China Blasts U.S., South Korea Missile Defense Deployment

(Bloomberg) -- South Korea and the U.S. have agreed to deploy the Thaad anti-ballistic missile system on the Korean peninsula, a move that drew immediate condemnation from China.

South Korea's military said Friday the U.S. will deploy the Terminal High Altitude Area Defense system in the country by the end of 2017 at the latest. The decision was made in response to a growing ballistic missile threat from North Korea, a South Korean defense ministry official said in a televised briefing.

The anti-missile system provides yet another friction point as the U.S. seeks to maintain its strategic dominance in the region amid China's rise, and Beijing pushes back against what it sees as a Washington-led containment effort. The announcement comes just days before an expected international court ruling on maritime rights in the South China Sea, a vital trade route where the two sides have been jockeying for control.

China's foreign ministry immediately responded, saying it strongly opposed the deployment, and urged Seoul and Washington to reconsider the move.

The deployment “doesn't help achieve the objective of denuclearization in the peninsula, doesn't benefit maintaining peace and stability in the peninsula,” China's foreign ministry said in a statement. “It's going toward the opposite direction of solving the problem via dialogue and negotiation.”

Russia's foreign ministry also criticized the decision, saying it sees “dangerous consequences” from the deployment.

The U.S. Defense Department said in a statement Friday that the Thaad system will be "focused solely on North Korean nuclear and missile threats and would not be directed toward any third party nations.”

Welcomed by Japan

Meanwhile, Japanese government spokesman Koichi Hagiuda told reporters in Tokyo that the advance in defense co-operation between the U.S. and South Korea would contribute to regional stability. Japan, South Korea and the U.S. last month held their first joint military exercises aimed at tracking North Korean missiles.

South Korea and Washington have been in talks about deploying the anti-missile defense system since Kim Jong Un's regime conducted a nuclear test in January and then followed it up with several ballistic missile tests in violation of a United Nation's resolution banning them.

Deploying the system is likely to cool relations between South Korea and China, said Kim Dong-yup, an analyst at the Institute for Far Eastern Studies at Kyungnam University in Seoul.

“There will be economic retaliatory acts by the Chinese government,” he said. “It will cause inconvenience in terms of trade, making it difficult, for example, for South Korea products difficult to pass inspections."

Cosmetics Stocks Fall

In intraday trading, South Korean cosmetic stocks fell sharply as investors appeared to be worried about the possibility of China's spending on Korean products dropping. LG Household & Health Care Ltd. dropped as much as 7.5 percent while Amorepacific Corp. fell as much as 5.8 percent.

The decision to deploy the system also comes as North Korea called recent financial sanctions imposed against its leader, Kim Jong Un, a “declaration of war.”

The U.S. Treasury Department for the first time on Thursday imposed sanctions on Kim, targeting him and other top officials for widespread human-rights abuses. The sanctions make it harder for banks or other financial institutions worldwide to hold or move assets owned by those on the list.

--With assistance from Ting Shi Emi Nobuhiro Brendan Scott Sohee Kim and Heejin Kim To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net. To contact the editors responsible for this story: Peter Pae at ppae1@bloomberg.net, Andy Sharp, Jeff Sutherland