Adios S. Korea, next man up, China!

The United States is scheduled to host the Asia-Pacific Economic Cooperation (APEC) on Nov. 11 in San Francisco. It is working hard on establishing a meeting between Chinese President Xi Jinping and U.S. President Joe Biden. The first U.S.-China summit in a year may materialize given Xi’s presence.

To this end, the two countries have been proactively engaging in high-level dialogue for nearly half a year. They want the summit as both are in desperate need of each other. The U.S. president is in dire need of leading his nation to better economic performance in the first and second quarters of next year in order to get re-elected come next November. The Chinese president is also in the same boat as his country’s economy is in a no-way-out situation without U.S. cooperation. One of the most viable ways for China to rejuvenate its economy and legitimatize Xi’s leadership is to adapt to America’s global supply resilience moves.

If all things go as planned and a Biden-Xi summit materializes, Korea will be left standing alone. It is now too ecstatic about the success of the ROK-U.S. alliance as dubbed by the presidential office to realize the ongoing strategic calculations being made in Washington and Beijing. Blindsided by the victory, Seoul is infatuated by Washington’s recent announcement on Oct. 10 when approval for its semiconductors manufacturing plants in China to import U.S.-made chip equipment without applying for permission was granted. It meant that Korea was given a status as verified end users (VEUs). All these U.S. moves only signify one of the long-held arguments that the hasty passing of the CHIPS and Science Act by Congress last year was full of loopholes. There are so many that it now proves to be almost impossible to effectively sustain the Act without adding appendixes. And for instance, the first one was made last March.

Critical to America’s decision was the sufficient supply of semiconductors. In this day and age of the Fourth Industrial Revolution, semiconductors are the heart and soul of it. It is a fast-growing machine. An insufficient supply of semiconductors to meet the industry’s ever growing appetite for them would stall many economies, which are heavily dependent on fourth-industrial technologies and innovation.

China’s economy can only stagnate without semiconductors and so will the U.S. It is unfortunate that both had to suffer as a result of the U.S. curbing Korea’s supply of memory chips to China. Korea stands as the largest memory chip manufacturer and supplier, occupying more than 60 percent of the world's supply. Those Korean semiconductor companies manufacture 40 percent of their products in China. The CHIPS Act restrictions imposed on Korean companies in China can only bite back on America’s own economy, let alone China’s. To subtract 40 percent of their production in China, there is only so much Korean companies can offer to satiate the U.S. fast-growing appetite for semiconductors for its fourth industrial revolution's development.

The U.S. is left with no other choice but to grant such an approval to Korean semiconductor companies. It is premised on improving ties with China. In other words, America’s only strategic option is to retreat from its highly boasted strategies like de-coupling or de-risking of China. Successive senior-level meetings between the U.S. and China speaks volumes. U.S. Secretary of State, National Security Advisor, Secretary of Treasury and Commerce have all engaged with their respective Chinese counterparts in the past eight months.

This year, State Secretary Antony Blinken met twice with the Chinese foreign minister, once in Munich, Germany in February and once during his visit to Beijing in June. NSC advisor Jake Sullivan also made a trip to China in May, while holding another round of talks in Malta in September. Treasury Secretary Janet Yellen was in the Chinese capital in July, followed by Commerce Secretary Gina Raimondo in August. Following vice minister Sun Weidong’s visit last month, Chinese foreign minister Wang Yi is scheduled to visit Washington this month. Recently, a bipartisan delegation of senators led by Senate Majority Leader Chuck Schumer (D-N.Y.) went to Beijing, having met with Chinese President Xi Jinping on Oct. 10.

American representatives all had one common message. That was, to call for “stable ties” with China. All their remarks and statements before and after their respective meetings with their Chinese counterparts allude to the fact that both countries need each other more than ever and for one reason: their respective economies. Most Chinese economic indicators are heading south at a dramatic rate with no sign of turnaround in sight. Its record-breaking youth unemployment rate is, for instance, too embarrassing for public announcement. America's economy is not faring any better. Inflation is still high, and the debt problem is on the verge of becoming a national crisis, as evidenced by the Congress’ chronical voting on the government shutdown. The U.S. economic problems must prescribe to other than supply resilience or de-risking. No parties are more ingrained in economic interdependence than the U.S. and China.

The U.S. much advocated supply resilience and de-risking strategies merely prove a self-fulfilling prophecy. The reality of economic interdependence between the U.S. and China has only prematurely denied the punitive sanction measures that the U.S. has taken on China to be ineffective. In the end, it only reflects the respective retaliatory economic measures were nothing more than a consequence of pandemic-ridden emotion. As a result, Washington and Beijing foresee a golden opportunity in the upcoming APEC meeting to patch things up.

The upcoming APEC meeting is likely to open the window of opportunity for U.S.-China relations. With this comes a closing window for ROK-U.S. ties. So much for the alliance that we celebrated on the 70th anniversary this year. With all scores settled, Korea must confront the challenges arising from U.S. shifts in its policy towards China and vice versa. It is time to crank up the chip factories in China and play wise with the leverage it has as the largest supplier of memory chips against the great powers.

Choo Jae-woo (jwc@khu.ac.kr) is a professor of international relations at Kyung Hee University and director of the China Center at the Korea Research Institute for National Security. He was a visiting fellow at the Brookings Institution.