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China’s Korea Policy in the Era of Reform, 1978-1992, Chapter I, China’s Unofficial Relations with South Korea since 1979

China’s Korea Policy in the Era of Reform, 1978-1992, Chapter I,
China’s Unofficial Relations with South Korea since 1979

Before the late 1970s, China pursued a rigid one-Korea policy recognising North Korea as a sole legitimate state of Korea. Beijing and Pyongyang signed a Treaty of Friendship, Cooperation, and Mutual Assistance in July 1961. However, there was a major change in China’s policy toward the Korean Peninsula in the 1980s when Beijing began to acknowledge, though not recognise, South Korea’s governmental authority and economic interaction between these two countries increased steadily. This chapter shows that the Sino-South Korean interaction in the 1980s was a result of the new political leadership in China in the post-Mao era that adopted a more liberal policy, emphasised national economic development and saw South Korea as a source of capital and technology and a model of economic development. Also, South Korea’s willingness to open its door to Communist countries favoured the increase of interaction between Beijing and Seoul.

The new Chinese leadership in the late 1970s
The death of Chairman Mao Zedong and the arrest of the Gang of Four in 1976 signalled the end of the Maoist era. Deng Xiaoping became China’s paramount leader, initiated economic reform and abandoned Mao’s radicalism. By the end of 1978, the Red Guards were dissolved; the cult of Mao was attacked and the Cultural Revolution was dubbed “the most devastating setback and heavy losses to the party, the state, and the people in the history of the People’s Republic”[1]. The Deng line called for the blending of socialist and capitalist ways:

"Only when we merge the superiority of the socialist system with the advanced science and technology of the developed capitalist countries and their advanced managerial experience, only when we combine what is useful in foreign experience with our specific conditions and successful experience can we … speed up the tempo of the Four Modernisations."[2]

Eventually, the Four Modernisations were written into the party constitution in the Eleventh Congress in August 1977 and the state constitution in the Fifth National People’s Congress in March 1978. In the eyes of the new leadership, modernisation became the “general mission of a new historical period”.[3] The Chinese Communist Party’s (CCP) Third Plenum in December 1978 established a reform-oriented policy agenda. Deng’s view on market economy was positive. He told a delegation from Encyclopaedia Britannica, Inc. in November 1979 that:

"It is surely not correct to say that market economy is only confined to capitalist society. Why cannot socialism engage in market economy? … A market economy existed already in the feudal society. Socialism may also engage in market economy."[4]

In 1981, Mao’s successor, Chairman Hua Guofeng, who had been gradually sidelined since 1978, was finally replaced by a liberal Hu Yaobang. Although Hu was later suddenly dismissed in January 1987, his successor as CCP General Secretary, Zhao Ziyang, assured that China would not abandon the open-door policy. He proclaimed at the Fifth Session of the Sixth People’s Congress held in March and April 1987:

"We shall open wider to the outside world and explore new possibilities for the effective use of foreign funds, the imports of advanced technology and the earning of foreign exchange through export. In this way our open policy will play a greater role in China’s economic development and social modernisation. Using foreign funds and attracting foreign businessmen to launch joint ventures, cooperative enterprises or wholly foreign-owned ones is a major component of our open policy."[5]

It is clear that the political leadership in China from the late 1970s had abandoned Mao’s rigid doctrinism and emphasised economic reform. This policy orientation favoured China’s economic interaction with the outside world, including South Korea.

The Chinese assessment of South Korea’s economic performance
South Korean economy had grown steadily during the reign of General Park Chung Hee (1961-1979). According to the World Bank, South Korea’s inflation-adjusted GNP tripled in each decade after Park’s first year in office. At the same time, the country dramatically reduced the incidence of poverty, from more than 40 percent of all households living below the poverty line in 1965 to fewer than 10 percent in 1980. Per capita income shot up from less than $100 annually when Park took power to more than $1,000 at the time of his death.[6] In addition, despite the economic growth, South Korean authorities were still able to maintain authoritarian rule, at least until the mid-1980s. As a result, economic prosperity in South Korea in the late 1970s did attract the new Chinese leadership’s interest.

Before the end of the 1970s, China rarely had any interaction with South Korea, except the exchanges of mail between South Koreans living in China and overseas Chinese in South Korea.[7] However, on September 7, 1978, an official of the New China News Agency said the economic success of South Korea was worthy of attention.[8] At the same time, the Chinese Academy of Social Sciences (CASS) established a small research group under the Institute of World Economy and Politics to study the developmental model of South Korea’s economy.[9] During his visit to Japan in 1979, Deng Xiaoping said that China should learn from the developmental experience of South Korea and Taiwan.[10] It has been known that the establishment of Shenzhen Special Economic Zone in 1979 was modelled on South Korea’s export processing zones. Hu Yaobang once asked: Why is South Korea doing better than North Korea, Taiwan better than the mainland and West Germany better than East Germany?[11] On December 14, 1980, in an interview with the official newspaper of the Greek Communist Party, Hu commented that “China’s open door policy is based upon the developmental experiences of Yugoslavia, Rumania and South Korea”.[12] In the same month, Zhao Ziyang was reported to have said that in an interview with Yugoslavian reporters that “China is in fact studying the experiences of South Korea in economic development”.[13] A number of Chinese publications, magazines, and newspapers in the 1980s openly praised South Korea’s economic success. For example, In Jinji Cankuo (Economic reference), edited by the Xinhua News Agency in October 1986, the Chinese referred to South Korea as one of Asia’s four dragons whose record should be studied. [14]

For China, South Korea was not only a model of economic development. China’s modernisation cannot be fulfilled without external support and exchanges from industrialised countries, which can provide advanced technology, capital, markets and managerial skills. As a newly industrialised country and a close neighbour of China, South Korea fits nicely into most of these categories. The Chinese found that South Korea’s capital is a potential source of foreign investment and the intermediate technology of South Korea was more suitable to their practical needs than the expensive high-technology of the United States, Japan, and Western Europe.[15] As Dan C. Sanford argues in his book, South Korea and the Socialist Countries: the Politics of Trade:

"Even though China has always preferred to import original technology, its managerial teams have not always been competent to handle the final processing of the semi-finished products it purchases. China will continue to import some consumer goods, but wishes to move toward the import of parts and components which will be assembled into finished goods at domestic factories. Thus, China sent technicians to Korea to learn how best to assimilate some of the sophisticated Japanese steel production technology it imports. South Koreans, of course, have mastered these intermediate technology processes and have become skilled at making production quicker and more efficient. China hopes its industrial leaders will learn from South Korea and therefore is especially eager to encourage joint ventures with South Korean firms."[16]

South Korea also provides for the Chinese a growing export market for mainland’s primary resources and industrial material. In addition, geographic proximity and cultural affinity between China and South Korea reduce transportation costs and barriers to communication. China’s Liaodong and Shandong Peninsulas and Bohai area are just across the Yellow Sea from the west coast of Korea and there are sizeable groups of ethnic Koreans living in Northeastern Chinese cities such as Harbin and Shenyang who can be an indispensable asset in smoothing Chinese correspondence with South Korean businessmen.[17] As a result, on December 18, 1978, Chinese Minister of Foreign Trade Li Qiang mentioned in an interview in Hong Kong that “China may have to consider having trade with South Korea”.[18] Few months later, indirect trade between China and South Korea via Hong Kong and Japan started. Chinese Foreign Minister Huang Hua, in his foreign policy address in January 1980, described China’s South Korea policy as Guanmen Bushangsuo (“the door is closed but not locked”).[19]

In contrast, the economy of China’s traditional ally, North Korea, still clinging on Kim Il Sung’s state ideology of Juche (self-reliance), did not fit Deng’s reform. After reaching a peak of its economic prosperity in the 1960s, North Korea in the 1970s began to face economic difficulties. Most competent economic advisors with managerial skills were purged in the mid-1960s. Its technological and economic backwardness and inefficiency became obvious but the government still preferred mass mobilisation to economic adjustments. By the end of the 1970s, the GNP of North Korea was only $12.40 billion whereas that of South Korea was $62.37 billion.[20] In addition, heavy defense expenditures and political campaigns exhausted North Korea’s financial resources. Its foreign debts rose so steadily that it rescheduled its Western European and Japanese payments due in the early 1980s.[21] It is clear that North Korea could not provide what China wants in the era of reform, i.e. advanced technology, capital, markets and managerial skills.

In short, by the end of the 1970s, attracted by South Korean economic performance, China became eager to engage with South Korea economically. However, the Sino-South Korean economic interaction in the 1980s could not have happened if South Korea had not pursued an open-door policy toward the Communist countries since the 1970s.

South Korea’s “Open-Door” policy since the 1970s
In the early 1970s, international strategic system changed significantly. The Sino-American confrontation came to the end after President Richard M. Nixon visited China in February 1972. Beijing and Washington became de facto allies against the Soviet Union. This change made the U.S. allies in the Cold War, including South Korea, adjust their foreign policy direction by opening their relations with the Communist nations. On June 23, 1973, President Park Chung Hee made a major speech, “New Foreign Policy for Peace and Unification”. Park stated:

"The Republic of Korea will open its door to all the nations of the world on the basis of the principles of reciprocity and equality. At the same time, we urge those countries whose ideologies and social institutions are different from ours to open their doors likewise to us."[22]

Park’s statement signalled South Korea’s abandonment of the “Hallstein Doctrine”, the practice of not having relations with any country that recognised the North Korean regime.[23] On November 17, 1978, coinciding with China’s opening to the outside world and its emphasis upon economic modernisation, South Korean Foreign Minister Park Dong Jin made it clear that “the government will not prohibit any commercial activities with communist countries, with which it does not have diplomatic relations.”[24] South Korea’s open-door policy culminated in the late 1980s with President Roh Tae Woo’s Nordpolitik (Northern Diplomacy), aiming to develop relations with the socialist countries. In his first speech at the U.N. General Assembly in October 1988, Roh stated:

"I welcome as an encouraging development the fact that socialist countries such as China and the Soviet Union are showing a forward-looking attitude in recent months concerning mutual exchanges and cooperation with the Republic of Korea in a number of fields. I find it significant that China, a nation which has traditionally been a good neighbour of Korea, is moving to overcome the wall of separation that has lasted for nearly half a century and is expanding its mutual exchanges and cooperation with the Republic of Korea."[25]

Indeed, South Korea’s foreign policy reorientation was not based only on geopolitical consideration, but also economic one. By the beginning of the 1980s, South Korean export-oriented economy faced a series of problems such as labour shortages, high wages, lack of natural resources, limited domestic consumption, global protectionism, and appreciation in currency.[26] Thus, Seoul wanted to diversify its economy by exploring economic relations with China which possesses a huge market, ample labour, and rich natural resources.

The interaction between China and South Korea in the 1980s
As China’s modernisation coincided with South Korea’s open-door policy, economic interaction between the two countries increased steadily in the 1980s, especially after the hijack incident, a significant breakthrough in Sino-South Korean relations. In May 1983, after six armed Chinese civilians had hijacked an airplane from Shenyang to Seoul, China dispatched a negotiating team to Seoul. This was the first official contact between the two countries[27]. In August of that year, it was the first time the Chinese government decided to grant a visa to a South Korea government official who attended a seminar at Wuxi under the auspices of the United Nations.[28]
Another opportunity for the Sino-South Korean negotiation came in March 1985 when a mutiny on a Chinese navy torpedo set it adrift on the high seas; it was founded by a South Korean fishing boat and towed to Kunsan in South Korea. Apart from crisis management, China sustained its unofficial relations with South Korea by conducting sports diplomacy. In March 1984, South Korea attended the Davis Tennis Cup’s preliminary games at Kunming. Beijing sent a large delegation to the 1986 Seoul Asian Games and the 1988 Seoul Olympics. These events provided a convenient excuse for Beijing to come to direct contact with Seoul and thus facilitated economic interaction between these two countries. Direct trade secretly began in 1981 and became an open secret by the mid-1980s.[29] China’s frontline organisation that directly dealt with South Korea was the China Council for the Promotion of International Trade (CCPIT), an agency under the sponsorship of the Ministry of Foreign Economic Relations and Trade (MOFERT). China’s trade volume with South Korea, after a slight decline in 1981-1982, rose from $120 million in 1983 to $434 million in 1984 and $3.09 billion in 1988, five times bigger than that of its trade with North Korea and making South Korea China’s fourth or fifth largest trading partner.[30] China exported agricultural products (corn, millet, and oil), natural resources (coal), textiles, silk, jute fibres, cotton yarn, and other raw materials to South Korea and imported intermediate technology goods – steel products, electronics, electrical appliances, textiles, machine tools, petrochemicals, and chemical fertilizers – from South Korea. [31]
Meanwhile, South Korea’s investment in China began, although its amount was not very significant relative to the size of its trade with China.[32] The first joint venture agreement was made in February 1985 between Sovereign Industries, a New York-based Daewoo company, and Ming Long Development Company of Jujina Enterprises that represents the commercial interests of Fujian Province. The joint firm was named King Woo and its first work was to build a television and refrigerator assembly plant in Fuzhou.[33]

In addition, the increase of economic interaction between China and South Korea was partly a result of pressure from China’s provinces. The Chinese government in the era of reform has conferred on the provinces the new authority to sign trade and direct investment with foreign companies, with the size of projects closely monitored by the centre. Since the province can now retain a portion of its foreign currency earnings, it naturally strives to expand the base of its foreign currency earnings by promoting more trade and luring more foreign investment.[34] During the early years of Deng’s reform, the preferential policies were applied to Fujian and Guangdong. By the mid-1980s, however, other provinces, including South Korea’s neighbouring Liaodong and Shandong provinces, began to lobby for the universalisation of preferential policies.[35] With the compatibility of these two countries’ economies and provincial pressure, it is no coincidence that in late 1987 the South Korean government announced a large-scale development plan for its western coastal region called the “Yellow Sea Project” at the same time the Chinese government announced a decision to further open the Shandong and Liaodong Peninsulas.[36] In August of the following year, the Shandong Branch of the China Council for the Promotion of International Trade (CCPIT) signed trade agreements with the Korean Trade Promotion Corporation (KOTRA) and opened the first representative office of a Chinese local government in Seoul.

Meanwhile, China’s diplomatic stance toward South Korea changed. Before the late 1970s, China recognised North Korea as a sole legitimate state of the Korean Peninsula. South Korea, in China’s eyes, was a territory “under the occupation of U.S. imperialism” ruled by “its lackey the Park Chung Hee puppet clique”.[37] From the late 1970s, however, Beijing began to acknowledge, if not recognise, Seoul’s governmental authority. During his five-day visit to Pyongyang in May 1978, Hua Guofeng’s characterisation of the Park government was less provocative and militant than before: he did not use such expression as “fascist dictatorship,” “suppression of democratic struggle,” or “continual military provocations against North Korea”. [38] In a nine-article memorandum settling the 1983 hijack incident, it listed the South Korean delegate, Gong Ro Myong, as representing “the Ministry of Foreign Affairs, the Republic of Korea”.[39] In the 1984 Davis Cup’s preliminary games, China permitted the South Korean team to display its national flag at the airport and during the games.[40] Also, the memorandum settling the 1985 torpedo incident specifically referred to “the Republic of Korea”.[41] In 1984, Zhao Ziyang was reported to have gone so far as to tell visiting Australian Prime Minister Hawke that “it isn’t feasible” to reunify Korea any longer, given the reality of two governments on the Peninsula.[42] Therefore, it can be argued that China in the 1980s pursued a de facto two-Koreas policy.

Overall, it is obvious that the Sino-South Korean relations in the 1980s were a result of the new Chinese leadership who emphasised economic modernisation and saw South Korea’s economic potential to fulfil China’s developmental goal. South Korea’s foreign policy orientation since the 1970s also facilitated their interaction. In addition, crisis management and sports diplomacy helped China sustain and strengthen these unofficial relations as well.

However, it must be noted that the Sino-Korean trade was not conducted by the central government at Beijing but, as mentioned, by provincial governments, special agencies, and trading firms in Hong Kong instead. In addition, although the trade volume between China and South Korea rose tremendously in the late 1980s and the former acknowledged the latter’s governmental authority, China did not plan to establish diplomatic relations with South Korea until the early 1990s. Therefore, it is worth considering the factors that retarded the Sino-South Korean normalisation. The next chapter will show that security and political concerns made China reluctant to recognise South Korea in the 1980s.

[1]Immanuel C. Y. Hsu, The Rise of Modern China, 6th ed. (New York: Oxford University Press, 2000), 825-826.
[2]Cited in ibid., 806.
[3]Immanuel C. Y. Hsu, The Rise of Modern China, 3rd ed, (New York: Oxford University Press, 1983), 833.
[4]Wei-Wei Zhang, Ideology and Economic Reform under Deng Xiaoping 1978-1993 (London: Kegan Paul International, 1996), 60.
[5]Chae-Jin Lee, “China’s Pragmatic Policy Oreientation and its Implication for Korean Unification,” in Perspectives on The Peaceful Reunification of Korea, ed. Hong Nack Kim et al. (Seoul: Institute of Korean Studies, 1988), 7.
[6]Don Oberdorfer, The Two Koreas: A Contemporary History (New York: Basic Books, 1997), 37.
[7]Chu Sung-po, “Peking’s Relations with South and North Korea in the 1980s,” Issues and Studies 22 (November 1986): 75.
[8]Jae Ho Chung, “South Korea-China Economic Relations: The Current Situation and Its Implications,” Asian Survey 28 (October 1988): 1033.
[9]Ibid: 1033-34.
[10]Ilpyong J. Kim, “China and the Two Koreas in the post-Seoul Olympics Era,” Korea Observer 14 (Autumn 1988): 275.
[11]Weiqun Gu, “China’s ‘Open-Door’ Policy and the Korean Peninsula,” in Peace and Cooperation in Northeast Asia, ed. Dalchoong Kim (Seoul: Institute of East and West Studies, Yonsei University, 1990), 115 .
[12]Jae Ho Chung, “South Korea-China Economic Relations,”: 1034.
[14]Chae-Jin Lee, China and Korea: dynamic relations (Standford, CA: Hoover Institution Press, 1996), 145.
[15]Ibid., 149.
[16] Dan C. Sanford, South Korea and the Socialist Countries: The Politics of Trade (London: Macmillan Press, 1990), 32-33.
[18]Jae Ho Chung, “South Korea-China Economic Relations,” : 1033.
[19]Xiaoxiong Yi, “China’s Korea Policy: From “One Korea” to “Two Koreas,” Asian Affairs: An American Review, no. 2 (1995): 123.
[20]Adrian Buzo, The Guerilla Dynasty: Politics and Leadership in North Korea (Boulder, Colorado: Westview Press, 1999), 91.
[21]Ibid., 122.
[22]Chae-Jin Lee, China and Korea, 106.
[23]Ahn Byung-joon, “South Korea and the Communist Countries,” Asian Survey 20 (November 1980): 1102. The doctrine was first expressed by Foreign Minister of Federal Republic of Germany Walter Hallstein in 1955. It dictated that West Germany would sever official ties with any countries that recognised East Germany except the Soviet Union.
[24]Jae Ho Chung, “South Korea-China Economic Relations,”: 1033.
[25]Chae-Jin Lee, China and Korea, 112-113.
[26] Zhang Xiaoming, “The Korean Peninsula and China’s National Security: Past, Present and Future,” Asian Perspective, no. 3 (1998): 266; and Jia Hao and Zhang Qubing, “China’s Policy toward the Korean Peninsula,” Asian Survey 32 (December 1992): 1145.
[27]Chu Sung-po, “Peking’s Relations with South and North Korea in the 1980s,”: 76.
[28]Chae-Jin Lee, “The Role of China in the Korean Unification Process,” Asian Perspective 10 (Spring-Summer 1986): 110.
[29] Dan C. Sanford, South Korea and the Socialist countries: The Politics of Trade, 9-13.
[30]Zhang Xiaoming, “The Korean Peninsula and China’s National Security: Past, Present and Future,”: 264-265; and Parris H. Chang, “China’s East Asian Policy during the Deng Era,” in Peace and Cooperation in Northeast Asia, 54. See North Korea’s trade with China in from 1970 to 1994 in Chae-Jin Lee, China and Korea, 140.
[31]Ibid., 147.
[32]Jae Ho Chung, “Sino-South Korean Economic Cooperation: An Analysis of Domestic and Foreign Entanglements,” Journal of Northeast Asian Studies 9 (Summer 1990): 59-79, [journal on-line] ; available from http://weblink2.epnet.com/delivery.asp?tb=1&_ug=dbs+0+1n+en-us+sid+3087E9E8-D6C... ; accessed 25 July 2003.
[33]Jae Ho Chung, “South Korea-China Economic Relation,”: 1042.
[34]Jae Ho Chung, “Sino-South Korean Economic Cooperation,”: 59-79.
[35]Peter T. Y. Cheung and James T. H. Tang, “The External Relations of China’s Provinces,” in The Making of Chinese Foreign and Security Policy in the Era of Reform, ed. David M. Lampton (Stanford, California: Stanford University Press, 2001), 97 and 117.
[36]Jae Ho Chung, “South Korea-China Economic Relations,” : 1045.
[37]See President Liu Shaoqi’s statement at a mass rally at Pyongyang in 1963 and the 1970 joint communiqué between Premier Zhou Enlai and Premier Kim Il Sung in Chae-Jin Lee, China and South Korea, 61 and 64.
[38]Ibid., 69.
[39]Ibid., 107.
[40]Ibid., 109.
[41]Ibid., 110
[42]Norman D. Levin, “Evolving Chinese and Soviet Policies toward the Korean Peninsula,” in Chinese Defense and Foreign Policy, ed. June Teufel Dreyer (New York: Paragon House, 1988), 191.