China and South Korea will disengage as ties sour

Significance

Seoul in June accused China’s ambassador of violating diplomatic protocols and interfering in South Korea's internal affairs. Later that month, Seoul cleared the way for full deployment of the US military's THAAD missile defence system in South Korea.

Impacts

• Companies with growing links to China must weigh any gains against the risk of US retaliation, such as exclusion from new subsidies.
• Vietnam is filling the role China used to play, offering South Korean firms the same advantages without the political and security risks.
• The main South Korean opposition's dovishness towards China will be a liability in next April’s parliamentary election.