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China might want to stop using its economy as a foreign policy bludgeon

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South Korean President Park Geun-hye shakes hands with Chinese President Xi Jinping at the China-South Korea summit on Sept. 5.   © Reuters

TOKYO -- Nearly two months have passed since the Chinese government reportedly issued warnings that South Korean songs, dramas, even celebrity appearances were no longer welcome in the country. Call it an unofficial ban, one intended to retaliate against Seoul's decision to deploy a high-tech antimissile system developed by the U.S.

It is unknown whether Beijing is really trying to ban South Korea's cultural exports, which are big all over Asia, but many Chinese internet users appear to support the move.

If China truly wants to become a market-oriented economy, however, its government should stop using certain imports and exports as negotiating cards at the foreign policy table.

In early August, a rumor swept across the internet about South Korean entertainment in China. According to the rumors, Korean entertainment would be banned as early as this month. A blacklist of 53 Korean dramas and 42 hallyu personalities was also circulated.

The word "hallyu" was coined to describe the huge wave of pop culture emanating from South Korea.

Searches on Google and Baidu turn up evidence of the ban: Joonang Ilbo reported on its Japanese website on Aug. 19 that K-pop star Hwang Chi-yeul has disappeared from Chinese TV. The same website on Aug. 31 ran an article headlined, "S. Korean actress dropped from Chinese TV series in possible THAAD fallout."

THAAD, or terminal high-altitude area defense, is the U.S. antimissile system.

Beijing, however, never directly issued a ban; neither has it issued a denial.

Chinese internet users, meanwhile, are posting comments that South Korea's economy will be hit even harder by the kind-of, sort-of ban on all things hallyu.

Their behavior is making Beijing look like a savvy negotiator.

The government dangles a rumor. The media and internet users effectively put a ban in place. A trade partner's cash cow is injured.

Beijing watches the drama play out and waits for the trade partner to accede to its wishes.

The wait, though, could prove interminable.

Something similar happened in 2010. A long-simmering conflict between Japan and China over the Senkaku Islands, known as the Diaoyu Islands in China, reached a boil. So China halted exports of rare-earth metals to Japan. As a result, Japanese factories had trouble turning out car batteries and other high-tech products.

Caught in its own trap

Everyone thought China was retaliating over the Senkaku flare-up. Media reports said China was using rare earths as a negotiating tool. Beijing naturally denied any embargo was taking place. It was merely trying to protect its rare-earth deposits from over-exploitation, Beijing said.

The hallyu and rare-earth episodes show how China regards trade as a foreign policy negotiating tool. Governments manage their economies, the thinking goes, and will make concessions if their economies suffer.

In the face of China's rare-earth embargo, Japanese companies procured the elements from elsewhere, not relying on their government to lend a hand in the matter. They also got serious about developing alternative materials.

Then the commodities supercycle ended, China's rare-earth inventories piled up and prices began to plummet.

Japan never conceded over the Senkakus.

Likewise, riling up the citizenry to effectively ban hallyu imports will eventually catch up with China. If they can't air Korean content, Chinese media will lose business opportunities.

Chinese consumers, meanwhile, have turned to the black market and piracy to get their fix of Korean entertainment. Illegal copies of music videos and TV dramas could undermine the government's attempt to protect intellectual property rights. Economies may bend to political will, but not as much as they do to supply and demand.

China should be fully aware of market dynamics, considering it is a market economy. Politicians should tend to market economies in a rational manner. This means government interventions should be kept nearby but only used to correct market distortions or failures.

Excessive intervention has a way of distorting and devitalizing an economy. It is unknown whether the hallyu ban is being led by the public or private sector, but Beijing should be aware that this kind of economic sanction is out of place in our interdependent world.

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