Beyond the Radar: Economic Coercion, Narrative Warfare, and the China–South Korea THAAD Dispute

Abstract

In 2016, South Korea’s decision to deploy the U.S. Terminal High Altitude Area Defense (THAAD) system prompted a coordinated campaign of informal economic coercion by China. Although Beijing denied any official retaliation, regulators shuttered Lotte retail stores, state-backed media amplified consumer boycotts, and the China National Tourism Administration quietly ordered a halt to group tours to South Korea. This case study reconstructs the timeline of coercive actions using primary sources including tourism data, corporate disclosures, and government statements. It assesses China’s use of informal tools—regulatory harassment, cultural sanctions, and market-based pressure—to signal displeasure while maintaining plausible deniability. The paper also considers South Korea’s countermeasures and policy responses, including WTO consultations and the “Three No’s” policy. While China inflicted tangible economic costs, especially in the tourism and retail sectors, it ultimately failed to reverse the THAAD deployment. The case illustrates both the capabilities and limitations of informal geoeconomic coercion in regional security disputes.

JEL Classification: F51, F52, F59, H56