When the history of North Korea's arms programs is written, the key event in 2016 may well be identified not as last Friday's (or January's) nuclear test, but South Korea's decision to allow US deployment of the Terminal High Altitude Area Defence (THAAD) missile interceptor system on its soil. Whether or not this system actually threatens China's missile capability, it now seems clear that Beijing regards this as a deal-breaker for its cooperation in bringing Pyongyang to heel, if this was ever a real prospect.

At the least, it has ended the Seoul-Beijing honeymoon that followed the ascension to power of Xi Jinping and Park Geun-Hye in late 2012. Sharp diplomatic exchanges and heated editorials have been followed by China's snubbing of the annual Seoul Defence Dialogue, and a spat over PLA bombers entering airspace overlapped by the two countries' air defence identification zones. At the G20 last Monday, Xi told Park in person that 'mishandling the [THAAD] issue is not conducive to strategic stability in the region'.

More serious is potential economic retaliation by China, which is generally downplayed in English language commentary. This is not just a matter of cancelled celebrity events and tour groups: a quarter of South Korea's exports go to China. The mere prospect of bans on South Korean components has proved enough for Chinese manufacturers to cut them off, saving Beijing the opprobrium while helping China's drive towards domestic upgrading. This is a major issue for South Korean industry, which is under pressure from Chinese competitors closing the technological gap.

Perhaps not coincidentally, an ex-Samsung Electronics executive and a video gaming company chairman (representing two sectors highly exposed to Chinese markets and investment) have just been elected to the leadership of South Korea's main opposition party, whose new chairwoman has made opposing THAAD party policy. This aims to leverage vociferous public opposition to the system's deployment in South Korea, inflamed by the government's ham-fisted PR management.

The angst over THAAD reflects long-standing divisions in South Korea over foreign policy. In the Asan Institute's annual opinion survey, over half the participants identified South Korea's most important partner as China for economics and the US for security, with pro-US sentiment stronger among older citizens. The potential to shift this balance explains Beijing's pre-THAAD charm offensive, which targeted not just the sinophile Park - going so far as presenting her with artwork of her first teenage crush - but hearts and minds across South Korean society. This likely stemmed not from a decision to isolate North Korea, but from optimism in China's ability to convince South Koreans that mutual alignment is the natural state of affairs, through the message that both countries share a prosperous future as well as an ancient past.

An example is the speech Xi gave at Seoul National University in 2014, which was replete with shared cultural and historical references, including one section (omitted from China's official English-language reporting) on standing together against Japanese invasion, albeit 400 years ago. The consideration involved can be judged by Xi's highlighting the deputy commander of the Chinese force; the commander is often portrayed as an incompetent who took Japanese bribes, while the deputy died in battle alongside Korea's greatest hero. Such details bypass most foreign observers, but are effectively dog-whistling to Koreans. If doubting whether such distant events still resonate, consider that a 2014 cinematisation of this battle is the most watched film in South Korea's history, and that the nation's public broadcaster is screening a drama on the Imjin War co-produced with China's CCTV.

This soft power push was widely mistaken for genuine reordering by Beijing of its priorities on the peninsula, encouraged by reports of Xi's dislike for Kim Jong-Un and a high-profile op-ed calling for 'abandonment' of North Korea from an editor at China's Central Party School (who was subsequently fired). THAAD has exposed the flaws in this assessment, which never had a solid basis as should have been clear from the ambivalent sanctions enforcement at China's border with North Korea. At most, the 'abandon Pyongyang' view was the underdog in internal Chinese debates, and sure to be compromised by unilateral action from Seoul seen as affecting the China-US military balance.

So long as there is strategic mistrust between Beijing and Washington as well as US troops in South Korea, China will never cut off North Korea. When Pyongyang conducted its fourth nuclear test in January, Xi apparently refused to take Park's phone call, for the obvious reason that he had nothing to offer her. The next month, China's Foreign Minister sent a clear signal that his country saw THAAD as a serious threat to its security. The tendency of foreign commentators to dismiss these concerns as paranoia or even bluffing has obscured the hardening of opinion in China over a system now described by state media as a tool of Washington's 'insatiable appetite for hegemony'.

This is vividly conveyed by Andrei Lankov's account of his recent visit to Beijing, where he found a general view that THAAD deployment amounts to a hostile act by South Korea, 'an unprovoked betrayal of [China's] goodwill' in supporting new sanctions on North Korea that presents a greater danger to China than Pyongyang's nuclear program. Preposterous as this may seem from Seoul or Washington, leaders there should ask themselves if they really want China's policy elite to reach consensus that the South Korea-US alliance is an irreconcilable threat; a mirror image of Tokyo's old fixation with Korea as a 'dagger pointed at the heart of Japan'.

This is especially dangerous given that state collapse in North Korea now seems to be Seoul's preferred solution to its security dilemma, prodded along by increasingly escalatory gestures. It can't be ruled out that China has plans for such a scenario that involve seizing large parts of North Korea before allied forces bludgeon their way up the peninsula, to maintain the buffer zone between its Yalu River border and a US security ally. The result would be South Korean and US forces confronting a PLA in occupation of land that Seoul regards as its birthright. Throw in millions of refugees, missing weapons of mass destruction, and a potential insurgency, and it starts to look like a less desirable outcome.

Close observers of the North Korea problem stress that there is no good solution that doesn't involve Chinese cooperation. Keeping open the door for this should be a priority, at a time when Beltway heavyweights are opining that the US-led international response to Pyongyang's nuclear and missile programs has failed. Since Friday's test however, the only response from Washington has been to blame Beijing and call for more sanctions. Meanwhile, China's official statements and well-placed commentators suggest that Lankov's readout is correct.

A parallel might be drawn with expectations placed in some quarters on the South China Sea arbitration award to modify China's behaviour. Two months on, it seems to have only undermined Chinese moderates and led Beijing to dig in behind its existing policy. With ASEAN having again failed to directly support the award, and the Philippines president more at odds with the US than with China, Beijing seems not to be paying any price in the South China Sea. Despite the protestations that THAAD doesn't target China, there were clearly expectations in Seoul and Washington that the deployment would make Beijing face the consequences of its policies; but signs are it may instead be convincing China's leaders that they can live with a nuclear-armed North Korea.

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