthened 2.5 percent since the dispute ended Oct. 31.

The two sides “reached some consensus on dealing with the issue,” Chinese Foreign Ministry spokesman Lu Kang said in response to a question about Moon’s visit Tuesday. “We hope that the issue can continue to be handled properly.”

Discussions about North Korea will dominate Moon’s visit to China, whose decades-old alliance with Pyongyang has frayed amid leader Kim Jong Un’s provocations. Officials on both sides have urged Trump to dial back threats of military action and focus on sanctions to push Kim back to negotiations.

Xi and Moon will also discuss adding a services component to the free-trade agreement that took effect in December 2015, according to a South Korean government official who spoke on the condition or anonymity.

‘Defensive Purpose’

Seoul has played down the prospects for a breakthrough, with Moon telling the state-run China Central Television on Monday that the two sides were trying to rebuild trust that had “collapsed considerably.” The leaders won’t issue a joint statement because they couldn’t reach agreement on pending issues, South Korea’s JoongAng Daily newspaper reported Tuesday, citing an unnamed senior official in the president’s office.

“South Korea will be particularly careful not to let Thaad go beyond its defensive purpose versus North Korea’s nuclear weapons and missiles and breach China’s security interests,” Moon told CCTV. “I also want to tell you that the U.S. pledged several times in that regard.”

While it’s unclear whether China’s moves represent a long-term strategic shift, Xi’s speech at the Communist Party’s congress in October laid out a plan to build global influence over decades. Last month, China agreed at Association of Southeast Asian Nations meetings in Manila to start talks on a code of conduct in the South China Sea, 15 years after first discussing the topic.

Singapore, Japan

“China has realized that its strategic relationships aren’t that good,” said Li Mingjiang, an associate professor at the S. Rajaratnam School of International Studies in Singapore. “If it doesn’t engage in the code of conduct process, its relations will be more challenging.”

Stable diplomatic relationships have become more valuable to China as Xi’s Belt and Road Initiative, a trade-and-infrastructure program knitting together dozens of countries along the ancient Silk Road, grows in scope and ambition. That may help explain why China also shelved a diplomatic spat with Singapore, a key financial center and port on the plan’s maritime route.

In September, Xi hosted the city-state’s prime minister, Lee Hsien Loong, officially closing a rift that emerged when Hong Kong authorities detained a shipment of Singapore armored personnel carriers en route from exercises with China’s rival, Taiwan. Singaporean officials have since accelerated efforts to participate in Belt and Road projects.

Similarly, Japanese Prime Minister Shinzo Abe has expressed a willingness to cooperate on the initiative as China takes steps to thaw ties plunged into a deep freeze five year ago over disputed East China Sea islands. Both sides emerged from a meeting on the sidelines of a regional summit in Danang, Vietnam, last month promising a “fresh start” to relations.

In recent weeks, China has also presented itself as a potential mediator in one of the region’s biggest human rights disputes, the Rohingya refugee crisis in Myanmar. In a revision of its traditional policy against interfering in other nation’s affairs, China suggested a three-pronged plan, including a cease-fire, repatriation and talks.

Zhang Baohui, director of the Centre for Asian Pacific Studies at Lingnan University in Hong Kong, said it’s always difficult to discern the strategic intentions of rising powers like China. But it’s clear that Xi is ending the year in a stronger position.

“The overall Chinese diplomatic offensive in 2017 has paid off in the form of China’s heightened prestige and status in international relations,” Zhang said.

©2017 Bloomberg L.P.