Resilience of supply chains Summit: China, Japan and South Korea and the "stabilization" of their high-tech supply chain

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The threat of sanctions and boycotts from the United States against China is leading the People's Republic to reevaluate its old alliances - a trilateral discussion between China, South Korea, and Japan has taken place in Seoul.

Henrik Bork, a long-time China correspondent for the German Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency specializing in China.

In order to defend against chip and technology boycotts from Washington, China is now courting its Asian neighbors Japan and South Korea more strongly again. The first "trilateral summit" between Beijing, Tokyo, and Seoul took place last week in the South Korean capital.

According to the news agency Bloomberg, the South Korean president said after the meeting that they wanted to jointly "build a transparent and predictable environment for trade and supply chains."

While vague, this statement nonetheless is a clear counterpoint to Washington's policy of trying to isolate China internationally and concentrate the high-tech supply chains of the electronics and semiconductor industries more heavily back on the U.S.

The last trilateral meeting between the three Asian neighbors took place in 2019. Since the Asian financial crisis in 1997, regular meetings had been held to minimize geopolitical risks. The meetings of the heads of government were flanked by working meetings at the ministerial level and more than 70 different dialogue mechanisms, but had been on hold for years as a result of the Corona crisis and the US trade war against China.

United against Washington?

So there was a rare revival of this trilateral dialogue, even though both Japan and South Korea are close political allies of the US and are being pressured by Washington to join its strategy of economically containing the People's Republic of China.

The two Asian neighboring countries fear becoming sacrificial pawns in the US-Chinese trade and chip war. The semiconductor industry in particular is heavily concentrated in Asia, and South Korean and Japanese companies have invested billions of dollars in production facilities in China and benefit greatly from exports to China.

There is a shared interest in Asia in at least "stabilizing" the supply chains in high-tech industries, which the three heads of government have now publicly advocated for at a forum with business people in Seoul following their talks.

Chinese Prime Minister Li Qiang, South Korean President Yoon Suk Yeol, and Japanese Prime Minister Fumio Kishida attended the formal summit in Seoul. The agenda of their discussions included "digital cooperation" between their countries.

Free Trade Agreement

All three heads of government also agreed at the summit to resume negotiations on a trilateral free trade agreement between China, Japan and South Korea. Even though it is known that such negotiations can drag on for years or decades, this announcement is also a symbolic act of solidarity in Asia that Washington is likely to dislike.

The key role that the two neighboring countries hold from Beijing's perspective in warding off technology boycotts from Washington is demonstrated by a meeting between Chinese Prime Minister Li Qiang and the CEO of Samsung, Jay Y. Lee, on the sidelines of the summit.

The Chinese Prime Minister urged Samsung in the meeting to invest more in China. Samsung, which has already invested 24 billion US dollars in memory chip and mobile phone production facilities in the People's Republic of China, is still "welcome" there, Li Qiang said in his meeting with the Samsung CEO at the Shilla Hotel in Seoul. The South Korean conglomerate, one of the world's leading semiconductor producers, is currently also being heavily courted by Washington.

"A distant relative is less useful than a close neighbor," was one of the comments with which Beijing campaigned for the goodwill of its neighboring countries and investments from tech companies like Samsung. The supply chains between China and South Korea are "closely intertwined," said the Chinese Prime Minister in Seoul. Economic and trade issues should not be politicized, the Chinese said in a clear sideways swipe at Washington.

Keep all options open

The trilateral summit is "a rerun and a fresh start" for economic cooperation between China, South Korea and Japan, said the Chinese Prime Minister in Seoul. Protectionism and a "decoupling" of supply chains must stop, Li Qiang said, in clear reference to China policy in Washington.

From the perspective of Tokyo and Seoul, where both the economic interests of their own companies in China and diplomatic obligations towards protectorate USA must be considered, participation in the summit meeting was an opportunity to at least keep communication channels with Beijing open and establish joint risk management for further geopolitical tensions following a potential re-election of Donald Trump as US president later this year. In Seoul, they promised to meet regularly in this trilateral format from now on. (sb)