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Editor | L.Y.

Preliminary

South Korea this time was entirely guilty of its own, and on the day of receiving the Chinese sanctions order, Li knew in the Ming government that things were bigger.

After China included five U.S. subsidiaries of the South Korean shipbuilding company "Huawei Ocean" on the sanctions list, the South Korean Presidential Chamber issued a statement on the same day that the South Korean government had launched the China-Korean economic and trade communication channel, seeking to minimise the losses suffered by South Korean companies.

China¡¯s sanctions are not a sudden outcome, but a targeted response to recent South Korean policies.On October 14, at 9 a.m., the Chinese Ministry of Commerce published the ¡°Policy Notice ¨C Countermeasures¡± column on its website, entitled ¡°Decision on Countermeasures to Some Foreign Companies Assisting in Implementing Discriminatory Measures Against China.¡±

The regulatory scope of the sanctions is highly targeted: Chinese companies are prohibited from exporting core components such as steel boards and marine diesel engines to these five companies; it is suspended from accepting applications for landing and unloading of ships with Chinese ports; and all cooperation projects involving ship design and construction technology are terminated.

The Ministry of Commerce in the announcement specially pointed out that the basis of the sanctions is the "Chinese People's Republic anti-foreign sanctions law", targeting the actions of the Chinese Navy through U.S. subsidiaries to assist the U.S. in the implementation of pressure on China's maritime field - before October 11, the US subsidiary of the Chinese Navy and the U.S. Department of Defense signed a $1.2 billion contract to build three offshore combat ships for the U.S. Army, and explicitly refused to transfer similar shipbuilding technology to China, this double act of "co-operation with China and assistance to the U.S."

It is worth noting that the sanctions decree adopted a ¡°transparent control¡± model, covering not only five U.S. subsidiaries themselves, but also clarified that 12 affiliates with which they hold or sharehold are equally limited to the scope of the sanctions. The updated ¡°Commercial Control Catalog¡± by the General Administration of China shows that since October 14, all import and export declarations involving the U.S. subsidiary of Huawei have been subject to additional approval documents, and the average customs time has been extended from the original 24 hours to 72 hours, further increasing the operating costs of its operations in China.

Presidential Chamber Emergency Response and Business Panic

When the news of the release of China's sanctions reached South Korea, it was at 10 a.m. Seoul time on October 14 (1 hour time difference between China and South Korea). President Lee Jae-ming is presiding over a cabinet meeting. The theme of the meeting was originally to discuss South Korea's economic stimulus plan for the fourth quarter. When the aides handed over the full text of the sanctions order, Lee Jae-ming immediately suspended the original agenda and temporarily joined the special discussion on "Responding to China's Sanctions." The originally 2-hour meeting was eventually extended to 4 hours.

The South Korean Presidential Chamber issued its first statement at 1:30 p.m. on the same day, and the attitude was clearly softened.The statement contained no previous ¡°protest¡± or ¡°regret¡± statements, but emphasized that ¡°the South Korean government attaches great importance to China-Korea economic and trade relations, has launched the China-Korea economic and trade communication channel, and will maximize the loss of Korean enterprises through dialogue.¡±

Presidential Office spokesperson Kim Eun-hye revealed at a press conference that Lee Zae-ming had instructed Foreign Minister Park Jin and Minister of Industry, Trade and Resources Li Changyang to contact the China Ambassador to South Korea and relevant officials in charge of the Ministry of Commerce respectively, hoping to "arrange bilateral consultations as soon as possible." This quick and moderate response is in sharp contrast to South Korea's previous tough stance when facing similar issues. The outside world interprets it as a direct signal that Lee Zee-ming's government realizes that "things are getting too big."

Within an hour after the sanctions order was issued, the price of Huawei¡¯s ocean stock fell 7.8 percent in the Seoul stock market, market value evaporated by about 2.3 trillion yuan (US$1.6 billion), the company urgently convened an investor call, and CEO Kim Mingae acknowledged that ¡°the Chinese business accounts for 28 percent of the company¡¯s revenue, and the sanctions will directly affect the fourth quarter¡¯s performance in 2025¡±.

On the same day, Hanwha Ocean China headquarters issued a notice to cooperative shipyards in Shanghai, Dalian, Guangzhou and other places, suspending the construction progress of all undelivered ships and waiting for further instructions. According to data from the China Shipbuilding Association, as of October 14, Hanwha Marine had 12 container ship construction orders in China, with a total contract value of US $3.5 billion. If sanctions continue, these orders may face the risk of default.

72 hours before sanctions

China's sanctions are not without trace. South Korea's series of "double operations" from October 11th to 13th have already laid the groundwork for this crisis. On October 11th, Hanwha Ocean America subsidiary signed a $1.2 billion littoral combat ship construction contract with the U.S. Department of Defense. The contract terms specifically added a "technical confidentiality clause" to prohibit the transfer of core technologies such as modular construction and stealth design of ships to "potential competitors" including China. On the same day, Hanwha Ocean China team was still negotiating with Shanghai International Port Group the cooperation intention of two super-large container ships.

What makes China even more dissatisfied is the attitude of the South Korean government. On October 12, the Ministry of Trade, Industry and Energy of South Korea released the "White Paper on Semiconductor and Maritime Industry Policy in 2025", which clearly listed "strengthening collaboration with the United States in key technology fields" as a key task, which mentioned "restricting the export of high-end ships to China." Steel and Core Components ", this policy echoes Hanwha Marine's business practices. On the same day, when Lee Jae-myung inspected Hanwha Ocean Busan Shipyard, he publicly stated that "South Korea should maintain a strategic balance between China and the United States, but its core technology must be consistent with its allies." This remark was regarded by the outside world as a clear gesture of goodwill to the United States, and it also made China question South Korea's policy intentions.

On October 13, China issued an early warning to South Korea through the China-South Korea Economic and Trade Joint Commission, hoping that South Korea would correct Hanwha Ocean's improper behavior. However, the South Korean Ministry of Industry only replied that "corporate behavior is market-independent decision-making and it is inconvenient for the government to intervene." No substantive measures were taken. This negative response ultimately prompted China to issue a sanctions order within 24 hours. The rapid progress from early warning to countermeasures also reflected China's repeated dissatisfaction with South Korea's policies.

The Industrial Shock

Hanwha Ocean was sanctioned this time, exposing its deep dependence on the Chinese market. As the second largest shipbuilding company in South Korea, Hanwha Marine's revenue in 2024 will account for 28% of the Chinese market, of which orders for high-end ships such as ultra-large container ships and LNG carriers will account for 70% of its business in China. According to data from the China Shipbuilding Association, Hanwha Marine's imports of marine steel plates, diesel engine parts and other materials from China will reach a total of US $1.8 billion in 2024, accounting for 35% of its global purchases. If sanctions continue, these supply chain links will face interruption risk.

What is even more serious is the stagnation of technical cooperation. Hanwha Ocean has long-term technical cooperation with China Shipbuilding Industry Corporation, Shanghai Waigaoqiao Shipbuilding and other companies, covering key areas such as LNG ship liquid cargo tank design and intelligent ship systems. After the sanctions came into effect, all these cooperation projects have been suspended. Among them, the "New Generation Green Container Ship" project jointly developed by Hanwha Marine and Shanghai Waigaoqiao has invested US$420 million in research and development. If the project is terminated, Hanwha Marine will face Huge losses.

For Li Zai-ming's government, the sanctions order brings not only economic and trade pressure, but also domestic political challenges. The opposition Common Democratic Party held a press conference on the same day, criticizing Li Zai-ming for "foreign policy mistakes" and saying that he "blindly followed the United States and harmed South Korea's economic interests." Disagreements also emerged within the ruling Common Citizens Party, and some lawmakers called for "a reassessment of China-South Korea relations and avoid falling into the whirlpool of confrontation between China and the United States."

conclusion

At the diplomatic level, Lee Zai-ming's government is in a dilemma. If you compromise too much, it may offend the United States and affect the US-South Korea alliance; if the original policy is adhered to, China's sanctions may escalate and further impact the South Korean economy. On the evening of October 14, South Korean Foreign Minister Park Jin mentioned for the first time in a phone call with Xing Haiming, China's Ambassador to South Korea, that he was "willing to conduct specific consultations on the Hanhua Ocean issue and seek a plan acceptable to both sides." This change in attitude shows the urgency of the Lee Jae-ming government after realizing that "the matter is too big."

As of October 15, the two sides have not yet determined a specific time for talks, but the Korean Sea has begun to take emergency measures ¡ª¡ª to suspend part of the US subsidiary¡¯s business, while submitting complaints to the Chinese Ministry of Commerce, hoping to withdraw the sanctions. This wave of dynamics initiated by South Korea, eventually ended with China¡¯s precise sanctions, Li in the day of receipt of the sanctions order, the government made it clear that in order to calm the crisis, not only communication is needed, but also to re-examine its strategic position between China and the United States, and the consequences of ¡°blame by self-picking¡± will continue to affect South Korea¡¯s economic and diplomatic layout.

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