2025-01-14: Two Hotspots: South Korea and Taiwan

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Update on Korea's Political Situation

Current Situation and Political Developments

Martial Law Declaration (Dec. 3)

- President Yoon declared martial law, citing “anti-state forces.” Soldiers were deployed around the National Assembly.

- The National Assembly immediately nullified the martial law within hours.

First Impeachment (Dec. 14)

- The National Assembly impeached President Yoon on charges of sedition (insurrection) and abuse of power, stemming from his martial law declaration.

- The Constitutional Court began impeachment proceedings; Yoon is suspended from office pending its final decision.

- Attempts to serve an arrest warrant on Yoon have failed so far, due to physical blocking by the Presidential Security Service.

Second Impeachment—Prime Minister Han Duck-soo (Dec. 27)

- Less than two weeks after Yoon’s impeachment, the acting president and prime minister himself was impeached over his refusal to appoint several Constitutional Court justices.

- Finance Minister Choi Sang-mok became the new acting president on Dec. 27, attempting to fill some vacant judicial seats and address pending legislation.

Ongoing Arrest Warrant Attempts

- Courts reissued an arrest warrant for Yoon in early January. Investigators, including the Corruption Investigation Office for High-Ranking Officials (CIO) and police, appear poised for a second attempt to arrest him.

- Fierce standoffs with the Presidential Security Service have hindered prior attempts.

- Internal divisions have emerged within the Security Service, with some staff unwilling to obstruct an arrest they consider lawful, while a hardline faction remains loyal to Yoon.

Constitutional Court Proceedings

- Oral arguments in Yoon’s impeachment trial are underway as of Tuesday.

- Yoon’s legal team has signaled he will not attend the first hearings, citing safety concerns over the possibility of forced arrest.

- The Court has repeatedly stressed its commitment to an impartial and lawful process, denying rumors that it recommended dropping sedition charges.

International and Domestic Responses

- The US has affirmed the bilateral alliance remains “ironclad.” High-level security and nuclear cooperation talks persist despite political instability in Seoul.

- Domestically, pro- and anti-impeachment rallies continue, with some participants warning of “civil war” and others demanding swift resolution. Tensions occasionally escalate, but large-scale unrest beyond protest zones has not materialized so far, and is unlikely to as of now.

Where We Stand Right Now

Vacuum in Top Leadership

- With both the president and prime minister under suspension, Acting President Choi manages urgent state affairs.

- Political parties are locked in a standoff over constitutional appointments, the validity of the arrest warrant, and impeachment procedures.

Polarization at Home

- Public opinion is increasingly polarized. Some polls indicate that support for impeachment is softening as voters grow weary of the paralysis, while others show continuing disapproval of Yoon’s martial law move.

- Both pro- and anti-impeachment protests unfold daily.

Global Watchful Eye

- Credit rating agencies are monitoring events closely, highlighting risks to investor confidence if the political crisis drags on.

- International partners have kept diplomatic and security ties steady but are wary of potential disruptions to Korea’s economic and political stability.

What Are the Impacts on the Economy So Far?

Tighter Financial Conditions & Sell-Offs

- Foreign Outflows from Bond Markets: Following the initial martial law declaration and impeachment, foreign investors sold off large positions in Korean Treasury Bonds (KTBs). Futures markets also saw a sharp spike in net sell-offs.

- Credit Rating Concerns: Rating agencies (Moody’s, S&P, Fitch) warn of a potential downgrade if the crisis persists. A downgrade would raise borrowing costs for both public and private sectors, constraining economic growth.

Plunging Consumer Confidence

- Consumer Sentiment Index: Dropped sharply in December, one of the worst plunges since the 2008–2009 global financial crisis. Households cite political uncertainty and potential legal disruptions as key factors discouraging them from discretionary spending.

- Retail & Leisure Sectors: Early data show reduced spending on entertainment and dining, with caution in the housing market and big-ticket purchases as well. Consumers are pulling back due to uncertainty about future policy direction.

Waning Business and Investment Sentiment

- Business Sentiment: Slumped to near-pandemic lows, reflecting fears that prolonged political turmoil will delay vital government approvals, budgets, or policy initiatives.

- Delayed Projects & Regulatory Gridlock: Companies have voiced concerns that leadership vacuums and impeachment battles may stall new economic or infrastructure projects. Regulations currently in flux—such as those affecting the semiconductor and energy sectors—remain on hold in the legislature.

- Foreign Direct Investment: While FDI tends to follow longer horizons, prospective investors dislike opaque environments and fear extended uncertainty.

Currency & Capital Market Volatility

- Exchange Rate Pressure: The won/dollar exchange rate has been volatile, occasionally spiking above 1,470 won per dollar. Concerns about political risk accelerate capital outflows whenever negative headlines peak.

- Stock Market Swings: Domestic equities face heightened volatility, as local and foreign investors weigh the possibility of further escalation. Some sectors see depressed share prices due to overshadowed growth prospects.

Risk of Broader Economic Disruptions

- Potential Spillover Effects: Prolonged instability and repeated attempts to forcibly arrest a sitting (albeit suspended) president raise doubts about Korea’s institutional predictability. Industries reliant on steady government support or stable regulations (e.g., defense, aerospace, infrastructure) stand on uncertain footing.

- Spending and Growth Outlook: Some forecasts have already been revised downward, reflecting the chilling effect on consumer and business activity. The IMF and private forecasters have trimmed 2025 growth estimates from around 2.5% to near 1.8% or lower, explicitly citing political risk.

What is the Main Problem with Yoon's Arrest at This Point?

- The key obstacle right now is the ongoing physical and legal standoff between law enforcement and the Presidential Security Service (PSS).

- Although investigators hold a valid court-issued warrant, PSS personnel have repeatedly blocked attempts to arrest Yoon, citing security concerns.

Physical Obstruction and Possible Confrontation

- The PSS claims it has a duty to protect Yoon and the presidential compound. A hardline faction within the PSS remains prepared to use force if necessary, fueling risks of violent confrontation.

- Law enforcement agencies (the Corruption Investigation Office for High-Ranking Officials, police) are regrouping for another attempt, but worry they may face escalating standoffs or injuries.

Internal Division Within the PSS

- Multiple reports indicate growing discontent among some security staff and middle-level officers, who view obstruction of an arrest warrant as illegal. Others remain firmly loyal to Yoon, intensifying the impasse.

- This division adds to confusion and complicates law enforcement’s attempts to serve the warrant.

Legal and Constitutional Uncertainties

- Yoon’s lawyers insist the warrant and the underlying investigation are “illegal and invalid,” raising constitutional and jurisdictional questions—particularly around who has authority to charge a president with sedition.

- The impeachment trial also complicates the timing: Yoon is simultaneously awaiting the Constitutional Court’s decision and ignoring summonses for questioning.

Potential Risks of Violence or Broader Instability

- Both Yoon’s defense team and some supporters have suggested that forced arrest could provoke severe unrest, even using terms like “civil war.” This may just be inflammatory rhetoric aimed at producing a partisan result.

- Concern about physical clashes places additional pressure on law enforcement to execute the arrest carefully, lest the attempt become a flashpoint for violent protests or deeper political crisis.

Is Support for Yoon Growing?

Signs of a Modest Rebound

- A handful of opinion polls conducted after the initial shock of martial law and the impeachment vote have reported that President Yoon’s approval rating nudged upward—for example, from the high 20s or low 30s back into the mid-30s or even around 40%.

- Notably, one ARS-based poll that gained attention put Yoon’s approval near 40%, sparking debate about methodology and bias.

Continued Polarization

- While a few surveys detect a bump in Yoon’s ratings, many voters remain dissatisfied or uncertain due to the ongoing impeachment, legal wrangling, and lack of political clarity.

- The proportion of respondents opposed to Yoon’s impeachment has grown somewhat, but so has the determination among Yoon’s critics—leading to very high partisan polarization rather than overwhelming support on one side.

Contextual Factors

- Public Fatigue with Turmoil: Some commentators believe the rebound reflects growing frustration with ongoing political chaos and a desire to avoid further upheaval.

- Unclear Trajectory: Though numbers show some recovery, they are still substantially lower than would be expected for a president early in a term, and ongoing legal threats keep the situation fluid.

Is the Divide in Society Getting Larger or Smaller?

How the Divide Has Evolved Over Time

Before Martial Law (Early to Mid-Fall 2024)

- Steady Partisan Lines: South Korea had longstanding left–right and pro-government vs. opposition divisions, but these were typical of most democracies—intense but not extraordinary by recent historical standards.

- Moderate Discontent: Yoon’s approval rating was under great pressure from various policy disputes, yet mainstream sentiment was considered organic--based in the realities themselves rather than in politically manufactured sentiment.

Right After Martial Law Was Declared (Early December 2024)

- Initial Shock & Uncommon Consensus: The immediate reaction to Yoon’s sudden martial law declaration was broadly negative, cutting across party lines. Even many on the right found it unsettling or unjustified.

- Rapid Legislative Action: The National Assembly nullified martial law within hours, reflecting a rare near-unanimity among lawmakers. At this stage, societal anger was widespread but not sharply split into two camps; the condemnation was fairly broad.

Impeachment & Attempts to Arrest Yoon (Mid-December 2024 – January 2025)

- Rapid Shift to Partisan Polarization:

- Once Yoon was impeached for sedition, many conservatives rallied to his defense, viewing the impeachment as an overreach by the opposition.

- Progressives and other critics continued to insist his martial law decree amounted to an authoritarian power-grab.

- Escalation and “Dueling Rallies”: Pro-Yoon groups and anti-Yoon groups both began holding daily or weekly demonstrations—often near government buildings or the presidential residence—sounding increasingly uncompromising.

- Political figures and some protesters used extreme rhetoric, with each side warning of dire outcomes (e.g., “civil war”) if the other prevailed.

Currently (Mid-January 2025)

- Deep Entrenchment: - Polling shows a hardening of both pro-impeachment and anti-impeachment blocs—meaning fewer undecided or “soft” supporters in the middle.

- Anger on each side is sustained by ongoing attempts to serve an arrest warrant, which are physically blocked by presidential security forces, as well as calls for a new special prosecutor.

- Harder Lines, Fewer Conversions: Because the political crisis has dragged on, supporters on each side view the other as threatening democracy. This mutual suspicion heightens polarization.

- Heightened Online & Street Activity: On social media and at rallies, pro- and anti-Yoon groups routinely confront one another. The debate has shifted away from shared condemnation of martial law toward blaming the opposing side for “destroying democracy.”

Why the Split Has Become Larger

- After the initial wave of near-universal criticism of martial law, the subsequent impeachment and prolonged legal confrontation polarized public opinion.

- Emotive, Zero-Sum Framing: Both sides treat this crisis as decisive for the country’s democratic future—either a “coup attempt” by Yoon or a “witch hunt” by the opposition. This high-stakes framing prevents compromise.

- Polarizing Public Figures & Media: High-profile politicians, influencers, and commentators have escalated their rhetoric; pro-Yoon media platforms and anti-Yoon voices alike hammer messages that incite suspicion of the other side.

Democratic Party’s Push Against ‘Sedition Propaganda’

Accusations & Investigations

- The Democratic Party (DP) has filed criminal complaints against a growing list of conservative YouTubers and social media users, alleging they spread misinformation about “seditious” plots.

- Threats to “Hold Ordinary People Accountable”: DP lawmakers have stated that even non-professional users who pass along “seditious fake news” (e.g., via KakaoTalk or social media) could face legal repercussions.

- Criticism of “KakaoTalk Censorship”: Opponents label the DP’s stance as an attempt to “control” private group chats and social networks, warning it could chill free expression.

Conservative Counter-Accusations of Political Suppression

- People Power Party’s View: The conservative People Power Party (PPP) argues that the DP is weaponizing sedition charges to silence critics. They liken it to “thought policing” and say it infringes basic liberties and freedom of speech.

- “Politics of Fear”: PPP lawmakers claim the DP’s approach is reminiscent of martial law–like tactics, describing it as “terrorizing ordinary people” who merely share skeptical views about the impeachment or the arrest warrant process.

Proliferation of Misinformation on Both Sides

- AI-Generated Content: Both pro- and anti-Yoon activists use AI to create audio tracks or composite images—sometimes including sensational or misleading claims—worsening the flood of questionable content.

- Low-Response-Rate Polls & Biased Questionnaires: Surveys with tiny response rates and loaded wording generate drastically different approval ratings and narratives, fueling accusations of manipulated data.

- Fractured Media Landscape: Social media influencers, partisan YouTubers, and talk shows amplify conflicting “facts,” making it harder for the public to discern reliable information.

The main issue involves how to respond to rampant political rumor, misinformation, and disinformation in a heated crisis—all without crossing into unconstitutional suppression of speech. The Democratic Party proposes a crackdown on what they term “seditious fake news,” while conservatives and many civil liberties advocates worry that these efforts will open the door to blanket censorship and stifle dissent. The tug-of-war reflects a deeper polarization in Korean politics, with each side believing the other is using “disinformation crackdowns” as a political weapon rather than a good-faith effort to keep public discourse honest.

What is the state of government and law-making during all of this?

Leadership Vacuum

- President and Prime Minister Suspended: President Yoon Suk Yeol is impeached and under an arrest warrant, while Prime Minister Han Duck-soo was also impeached over judicial appointments.

- Acting President: Deputy Prime Minister and Finance Minister Choi Sang-mok assumed the acting presidency on Dec. 27. He has authority to sign or veto bills and to fill some government appointments, but he faces the reality of a power struggle in Parliament.

Parliamentary Paralysis

- Deep Partisan Divisions: The National Assembly is polarized between pro-Yoon lawmakers who call the impeachment an overreach, and opposition or non-Yoon conservatives who say martial law broke constitutional norms.

- Key Legislative Agenda Stalled: A range of economic and security-related bills—such as reforms for semiconductors, energy, or budget allocations—remain on hold. Both sides are preoccupied with impeachment proceedings, special counsel bills, and attempts to resolve (or leverage) the crisis.

- Frequent Boycotts & Delays: Committee sessions and general floor votes are frequently postponed or deadlocked, slowing most legislation that does not relate directly to impeachment or special prosecutor proposals.

Administrative Workarounds

- Acting President’s Executive Authority: Some immediate policy and administrative tasks can be handled by executive agencies under Choi’s direction—like emergency measures to stabilize markets or respond to international obligations.

- Policy Implementation Delays: Nonetheless, major initiatives—budget adjustments, big infrastructure or defense contracts, and major regulatory reforms—generally need parliamentary approval, which is almost impossible to secure amid the current gridlock.

- Risk to Economic and Trade Agreements: While existing international treaties and trade deals remain in force, the inability to pass new legislation or ratify updated agreements could hamper government plans or leave potential deals in limbo.

China's Incursions Around Taiwan

The Current Situation

Ongoing Military Tensions Across the Taiwan Strait

- China's Increased Military Activity: The People's Liberation Army (PLA) has ramped up aerial and naval exercises around Taiwan (often dubbed “Joint Sword” drills), employing large-scale ship and aircraft maneuvers. These include repeated incursions into Taiwan's Air Defense Identification Zone (ADIZ) and maritime “joint combat readiness patrols.”?

- Rapid Responses by Taiwan: Taiwan's Air Force regularly scrambles its IDF Ching Kuo fighters armed with indigenous missiles (e.g., Tianjian-2) and coordinates with Navy and shore-based missile units. “Tianju Missions” station fighters in Penghu year-round, reflecting heightened readiness to intercept PLA aircraft.

Calls for a Stronger Defense Posture in Taiwan

- U.S. Urging an Increased Defense Budget: Prominent figures in the U.S.—including members of the Trump (2025–) and Biden administrations—have pressed Taiwan to boost military expenditures and readiness. The Institute for National Defense and Security Research has advocated greater investment to counter sustained “gray zone” operations and a potential full-scale invasion.?

- Bolstering Morale and Capabilities: Analysts warn about attrition in manpower and hardware due to constant PLA harassment. Taiwan is urged to modernize equipment, retain personnel, and show a determined will to defend itself, thus complicating the PLA's calculus and deterring aggression.

Cybersecurity Threats Linked to Taiwan Contingencies

- Chinese Cyber Attacks: Chinese state-backed hackers have infiltrated U.S. critical infrastructure, aiming to slow or disrupt American support in the event of a Taiwan crisis. U.S. intelligence believes these operations could hamper Washington's ability to project power across the Pacific if conflict erupts in the Taiwan Strait.?

- Goal: Delay U.S. Intervention: Beijing is reportedly trying to ensure it can act against Taiwan before allied responses materialize.

Submarine Cable Vulnerabilities

- Recent Damage Off Northern Taiwan: A freighter flying a “convenience flag” (Cameroon, but with Chinese links) is suspected of severing parts of a trans-Pacific undersea cable. Similar suspicious incidents occurred around Matsu in 2023, and in the Baltic Sea region involving ships of Chinese background.?

- Strategic Implications: Cutting cables can disrupt communications and hamper military or economic responses during a crisis. Taiwan's government and regional partners are increasingly focused on strengthening undersea-cable security, deploying backup systems (e.g., satellite communications), and improving repair capabilities.

Sino-Russian Joint Air and Maritime Patrols

- Heightened Coordination: China and Russia have normalized large-scale joint air patrols, including strategic bombers and early warning aircraft, sometimes passing through air defense zones near Japan and South Korea, or crossing the first island chain in the western Pacific.?

- Regional Signaling: These exercises serve multiple purposes—demonstrating deepening ties between Beijing and Moscow while pressuring U.S. allies in Northeast Asia. Their “gray zone” tactics challenge existing boundaries without sparking overt conflict.

Wider Concerns About Island Chain Stability

- Blocking or Encircling Taiwan: Recent large-scale Chinese naval deployments show the PLA practicing blockade scenarios and “denying access” to potential foreign reinforcements.?

- Implications for the First Island Chain: China's growing ability to project power beyond Taiwan's vicinity threatens to change security dynamics from the Taiwan Strait to the entire island chain, challenging both Taiwan's survival and the regional status quo.

Where We Stand Now

- Cross-Strait military frictions remain high, with the PLA conducting near-daily flights, naval patrols, and extended exercises.?

- Taiwan continues to scramble fighters and has shifted to year-round heightened alerts (the “Tianju Mission” in Penghu), reflecting an elevated readiness posture.?

- International pressure on Taiwan to boost defense spending and modernize forces is growing, amid persistent warnings that China's gray zone pressure could escalate into outright force.?

- Chinese cyber intrusions highlight a strategy to disrupt U.S. logistical and communications networks, buying time for Beijing should it act against Taiwan.?

- Undersea cable cuts expose a critical vulnerability. Taiwan and other democracies are now stepping up maritime patrols and underwater infrastructure defenses to mitigate risks.?

- Sino-Russian joint patrols intensify the overall security challenge in the region, underlining China's increasing coordination with Moscow and presenting an added layer of complexity for U.S. and allied responses.?

Overall, the security environment around Taiwan has grown more precarious, with China pursuing layered strategies—economic, cyber, legal, and maritime/air exercises—to isolate Taiwan and deter foreign support. The combination of daily encroachments, cyber sabotage, and potential undersea cable disruption underscores a heightened state of alert both within Taiwan and among regional allies committed to preserving peace and stability in the Indo-Pacific.

These actions do not, of themselves, signal an immediate Chinese attack or crisis in the Taiwan Strait, but are a persistent pattern of escalation aimed at learning, training, creating a "new norm" level of activity, and wearing out Taiwanese defense capabilities. Continuous activities move once provocative actions into the range of what we're used to seeing, making them seem normal and average. Rather than brash overt periodic provocations, we are seeing stepwise, inch-by-inch shrinking of Taiwan's safe space.?

The Net Effect So Far

The net effect of ongoing incursions and gray zone tactics on Taiwan and its defense situation can be summarized as follows:

Increased Operational Tempo & Resource Strain

- Taiwan's Air Force must frequently scramble fighters—including IDF Ching Kuo aircraft—to intercept or shadow PLA incursions.?

- Constant harassment risks manpower attrition and accelerated wear-and-tear on military hardware.?

- Sustained PLA activities create a war of attrition, where Taiwan is compelled to deploy aircraft and ships more often than during normal peacetime readiness, thereby hastening fatigue and equipment usage.

Budgetary and Defense Posture Shifts

- Calls from the U.S. and policy institutions have pushed Taiwan to increase defense spending to counter gray zone tactics and a potential full-scale invasion.?

- Taiwan is urged to modernize its forces, strengthen defensive platforms, and shore up morale to deter Beijing.?

- Trump, et. al. pressing Taiwan for larger defense outlays, along with internal analyses, confirms that rising pressure from incursions compels a heavier financial and strategic commitment. This indicates that Beijing may have been better off not pressing Taiwan so heavily, as heavy pressure leads to greater preparation and a better defensive posture.?

Expanded Multi-Domain Vigilance

- In addition to air-naval pressure, undersea cable disruptions and cyber intrusions illustrate how Taiwan must now defend across multiple domains.?

- This forces Taiwan to coordinate efforts among its Air Force, Navy, Coast Guard, information-security agencies, and partners abroad.?

- Sabotage or interference in communications (cables) and hacking (cyber), show a broader operational scope that Taiwan must address alongside traditional military readiness.

Heightened State of Alert Regionally

- Just as Hong Kong's experience following takeover by China catalyzed democratic sentiment in Taiwan, Taiwan's experience in dealing with Chinese incursions is catalyzing stronger reactions in Japan, the Philippines, South Korea, Australia, India, and elsewhere in the region. Once again, China's threats is having the opposite effect it intended.

- Taiwan's air and naval forces remain on watch for any blockade or encirclement scenario. Since Japan has disputed islands in the area, it also is dealing with increased incursions in the area and having to face tough questions of readiness now rather than later.?

- Beijing's coordination with Russia amplifies the potential for more advanced, large-scale exercises close to Taiwan, meaning Taipei has to factor in expanded threats from multiple directions.

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Thanks for reading,

Rodney J Johnson

Erudite Risk