Analysis & Opinions - The Diplomat

What Can Vietnam Learn From China's Economic Retaliation Against South Korea?

| Mar. 29, 2017

The dispute between South Korea and China over the deployment of the Terminal High Altitude Area Defense (THAAD) system by the United States on South Korean soil has both political and economic ramifications. In particular, the retaliatory measures by the Chinese government against South Korea’s decision to deploy THAAD have been surprisingly damaging to the export-oriented economy of South Korea.

According to a recent report by a senior researcher from the Economic Research Institute of the Industrial Bank of Korea (IBK), this economic retaliation by China may cost South Korea from $7.69 billion up to $14.76 billion in the worst-case scenario. As China is the biggest importer of South Korean exports (more than a quarter of South Korea’s export revenues in 2015 came from China), the report concluded that the export sector of South Korea will likely be hit with the heaviest blow, with possible losses from the Chinese retaliation ranging from $4.14 to $8.27 billion (or from 5 percent to 10 percent of the total export value). Although suffering less in term of total loss, the tourism and entertainment sectors of South Korea will probably experience a much bigger percentage decrease (ranging from 10 percent to 30 percent) since they have been directly affected by Chinese government’s moves to partially ban the sales of Korean entertainment content and to discourage the promotion of South Korean tours to Chinese customers, who held more than 34 percent of all South Korean tourist visas granted in 2016.

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For Academic Citation: Nguyen, Viet Phuong.“What Can Vietnam Learn From China's Economic Retaliation Against South Korea?.” The Diplomat, March 29, 2017.

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