South Korea’s economic security agenda and the influence of the private sector

By Aaron Magunna

For South Korea, intensifying tensions between China and the United States deepen an already complicated strategic environment in Northeast Asia. China has long been one of South Korea’s most important economic partners. At the same time, South Korean security is tied to its alliance with Washington, which provides deterrence against North Korea.

This paper examines how South Korea has sought to bolster its economic security and highlights the key role the private sector played in driving increased divestment from China. Recognising the central role of companies in shaping the effectiveness of government policy ultimately holds key lessons for Australia and other regional states.

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Key Messages

1. After limited political and economic engagement during the Cold War, China emerged as one of the most important trade and investment partners for South Korean firms in the 2000s.
2. Chinese economic coercion against South Korea in 2016-17 motivated a rethink among South Korean policymakers and a greater policy focus on derisking the economic relationship with China.
3. While business support for government derisking policy was initially limited, the American sanctions regime against China, COVID-19, and US industrial policy subsidies have now driven a pivot of firms from China to the US.
4. Businesses ultimately play a key role in informing the effectiveness of economic security agendas. In Australia and elsewhere, this should lead to greater discussions on how business compliance with national security goals can be ensured when states’ objectives do not immediately support businesses’ short-term profitability aims.