Mounting hidden local government debt is one of China’s pressing challenges. Held by local government financing vehicles (LGFVs) and estimated between US$8-10 trillion, this off-the-books debt originates from a long-running tug-of-war over tax revenue between China’s central government and the localities. In the years before COVID-19, LGFVs controlled their debt by drawing on steady non-tax revenues. In summer 2020, however, approximately six months after the pandemic broke out in Wuhan, the hidden debt held by LGFVs began rising dramatically. Today, many of them are nearing default, and local governments are increasingly going broke.

​​Why did hidden LGFV debt rise so much during COVID?

A recent study, published in The China Journal, sheds light on this question. The study’s co-authors – including Jean Oi, the William Haas Professor of Chinese Politics, a senior fellow at the Freeman Spogli Institute for International Studies, and director of the China Program at APARC – use quantitative data to show how China’s central government’s regulatory crackdowns on income tied to the real estate sector during the pandemic disrupted the revenue sources LGFVs and their local governments relied on to service their debts. These policy changes “interacted with the zero-COVID policy to create a perfect storm, pushing hidden local government debt to new highs,” they write. 

Their study draws on a wide array of quantitative data, tracking information on factors ranging from COVID shocks (including confirmed cases and deaths) to, among others, government medical responses, special treasury bonds and their allocation, local debt, land purchases, and business activities. Using these sources, the co-authors built a province-level dataset covering all 31 of China’s provincial units from 2018 to 2022, allowing comparative analyses before and after China’s COVID shocks. They organized the data into three categories: (1) the impact of COVID on small and medium enterprises; (2) government fiscal responses and COVID expenditures during the pandemic; and (3) local government finances and debts.

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The Pre-COVID Era: The Grand Bargain That Failed

China’s local debt problem traces back to the 1994 fiscal reforms, which recentralized tax revenues in Beijing and left local governments with chronic budget shortfalls. To bridge the gap, the central government struck a “grand bargain”: while claiming a larger share of tax income, localities could generate new non-tax revenues through special-purpose vehicles, namely, local government financing vehicles. These LGFVs were set up as state-owned enterprises to incur and hold debt off-the-books, yet not illegally, on behalf of local governments.

The workaround fueled rapid development for years but laid the groundwork for today’s mounting hidden debt crisis.

“The success of LGFVs hinged largely on revenue generated through land finance,” explain Oi and her co-authors. “Local governments provided LGFVs with cheap land as collateral for bank loans and bonds. Further revenue was generated from preparing and selling land to real estate developers.”

Thus, LGFVs powered over a decade of rapid growth in China, driving infrastructure booms and urbanization that made the real estate sector a cornerstone of the economy. The model appeared mutually beneficial: the central government gained more tax revenue as the economy grew, while local governments used land sales and debt to fund development. But this growth depended on a continuous flow of non-tax income, making the system increasingly fragile.

After the 2008 global financial crisis, Beijing launched a sustained push to rein in local government hidden debt, focusing heavily on LGFVs. By 2017, officials labeled the risk a “gray rhino.” Yet this drive for fiscal discipline ground to a halt with the onset of COVID.

A Perfect Storm of Policy and Pandemic

The pandemic’s impact was swift and severe. Small and medium-sized businesses, especially in the hardest-hit regions like Hubei Province, saw their incomes collapse by up to 90%. In response, Beijing provided a massive fiscal support package to localities, including one trillion yuan in special COVID bonds to offset the costs from the initial onslaught of the pandemic. Crucial for LGFVs, these bonds cushioned the impact of the pandemic on land sales.

By summer 2020, however, as China was still locked away from the rest of the world and COVID was under control, Beijing resumed its policy agenda to enforce fiscal discipline and curb local government debt. The central government’s most consequential measure was the “three red lines” policy, which dealt a major blow to China’s real estate sector by sharply restricting developers’ ability to borrow once debt thresholds were crossed. The policy, expanded from 12 pilot firms in 2020 to cover the entire sector by 2021, disrupted the “borrow-to-grow” model and triggered a liquidity crisis. Evergrande, China’s second-biggest property developer, was among the first groups affected.

As borrowing dried up, firms struggled to repay debt, halted construction, and stopped buying land, slashing local government revenues. Land sales plummeted across provinces, with national revenue growth from land transfers plunging into negative territory by 2022. The crisis deepened when unfinished housing projects led to mortgage boycotts by frustrated home buyers, prompting more state intervention.

For local governments, the shift came at a steep cost. They were ordered to step in, using LGFVs to purchase land and inject cash into public budgets. As a result, even wealthier provinces like Shanghai and Guangdong saw sharp increases in LGFV debt.

“The call for LGFVs to buy land to create revenue for local governments made matters worse, turning land from a key source of revenue into a source of new debt and forcing LGFVs further to increase borrowing, all of which caused soaring increases in LGFV debt, without any alternative revenue source to service or pay that debt,” explain Oi and her co-authors.

A Fiscal Reform Imperative

The study shows how China’s shifts in central government policies during the pandemic – especially the three red lines and the directive for LGFVs to buy up unwanted land — exacerbated long-standing vulnerabilities in local public finance. What had been a delicate balancing act quickly became unsustainable.

“At the root of China’s continuing crisis of LGFVs' debt is China’s flawed fiscal system,” the co-authors emphasize. Before the pandemic, the system masked deficits by relying on LGFVs to generate off-the-books revenues, primarily through land sales fueled by a booming real estate market. This arrangement allowed Beijing to capture the bulk of tax revenue while localities chased growth. But when COVID struck and the property sector collapsed, the facade crumbled.

The fallout exposed how deeply local governments had come to depend on land finance – an unstable, non-institutionalized revenue stream. With the real estate sector once accounting for over 20 percent of GDP, its collapse left localities and their financing vehicles adrift. “In the context of a crisis such as COVID, the weakness of the fiscal system and LGFVs was exposed as policy instability added to the volatility of the economic situation,” Oi and her co-authors note.

The local government debt problem might not trigger a financial crisis in China, “but LGFVs and their local governments remain in dire straits,” they write. More worrying, the economy has not rebounded in the post-COVID years as hoped, and “as long as the real estate sector remains depressed, land finance will not be able to make local government budgets whole as it once did. The grand bargain can’t work.”

Rather than assume the debt, Beijing is extending lifelines: urging banks to offer LGFVs 25-year loans with temporary interest relief, approving debt swaps into longer maturity municipal bonds, and allowing new issuances of special-purpose bonds. But these are stopgaps, not solutions.

Hidden debt will keep resurfacing unless China overhauls the fiscal system born out of the 1994 reforms, Oi and her co-authors conclude. Institutionalized, dependable, alternative revenue streams for local governments are needed, or the crisis will persist. “It may be time for Chinese leadership to stop kicking the can down the road and undertake institutional reforms of the fiscal system. This may be painful, but there is no other sustainable solution.”

This interview first appeared in The Paper on April 4, 2025. The following English version was generated using machine translation and subsequently edited for accuracy and clarity.

It has been 122 days since South Korean President Yoon Suk Yeol issued an "emergency martial law" order on December 3, 2024. On the morning of April 4, the Constitutional Court of Korea will issue a ruling on Yoon’s impeachment case. From the National Assembly’s motion to impeach to 11 court hearings and now the final verdict, 111 days have passed—far more than for former Presidents Roh Moo-hyun and Park Geun-hye. Over these four months, the divide between the ruling and opposition parties — and within Korean society — has become increasingly apparent. Whether the Constitutional Court can safeguard the Constitution and public trust has become a major focus of public opinion in South Korea.

"I’ve long believed in the resilience of South Korean democracy, but over the past two or three months, I’ve started to worry. In the face of this current political stalemate, I wonder whether Koreans can still accept decisions that contradict their positions," said Gi-Wook Shin, Professor of Sociology at Stanford University, founding director of the Korea Program, and Director of the Walter H. Shorenstein Asia-Pacific Research Center, in an interview with The Paper. He noted that there are no signs South Korea will escape its current political polarization anytime soon — and that the situation may worsen.

Shin entered Yonsei University’s Sociology Department in the late 1970s. In the early 2000s, he founded the Korea Program at Stanford, focusing on social movements and nationalism. In 2024, he published Korea’s Democracy in Crisis: The Threats of Liberalism, Populism, and Polarization, a book whose concerns — resurgent populism and societal polarization — are now vividly reflected in real life.

On December 3, 2024, Yoon declared a state of emergency and described his political opponents as "anti-state forces." The language he used in his televised emergency address was directly reminiscent of the Cold War era. Meanwhile, during Yoon’s administration, opposition parties submitted a record 29 motions for impeachment. These episodes highlight deep rifts in Korean politics, intensifying the fierce struggle between the left and right across all levels of society.

The roots of South Korea’s political divide trace back to the post-WWII era. Under global pressures, political elites on the Korean peninsula quickly split into left-wing, right-wing, and various centrist groups, each hoping to build the country according to their ideals. After the United States and Soviet Union occupied different parts of the peninsula, a sharp ideological confrontation emerged, and the left and right failed to unite to establish a single nation.

During the military rule in South Korea, U.S.-backed authoritarian strongmen governed the country, laying the groundwork for today’s conservative political parties. Meanwhile, leftist forces were strengthened by decades of street protests. Since democratization in 1987, South Korean politics have swung between the left and the right. Under President Yoon, this shift toward the right has become even more pronounced.

Amid the growing hostility between conservatives and progressives, Yoon’s martial law declaration and subsequent impeachment proceedings have amplified South Korea’s political polarization and left-right conflict. Yoon’s supporters have launched massive demonstrations. Conservative voices have grown louder, with many chanting U.S.-style slogans like “Stop the Steal” in homage to Trump’s MAGA movement. Shin warns that among Asian countries, South Korea may be the only one to experience a phenomenon akin to “Trumpism.” A recent survey by Korea’s Center for Conflict Resolution found that most South Koreans see ideological division as the country’s most pressing social issue.

Conservative Voices Grow Louder, More Extreme

The Paper: From your observations, what changes has this political storm — from emergency martial law to the president’s impeachment — brought to South Korean society?

Gi-Wook Shin: Regarding presidential impeachment, Roh Moo-hyun’s case in 2004 was dismissed by the Constitutional Court, and Park Geun-hye was removed from office in 2017. Both previous cases strictly followed legal procedures with clear rules. But this time, the situation is far more chaotic, with fiercer partisan conflict. In a sense, we’re witnessing a threat to the rule of law.

On the other hand, mass mobilization by both the left and the right is very active, especially the anti-impeachment forces, whose scale and influence are significant. This shows that political polarization has deepened, and social division has worsened — developments that deeply concern me.

The Paper: In this wave of political turmoil, what is the core conflict between conservatives and progressives?

Shin: When martial law was declared, the right tried to assert control over state power and justified their actions with claims that pro-North Korean forces needed to be purged from the country. Their stance clearly supports the South Korea-U.S. alliance. In their protests, you’ll often see both Korean and American flags, as well as images of Trump and Yoon Suk-yeol side by side.

The left, by contrast, believes that this emergency declaration is essentially destroying the democracy that South Koreans fought so hard to achieve. They see the right not just as opponents, but as anti-state and anti-people forces.

Today’s political confrontation in South Korea is filled with resentment and hostility. It has become a kind of “identity politics.” That’s why compromise is so difficult. The two sides no longer see each other as legitimate political rivals, but as “evil forces” or enemies to be defeated at all costs.

The Paper: It’s been over three months since the martial law controversy began. As time passes, conservative voices have grown louder, the ruling People Power Party's approval ratings have rebounded, and anti-impeachment rallies are massive. Are we seeing signs of an expanding conservative base?

Shin: Large-scale protests aren’t new in South Korea. In the past, they were usually led by liberal or progressive groups. In recent years, however, right-wing and conservative forces have increasingly mobilized for protests. This is a new trend. You could already see this during the 2022 presidential election: it was extremely close, with Yoon and Lee Jae-myung separated by less than 1 percent of the vote. Conservatives realized the importance of mobilizing public support to counterbalance the left.

Indeed, conservative voices have grown louder and more extreme. We’re even seeing cases of storming courts and self-immolation. But that doesn’t necessarily mean their numbers are increasing. Overall, South Korea’s population is roughly divided into 30 percent liberals, 30 percent conservatives, and about 40 percent swing voters. Sometimes conservatives use “bluffing” to create the impression of overwhelming influence and suppress progressive mobilization.

The Paper: The far right is now active on the political frontlines, loudly supporting the conservative camp. Some far-right individuals even stormed the court. Right-wing YouTubers have become among Yoon’s most fervent defenders. In this context, will the People Power Party continue shifting further right, or even toward the far right?

Shin: What’s visible now is that the ruling People Power Party has some connection to the far-right forces in the current street protests. Especially in the wake of the martial law declaration and impeachment, the far right has taken the lead in organizing massive demonstrations, mobilizing hundreds of thousands every weekend.

There is latent cooperation between the ruling party and the far right. But now that the impeachment has triggered an early presidential election, the People Power Party must also appeal to a broader base, which means distancing itself from the far right — creating a dilemma.

If the People Power Party continues working with the far right, it may retain its base and ensure right-wing support. But elections are won by swing voters. Distancing from the far right helps avoid being labeled “extreme” and attracts moderates.

Given that the election will happen within 60 days of the impeachment, the ruling party has little time to adjust its campaign strategy. They must quickly decide how to handle their relationship with far-right street forces: should they continue cooperating or distance themselves? This will be a core political challenge in the coming weeks.

South Korea’s Democratic Crisis Reflects a Global Trend

The Paper: At conservative protests, many people carry signs with slogans like “Stop the Steal,” borrowed from Trump supporters. Trump had the “Make America Great Again” movement. Yoon has the Taegeukgi Budae movement (a far-right group of older conservatives, many of them fundamentalist Christians who strongly support Yoon). How do you see Trump’s influence on Korean politics?

Shin: It’s interesting. Among Asian countries, South Korea may be the only one to experience something like “Trumpism.” Two factors are worth noting.

First, there are organizational similarities between the Korean and American contexts. Yoon and Trump supporters share common traits, especially religious ones. That’s not the case in other Asian countries. For example, the Philippines is Catholic, others are predominantly Muslim or Buddhist. South Korea is the only Asian country where fundamentalist Christians have strong political influence. (Editor’s note: According to Yonhap, Korea’s Yoido Full Gospel Church is currently the largest Christian church in the world.) There seems to be a connection or sense of identification between American evangelicals and Korean Christian fundamentalists.

Second, ideologically, Korea’s right resembles America’s right. Their fondness for slogans like “Stop the Steal” reflects their belief in election fraud conspiracies. YouTube’s influence in Korea is possibly stronger than in most of the world, especially among the far right. It has become a vital tool for mobilization and organizing large-scale protests.

The Paper: South Korea’s democratization was closely tied to the U.S. export of democracy. After the Korean War, with U.S. support, South Korea adopted a democratic constitution and a relatively modern political framework. How has foreign influence shaped Korean democracy? Is it connected to the current democratic crisis?

Shin: U.S. influence on Korean democracy is complex. Until the 1980s, the United States supported South Korea’s military dictators like Park Chung-hee and Chun Doo-hwan. Only after 1987 did the United States back democratic development. But ultimately, it was the Korean people who fought for democracy. That’s why so many opposed the martial law declaration on December 3. They don’t want to give up hard-won freedoms. Many made great sacrifices for democracy.

South Korea has been democratic for over 40 years. What we see today may be tense or even extreme, but many places worldwide are also experiencing democratic backsliding. It’s unclear whether the United States is doing any better, especially in the Trump era. Many European countries — France, Italy, Hungary, the Netherlands, Spain — are facing similar crises.

South Korea’s current democratic crisis is part of a global trend. It’s just that the martial law announcement drew special attention. But populism, polarization, and identity politics are global issues.

The Paper: After democratization, South Korea again saw emergency martial law, fierce clashes between the president and law enforcement, and general chaos. Yet parliament quickly revoked the martial law order, the impeachment process followed legal procedure, and there were no bloodshed or full societal collapse. What has maintained this relative order?

Shin: South Korea has experienced many legal and political crises before. Also, civic engagement is very high: many LGBTQ+ and minority groups are highly politically active, perhaps even more than in the United States. That’s part of why political clashes are so intense, but it also shows a deep sense of civic participation.

Korea is a relatively well-governed country, with a strong bureaucratic system. I used to believe strongly in the resilience of Korean democracy, but over the past two or three months, I’ve started to worry. Can people still accept outcomes that contradict their positions?

In 2017, the Constitutional Court upheld Park Geun-hye’s impeachment, and most Koreans accepted it and moved on. But this time, it’s unclear whether Yoon’s supporters will accept a guilty verdict — they’re already challenging the court’s legitimacy. On the other hand, if the impeachment fails, opponents may also refuse to accept the result.

The political turbulence may persist for months, or even years.

How to Heal a Divided Society

The Paper: Beyond left-right ideology, what other messages are South Korean protesters trying to express? Also, Korean pop culture has entered these events: people are playing K-pop music and waving glowsticks. How do you see this unique cultural phenomenon?

Shin: Today, there are many legal disputes and procedural questions between the Constitutional Court, regular courts, the Corruption Investigation Office, prosecutors, and police. Sometimes the legal process is inconsistent or fragmented, which confuses the public and weakens faith in the legal system.

But Koreans have a long history of protest culture. They know how to demonstrate in an orderly way. Protests aren’t always serious or violent, sometimes they feel festive or recreational, with music, dancing, and food stalls. Some elderly people even travel from rural areas to Seoul for a day just to enjoy the atmosphere and social gathering.

Also, Korea is a highly centralized society — everything is concentrated in Seoul, and issues can quickly become national news.

The Paper: This political crisis has deepened Korea’s ideological rifts. A recent survey shows that ideological conflict is now seen as the most urgent social problem, even ahead of gender or wealth inequality. What can be done to prevent further division or begin healing?

Shin: There are no signs that Korea will overcome its political confrontation and polarization anytime soon. The divide may worsen. In the long term, I call for political reform.

Korea should adopt a parliamentary system. The current presidential system is “winner-takes-all,” so even if someone wins by less than 1 percent of the vote, they gain total control. A parliamentary system might encourage more cooperation and compromise. But I don’t think Korea currently has the political atmosphere to make that shift.

The electoral system also needs reform. Right now, each district elects just one representative — sometimes by a single vote — giving them total power.

Civic education is another area for reform. Koreans need to learn how to share and compromise. In Korean, “compromise” often carries a negative connotation. But in a democracy, compromise is essential. No one can get everything they want.

These are long-term reforms and there’s a long road ahead. What truly worries me is that in the next year or two, social division may grow even worse.

Three years after Russia’s full-scale invasion of Ukraine and the joint declaration of a "friendship without limits" by Vladimir Putin and Xi Jinping, the two leaders reaffirmed their partnership during a phone call, pledging continued coordination on foreign policy, security, and trade. Meanwhile, President Donald Trump’s controversial Oval Office meeting with Ukrainian President Volodymyr Zelensky and his administration's vitriolic foreign policy rhetoric have raised concerns that Washington may no longer be the reliable partner it once was. Moreover, amid ongoing U.S.-imposed tariffs, India is bracing for the fallout from Trump’s trade war, despite Prime Minister Narendra Modi’s February visit to the White House, which did not yield the concessions and Trump support New Delhi had hoped for.

The 2025 Oksenberg Symposium, titled China’s Strategic Relationships, brought together experts to discuss these evolving strategic relationships between China, the United States, Russia, and India, and to consider their perspectives and strategic adjustments in response to shifting internal and external political, economic, and social dynamics. The discussion, moderated by APARC’s China Program Director Jean Oi, featured panelists Da Wei of Tsinghua University, Alex Gabuev of the Carnegie Endowment for International Peace, Sumit Ganguly of the Huntington Program on Strengthening U.S.-India Relations at the Hoover Institution, and FSI Director Michael McFaul.

This convening followed Chatham House rules to encourage candor, so the following summary does not attribute comments to individual panelists.

A Partnership Without Limits

The panelists first focused on the increasingly complex relationships between Russia, China, and the United States. On the one hand, a growing China-Russia alignment across military, economic, and political domains has been well documented. On the other hand, Russia’s increasing dependence on China — especially after the war in Ukraine — has raised questions about the asymmetry of their partnership.

Even so, the relationship between the two nations remains strong, partly due to their shared distrust of the West. Although China has been cautious about fully endorsing Russia’s invasion of Ukraine, it has refrained from condemning the war, understanding the risks of destabilizing Russia or fostering a Western-aligned regime.

The View from New Delhi

India’s relationships with the United States and China are marked by a delicate balancing act. The U.S.-India partnership has strengthened over the years, driven by shared concerns about China’s growing assertiveness. Still, despite bipartisan support for this relationship, India’s historical experiences, particularly during the Cold War, have left a lingering distrust toward U.S. intentions. That wariness is now increasing under the uncertainties of the Trump administration.

India's relationship with China is complicated by military and economic disparities and by China’s strategic partnerships in South Asia, particularly with Pakistan. India's policy remains cautious, aiming to maintain a non-aligned stance while strengthening defense and trade ties with the United States and managing tensions with China, especially over border disputes.

Beijing’s Patience

U.S.-China relations took center stage at this year’s symposium. China’s rise as a global power has posed a complex challenge for U.S. foreign policy. Under the first Trump administration, China was portrayed as a revisionist power with expansionist ambitions. Trump’s rhetoric framed China as a strategic adversary, drawing comparisons to the Soviet Union under Stalin. This characterization contributed to the perception of a new Cold War and an accelerated decoupling of the two economies. In the second administration, tariffs and a looming trade war define the relationship.

From China’s perspective, the past decade has seen an overemphasis on its relationship with the United States., which at times strained its ties with Russia and India. China’s growing partnership with Russia, motivated by shared concerns over Western policies, has been key in countering perceived threats, particularly NATO’s expansion. However, China has remained cautious about fully endorsing Russia’s actions, such as the invasion of Ukraine, while acknowledging the risks of a collapsing Russian regime.

China’s relations with India have been challenged by border issues, as well as India’s shift away from non-alignment and its growing ties with the United States. These changes have complicated China’s strategic calculations in South Asia, though recent stabilization in Sino-Indian relations shows potential for improvement.

Challenges for Global Stability

The panelists noted that the increasing competition between the four countries is reshaping the international order, creating a more multipolar world where countries are single-handedly pursuing their national interests. This fragmentation of global power poses challenges for international cooperation but also provides China with opportunities to pursue more flexible diplomatic strategies, potentially easing tensions with Russia and India.

The U.S. response to these changes, particularly under Trump, was heavily scrutinized. In both Trump's first and second terms, the administration’s foreign policy marked a radical departure from past practices, blending radical isolationism, unilateralism, and realism. Panelists noted that the erosion of democratic ideals in U.S. foreign policy contrasts with its role in the Cold War era as a champion of democracy and human rights, particularly in opposition to Soviet authoritarianism. This shift has been especially evident in its approach to Taiwan, where there has been limited emphasis on supporting its democratic values amid growing pressure from China.

This new isolationist stance, driven largely by domestic concerns and a belief that the United States has been exploited in global trade, has led to a strategic pivot away from multilateralism. During Trump’s first term, the administration withdrew from key international agreements such as the Paris Climate Accords, the Iran nuclear deal, and the World Health Organization, favoring "America First" policies over collective global action. The continued shift toward isolationism and unilateralism marks a radical departure from previous administrations' commitment to liberal internationalism.

A Rough Road Ahead

Panelists expressed concern that this dramatic shift could leave Washington isolated, undermining its ability to address global challenges like climate change, international security, and the rise of authoritarian regimes. The erosion of key alliances could also diminish U.S. influence, making it harder to counter the growing power of China and Russia.

One panelist observed that while Trump initially framed China as a strategic adversary, his second term saw more conciliatory rhetoric, though his policies — especially the trade war — could ultimately harm U.S. interests. This approach could erode U.S. global influence by weakening international alliances and multilateral institutions that have long underpinned U.S. power. The panelists agreed that Trump’s foreign policy would fundamentally reshape U.S. relationships with key global players.

The symposium underscored the complexity of balancing strategic interests in a rapidly changing world, where traditional alliances are being tested and new dynamics continually emerge. The challenge for China, the United States., Russia, and India is to navigate these relationships in ways that secure their national interests while contributing to broader global stability.

In the February 2025 issue of The Diplomat magazine, APARC and Korea Program Director Gi-Wook Shin, professor of sociology and the William J. Perry Professor of Contemporary Korea, discusses the political crisis in South Korea following President Yoon's ill-fated attempt to impose military rule and its implications for the country's future.

On January 26, 2025, the impeached and arrested Yoon was formally indicted on insurrection charges. Separately, the Constitutional Court has begun deliberations on whether to dismiss him as president or reinstate him. The national reaction to Yoon’s martial law declaration "underscores how South Koreans’ hard-won democracy is not taken for granted,” Shin, an expert on social movements and democracy in South Korea, says. "This episode highlights both the fragility and resilience of Korea’s young democracy."

In this interview with The Diplomat's Editor-in-Chief Shannon Tiezzi, Shin explains how sharp political polarization in Korea set the stage for the marital law episode of December 2024 and how the country can start bridging these gaps, how the prolonged political upheaval is impacting Korean economy and society, and what's ahead for the ruling People Power Party and the opposition Democratic Party.

How did South Korea’s history as a dictatorship – and past experiences of martial law – inform both Yoon’s decision to declare martial law and the public response?

South Korea’s painful history with dictatorship and martial law casts a long shadow over contemporary politics. I entered college in 1979, a year marked by the assassination of Park Chung Hee in late October and a period of intense political instability ensued under martial law. In fact, President Yoon Suk Yeol entered a college in the same year as me and it is hard to understand how he could forget these shared experiences and decided to declare martial law.

When Yoon declared martial law last December, it triggered an immediate and decisive public backlash, driven by a collective memory of decades of struggle against autocratic regimes. This reaction underscores how South Koreans’ hard-won democracy is not taken for granted. Civic groups, citizens, and lawmakers mobilized swiftly, reversing the martial law decision within six hours and passing the motion to impeach Yoon 10 days later. Despite recent backsliding, proactive civic engagement demonstrates that their experiences have informed strong commitment to safeguarding democratic principles.

Read the complete interview in The Diplomat magazine (subscription) >

Additional Media Commentary and Analysis

In recent weeks, Professor Shin has commented on and analyzed the evolving political situation in Korea via the following media outlets:

“For a United States that Remembers the Capitol Riots, Korea’s Turmoil Isn’t Someone Else’s Business”
Shindonga, January 8, 2025 (interview – Korean)

South Korea Needs to Move On from This Crisis
Bloomberg, January 8, 2025 (quoted)

It’s a Challenge for a Weakened Political Leadership in South Korea to Handle Trump Presidency
CNBC Squawk Box Asia, January 7, 2025 (interview)

South Koreans Adopt Trump's “Stop the Steal” Slogan for Impeached Yoon
AFP, January 6, 2025 (quoted)

South Korea: “The Crisis Risks Lasting Beyond the Next Presidential Election”
Les Echos, January 6, 2025 (interview)

South Korea Divided Over Yoon Standoff
BBC News - The Context, January 3,  2025 (interview)

Is South Korea a Beacon of Global Democracy?
The Korea Times, December 30, 2024 (author - Korean)

This post was originally published by the Harvard Law School Forum on Corporate Governance.

TikTok’s travails under the Trump and Biden Administrations are typically portrayed as a clash between national security interests and First Amendment protections. This tension is the focus of TikTok’s suit against the U.S. Government over a 2024 law that subjects the video platform to a ban in the United States unless it is divested from Chinese control by January 19, 2025.

But TikTok’s problems in the United States expose another serious tension: between longstanding legal doctrines of corporate identity and separate personality, on one hand, and increasing concerns over Beijing’s use of erstwhile private commercial firms as instruments of state influence, on the other. The divest-or-ban legislation illustrates that corporate law’s answers to the question of corporate identity and separateness are not definitive in a de-globalizing world.

Continue reading the post here.

Story last updated December 15, 2024

On December 3, 2024, South Korean President Yoon Suk Yeol abruptly declared martial law in a dramatic response to the political deadlock that has stymied his tenure, only to rescind the decision six hours later, sparking widespread protests and plunging the nation — one of the United States’ closest allies — into turmoil.

What were Yoon’s motivations? What happens now? What are the implications of the dramatic events for South Korea’s democracy?

Stanford sociologist Gi-Wook Shin, the William J. Perry Professor of Contemporary Korea and the director of APARC and its Korea Program, has written extensively about South Korea’s democratic decay and is the co-editor of the volume "South Korea’s Democracy in Crisis: The Threats of Illiberalism, Populism, and Polarization" (Shorenstein APARC, 2022). This news roundup highlights Shin's commentary on Korea's political turmoil, published in national and international media. We update it as this developing story unfolds.

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Elected in 2022 by a razor-thin margin of less than one percentage point over his left-wing rival, Yoon entered office as a political outsider with an unyielding approach to leadership. “He may have been a successful prosecutor, but he entered politics without much preparation,” Shin told the Financial Times. “He is completely out of touch if he thought he could run the country through martial law.”

Yoon came into power in a toxic political environment, where democratic norms have become increasingly rare. Korean politics, shaped by a winner-take-all electoral system and a dominant presidency, has further heightened the tensions between the executive and legislative branches, writes Shin in a Stanford University Press blog post, explaining the historical and sociopolitical contexts of Yoon’s martial law declaration and its aftermath.

Yoon has been a “lame duck” president since the opposition Democratic Party (DP) secured a landslide victory in the April 2024 National Assembly elections. His audacious martial law declaration was “a surprising last-ditch move to grab political power" in the face of steadily falling approval ratings, Shin told AFP and Vox. But this move “is basically political suicide” that “will only fasten the demise of his political career," Shin added.

On the morning following his short-lived martial law bid, members of the DP submitted a motion to impeach Yoon. “He really has two options: resign or face impeachment,” Shin said in an interview with BBC Newsday. Yoon has lost the public trust, legitimacy, and even his mandate to rule the country. “He should resign, it's better for him and the country, but I doubt that he will,” noted Shin, predicting a political ruckus over impeachment during the coming days and weeks. Watch the complete interview below:

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Should Korean citizens be worried about the future of their democracy? Yes and no, explained Shin in an interview on NPR’s "All Things Considered." In the short term, there will likely be significant political instability and societal uncertainty, with potential economic repercussions, he said. In the long run, however, Shin believes that Korea’s strong democratic institutions will ensure its democracy will prevail. He emphasized that he remains optimistic and encouraged by how swiftly and decisively the martial law attempt failed. Listen to the conversation:

Martial law was last imposed in South Korea in 1980 by Chun Doon Whan, a general who seized power through a coup after the 1979 assassination of President Park Chung Hee — himself a former general who had also used martial law to crack down on student-led dissent during his rule. Chun brutally suppressed civilian protests in the city of Kwangju in May 1980. Many Korean people, including Shin, who was a student at the time, still hold painful memories of this violent episode in Korean history. Shin reflected on that period in an interview on WBUR’s OnPoint program (listen starting 35:24).

But the situation today is very different from when South Korea was fighting against dictatorship, Shin told The Washington Post. “Democracy was not given to the Korean people. It was hard fought and won,” he said. “I believe Korean democracy will come out stronger after this.”

This week’s turn of events has highlighted “both the vulnerabilities and resilience of South Korean democracy”, Shin told the Financial Times. It has exposed challenges and problems including polarization, potential executive overreach, and weakened public trust, "but the swift rejection of martial law by the National Assembly and public outcry demonstrated strong institutional checks, civic engagement, and the opportunity to reinforce democratic safeguards.”

Yoon justified the imposition of martial law as a measure to protect South Korea from the threats of North Korea's communist threat and prevent gridlock by “anti-state” forces, referring to the DP, his liberal opposition.

“I am sure North Korea will be watching the situation very closely and may issue a statement condemning the martial law [...] Other than that, I don't think they will take any immediate action,” Shin told Newsweek in the hours before Yoon reversed course, predicting that Yoon’s ploy would be short-lived as it would face fierce national resistance.

The United States, which has around 28,500 troops stationed in South Korea, was unaware of Yoon's intention to declare martial law. The White House voiced relief over Yoon’s decision to rescind his martial law bid, emphasizing that the United States reaffirms its “support for the people of Korea and the U.S.-ROK alliance based on shared principles of democracy and the rule of law.” Shin believes the alliance is resilient enough to weather Korea’s political turmoil. "I don't think the situation will affect the alliance that much," he remarked on NPR’s "All Things Considered."

A Tumultuous Road Ahead — And Lessons for Democracies Worldwide

What's next for South Korea after the martial law crisis? If Yoon does not resign, then the main opposition party will pursue impeachment. The National Assembly must vote on the motion within 72 hours after it is introduced, and the Constitutional Court has 180 days to make a ruling. A snap election would follow if impeachment is upheld, explains Shin.

The conservative People Power Party (PPP) will need to evaluate carefully the political landscape and their election prospects, and might not necessarily abandon President Yoon. “There is a difference between voting to stop martial law and voting in favor of an impeachment that would likely guarantee an opposition victory in the snap election to follow,” Shin told TIME Magazine.

While PPP leader Han Dong-hoon, once Yoon's protégé, has urged the president to resign, citing “significant risks” to the nation, impeachment poses a tough choice for the ruling party, which remains haunted by the 2017 impeachment of Park Geun Hye, Shin explains in the Journal of Democracy. Conservative leaders lost the snap election following Park's removal and faced intense political retribution under her liberal successor, Moon Jae In. History could repeat itself now, although DP opposition leader Lee Jae Myung is facing trial on multiple criminal charges. "This alternative to Yoon does not appear as promising for Korean democracy as one would hope," Shin notes.

Yoon's doomed power grab is "a stern warning to the world: People should take democratic backsliding in their countries seriously," Shin concludes his Journal of Democracy essay. "If such an event can happen in Korea — an advanced nation long regarded as an exemplary case of the 'third wave' of democratization — then it can happen anywhere that is experiencing similar democratic challenges. This is a critical lesson for democracies worldwide."

As Shin expected, President Yoon avoided impeachment on Saturday, December 7, after PPP lawmakers boycotted a parliamentary vote on the impeachment motion proposed by opposition parties, despite massive public protests outside the National Assembly.

The PPP defended its decision, stating it acted to prevent "severe division and chaos" and pledged to address the crisis "responsibly." PPP leader Han Dong-hoon claimed Yoon had agreed to step down and would be "effectively excluded from his duties," with the prime minister and party taking over governance in the interim.

“I don't think Korean people have the patience to wait for this plan to work out,” said Shin in a BBC News interview. He explained that the ruling PPP is trying to buy time, but Yoon will have to go sooner or later. The opposition parties have declared their intent to file an impeachment motion against Yoon every week until it is passed. With growing public anger and mounting demonstrations, pressure on the ruling party is expected to intensify, Shin said. Watch:

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As Yoon clung to power, the National Assembly passed a bill on December 10 mandating a special counsel to investigate insurrection charges against him. The ruling party "might delay the demise of Yoon's tenure but won't prevent it — its road will be messier," Shin told AFP.

Shin is concerned that this crisis in political leadership and the resulting leadership vacuum spell trouble for South Korea on the world stage. The nation already faces mounting foreign policy challenges with President-elect Trump’s anticipated policies and a new prime minister in Japan. It’s unclear how it can effectively navigate critical issues involving the United States, Japan, North Korea, and China amidst such instability, Shin told BBC News.

Winds of Change

On December 14, South Korea's National Assembly voted to impeach Yoon, passing the motion 204-85 (including a dozen ruling party members) as jubilant crowds celebrated a triumph for the country’s democracy. Yoon's presidential duties were suspended, and Prime Minister Han Duck-soo will take over as acting president. The Constitutional Court now has 180 days to decide whether to remove Yoon from office or reinstate him. If he is removed, a national election to select his successor must be held within 60 days.

Shin believes the likelihood the Constitutional Court will overturn the impeachment is low, as Yoon’s constitutional violations appear quite clear. “Certainly, Yoon will go down in Korean history as a very poor political leader,” he remarked in the latest interview with BBC News, several hours after the impeachment vote.

The day after the passage of the impeachment bill, Han Dong-hoon announced his resignation as leader of the ruling People Power party, saying his position had become untenable after he backed Yoon’s impeachment. The PPP is in turmoil, attempting to buy time to be better prepared for the potential snap election that could follow than it was in the 2017 scenario, Shin explained, expressing skepticism about the PPP’s chances of success. Watch the interview:

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The crisis offers Korean people an opportunity to reflect on their tumultuous democratic journey and push for necessary reforms stymied by political calculations, Shin writes on Stanford University Press’ blog. He explains that addressing the negative consequences of the nation’s extremely powerful presidency and the winner-take-all voting system requires constitutional and electoral reforms.

“Korea’s political culture must also change,” Shin emphasizes. “Demonizing opponents, divisive identity politics, and insular political fandoms and populism have no place in a healthy democracy.”

Additional Media Commentary
 

• The Economist
• Politiken (Danish) 
• Il Messaggero (Italian)
• Caixin Weekly (Chinese)
• Voice of America (Korean)
• Korean Media
  • Fortune Korea
  • The Value News (in Korean)
  • Edaily News (here and here)