South Korea Has More Leverage Over China Than You Think

Key Takeaways:

• South Korea and China share an asymmetric interdependence, not one-sided dependence.
• Technological advancements, particularly in semiconductors, give South Korea leverage over China.
• South Korea is diversifying its economic ties, reducing investments in China while increasing them in the U.S.
• Seoul has withstood Chinese economic coercion and is adopting a more assertive foreign policy.
• Other middle powers can learn from South Korea’s approach to balancing relations with major powers.

Challenging the Myth of Dependence

For years, conventional wisdom has painted South Korea as a nation caught between its long-standing ally, the United States, and its largest trading partner, China. With China and Hong Kong accounting for 23.7 percent of South Korean exports in 2023, many have portrayed Seoul as dangerously dependent on Beijing for its economic survival.

However, this narrative overlooks a crucial reality: South Korea and China share an asymmetric interdependence. While the sheer size of the Chinese economy suggests a greater reliance on China, South Korea holds significant leverage, particularly through its technological advancements.

Asymmetric Interdependence Unveiled

“The two countries are dependent on each other,” notes the analysis, “even if the sheer size of the Chinese economy means that South Korea relies more on its trade partner than vice versa.” This mutual reliance matters profoundly for South Korean foreign policy, allowing Seoul to engage more confidently on the global stage without being tethered by economic fears.

The Technological Edge

At the heart of South Korea’s leverage is its semiconductor industry. Semiconductor shipments have accounted for between 20 and 25 percent of South Korean exports by value annually. In 2024 alone, China and Hong Kong took in over 51 percent of these exports.

Chinese firms aren’t purchasing South Korean semiconductors out of goodwill or to gain leverage—they genuinely need them. “Chinese chipmakers are at least two or three generations behind their South Korean, Taiwanese, and U.S. competitors,” the analysis points out. U.S. sanctions preventing the export of advanced chips to China further entrench this reliance.

Shifting Investment Landscapes

South Korea’s economic ties are evolving. In 2023, the United States became South Korea’s top foreign investment destination, attracting a record 43.7 percent of the country’s total overseas investment. This shift is driven by South Korean firms seeking opportunities under U.S. policies like the Inflation Reduction Act and CHIPS and Science Act.

Simultaneously, South Korean investment in China has plummeted. Companies are looking for less politically charged manufacturing locations, with countries like Vietnam becoming preferred destinations following a free trade agreement in 2015.

Standing Firm Against Economic Coercion

South Korea’s resilience was tested in 2016 when it decided to deploy the U.S. THAAD anti-missile system. China retaliated with informal economic sanctions, hoping to sway Seoul’s decision. Instead, South Korea moved ahead with deployment, and Beijing eventually backed down, quietly removing the sanctions.

This episode taught South Korea a pivotal lesson: it could pursue its preferred policies and withstand Chinese economic retaliation. The realization emboldened Seoul to be more assertive, as seen in 2021 when it joined calls for further investigation into the origins of the COVID-19 pandemic and expressed concern over peace and stability in the Taiwan Strait.

A More Assertive Foreign Policy

Recent actions signal South Korea’s shift towards a more confident foreign policy. In 2022, it voted in favor of the U.N. Human Rights Council debating the human rights situation in Xinjiang. South Korean leaders have advocated for a more mature foreign policy, not simply swayed by great powers.

“Seoul should be more assertive and mature in its foreign policy and not simply at the mercy of great powers—particularly Beijing,” former Foreign Ministers Kang Kyung-wha and Park Jin have indicated.

Lessons for Other Middle Powers

South Korea’s approach offers a blueprint for other nations navigating complex relationships with major powers. Countries like Australia, Germany, and Japan, each with their unique economic strengths, can take cues from Seoul’s strategy of leveraging their assets to maintain autonomy.

By recognizing and utilizing its leverage, South Korea demonstrates that middle powers can withstand economic coercion and pursue their national interests without succumbing to pressure from larger economies.