[Why&Next] BRICS Expansion and No Japan Movement... Will China's Counterattack Affect Korea Too?

China Expands BRICS Influence... Countermeasures Against US
Strong Measures to Ban Imports Amid Japan's Contaminated Water Discharge
Counterattack Against US and Allies' Containment... Next Target After Japan is Korea
If China's Economy Tilts Toward BRICS, Korean Exports Also Affected

China, which is expanding BRICS in opposition to the US-centered Group of Seven (G7), is now turning its attention sharply toward Japan, a key pillar of the South Korea-US-Japan cooperation framework. Although the apparent cause is Japan's discharge of contaminated water from Fukushima, analysts say it is largely a political retaliation against the US and its allies. As the US strengthens export controls on advanced technologies to China in cooperation with South Korea and Japan, China is launching a full-scale counterattack.

With anti-Japanese sentiment intensifying in China, if China blocks group tours to Japan again or initiates a boycott of Japanese products, South Korean companies could benefit indirectly. However, many believe that in the mid to long term, the South Korean economy cannot be complacent. If China escalates conflicts with the US and its allies while strengthening cooperation with BRICS or Belt and Road Initiative (land and maritime Silk Road) countries, South Korea, which is highly dependent on China, will inevitably suffer damage.

Chinese President Xi Jinping is attending a BRICS (Brazil, Russia, India, China, South Africa) press conference held on the 24th (local time) in Johannesburg, South Africa. [Image source=Yonhap News]

According to Chinese local media on the 29th, criticism against Japan has grown in China since Japan recently began discharging contaminated water from the Fukushima Daiichi Nuclear Power Plant. The Chinese government, as if waiting for this, imposed a total ban on imports of Japanese seafood on the 24th, the day Japan started the discharge, and Communist Party-affiliated media outlets flooded with articles criticizing Japan. In response, Chinese travel agencies have also reduced promotions for travel to Japan, intensifying the 'No Japan' movement.

The Chinese government's stronger-than-expected backlash is not only due to the issue of Japan's contaminated water discharge itself but also because it serves as a check against the US, which has strong ties with Japan in semiconductor and military sectors. Zhong Ziyan, a professor at the National University of Singapore, said in an interview with major foreign media, "China's ban on Japanese seafood appears to be part of China-Japan competition," adding, "Considering the close relationship between Japan and the US, this is naturally intertwined with China-US competition."

If China's 'No Japan' movement spreads, the South Korean economy is expected to gain indirect benefits. Immediately, on the previous day’s stock market, there was a forecast that China would increase consumption of South Korean products and travel instead of Japanese ones, leading to a rise in stock prices of domestic cosmetics companies like Tony Moly and travel agencies like Norangpungseon. The Bank of Korea expects that the number of Chinese tourists will increase to 2.2 million in the second half of this year, helping to recover growth rates, and there is a possibility of an even better trend than expected.

China’s Counterattack... South Korea Could Be Next After Japan

However, in the mid to long term, South Korean companies cannot be complacent either. As long as conflicts between the US and China continue, South Korean travel and products could also become targets of boycotts or regulations at any time. South Korea has already experienced retaliation from China in 2017 over THAAD (Terminal High Altitude Area Defense). Viewing China's anti-Japanese sentiment not simply as a reaction to contaminated water discharge but as part of the US-China hegemonic conflict suggests that South Korea will find it difficult to maintain an economically friendly relationship with China for the time being.

In particular, China has long been reducing its economic dependence on Western advanced countries such as the US, Japan, and Europe, and expanding its reach to Third World countries. According to the Bank of Korea, the share of China’s exports to the US, Japan, and Europe accounted for more than half in the early 2000s but has steadily decreased over the past 20 years, recently being overtaken by Belt and Road Initiative participating countries. This indicates that the center of the Chinese economy is shifting from advanced countries like the US and Japan to developing countries.

South Korea has grown together with China over the past decades by exporting intermediate goods to China, which then processes and assembles them into finished products for export to the global market. Because of this, South Korea is particularly sensitive to changes in China’s export country composition. If there are changes in China’s export countries, export products, or intermediate goods import environment, South Korea’s export structure to China could change significantly. However, research and preparation of countermeasures for this are still insufficient.

An official from the Bank of Korea explained, "China showed rapid growth by importing large quantities of intermediate goods, then using cheap labor and capital to produce final goods and export them to advanced countries, but now there are signs that this pattern is changing," adding, "Depending on the income levels and industrial characteristics of Belt and Road countries, it will certainly affect South Korea’s exports to China, but it is difficult to judge the pattern prematurely at this point."

BRICS Expansion... Export Risks for South Korea to China

The approval of six new member countries?Saudi Arabia, Iran, the United Arab Emirates (UAE), Argentina, Egypt, and Ethiopia?into BRICS, where China holds significant influence, on the 24th also raises concerns in a similar context. BRICS, composed of China, Russia, India, Brazil, and South Africa, has already surpassed the G7 in terms of gross domestic product (GDP), and this expansion is expected to increase its global influence further.

The new member countries are also significant. Iran has a long-standing hostile relationship with the US, and Egypt traditionally maintains friendly ties with Russia. Saudi Arabia has been a long-time ally of the US but has recently experienced strained relations due to human rights issues and international oil price increases caused by production cuts. Although BRICS is not yet a threat to the G7, the inclusion of the world's largest oil producer and the fact that many countries are lining up to join indicate great growth potential.

As China actively expands its influence in the Middle East and Africa, the restructuring of global supply chains and acceleration of Belt and Road projects are expected. Given South Korea’s high external dependence on energy and grains and its need to trade globally, this is a reason for close attention. Lee Da-eun, a researcher at Daishin Securities, said, "The expansion of BRICS shows that changes in international relations and supply chains due to intensified economic bloc formation centered on nationalism are not a distant future."

In fact, after China’s total ban on Japanese seafood imports, it is analyzed that Russia will fill the gap. Jung Dae-hee, head of the Macroeconomic and Financial Policy Research Department at the Korea Development Institute (KDI), said, "Since BRICS countries do not have a large substitutive relationship with South Korea in terms of industry, there may not be significant changes immediately," but pointed out, "If China forms economic cooperation relationships with BRICS or Belt and Road countries in the future, it could affect our exports in some way."