Chinese President Xi Jinping's three-day trip to South Korea will conclude on Saturday, with a dinner and summit hosted at President Lee Jae Myung's home. The newly elected U.S. ally has promised to balance Seoul’s ties to Beijing.

Lee's stakes are high. He took office in June after his predecessor, a hawkish politician who had tried to impose martial laws but failed, was ousted. Lee has to protect South Korea's export economy while lowering tensions between North Korea and China in the face of increasing competition from both countries.

Lee hosted Donald Trump, the U.S. president, for a hasty state visit earlier this week. He showered him with gifts and praise, before announcing an unexpected trade deal that would lower U.S. import tariffs in exchange for South Korean investments worth billions of dollars.

Lee will host similar events on Saturday, in Gyeongju on the sidelines the Asia-Pacific Economic Cooperation forum (APEC). These include a summit and a state dinner. Xi is making his first trip to South Korea since 2011.

Seoul is an important ally of the United States, as it hosts thousands of American soldiers and relies on its nuclear umbrella to protect itself from a nuclear-armed North Korea. But its economy is closely tied to not only the U.S. but also China. China has become a major challenge for South Korean businesses and exerts influence on North Korea.

Lee's office said that he will meet with Xi to discuss denuclearization of the Korean Peninsula, a diplomatic term used to describe North Korea's nukes, which have been banned by United Nations Security Council Resolutions.

Pyongyang - a Chinese military and economic ally - issued a statement Saturday, dismissing denuclearisation as a "pipedream" that will never be realized.

Trump offered to meet North Korean leader Kim Jong Un on his South Korean visit, but Pyongyang didn't respond publicly.

Trump and Xi met on Thursday, ahead of the APEC Summit. They struck a deal which includes lower U.S. Tariffs on Chinese Goods in exchange for Beijing cracking down on the illicit fentanyl traffic, the resumption U.S. Soybean purchases, and the continued flow of exports of rare earths. The Chinese President also met with leaders from Japan, Canada and Thailand.

Xi, in his closing remarks to the APEC meeting on Saturday, proposed establishing a World Artificial Intelligence Cooperation Organization. Lee, meanwhile, expressed hope for regional cooperation on AI and demographic change.

Sources familiar with the negotiations confirmed Chinese reports that were published on Saturday by state media in China. The reports stated that all member states had agreed to a joint statement of leaders, as well as on declarations about AI and demographic changes.

CHARM IS OFFENSIVE?

Trump missed this week's APEC summit of leaders. China positioned themselves as the obvious champion for free and open trade. The U.S. dominated that role for decades. Xi has announced that China will host APEC next year in Shenzhen.

John Delury is a senior fellow at Asia Society. He said that China has not yet launched a charm offensive towards U.S. ally South Korea. This is despite the pressure of Trump's tariffs, and the uncertainty surrounding U.S. commitments to military operations.

He said: "I believe Beijing is taking a phase-one approach, where they are a bit hesitant and letting Trump's administration do the damage by itself."

He added, "We haven't seen China launch big charm offensives in order to capitalize on this damage."

He said that a second phase might include more outreach but also Beijing's own pressure.

South Korea expressed concern about China's control of rare earth exports and demanded the lifting of Chinese sanctions against five U.S. linked units of South Korean shipbuilder Hanwha Ocean. Beijing claimed that the sanctions were a result of security concerns arising from the company's collaboration with U.S. investigation.

Seoul hopes that Xi’s visit will lead to Beijing easing restrictions on South Korean entertainment, which were effectively banned following the deployment of the U.S. led Terminal High Altitude Area Defense system (THAAD), missile defence system.

South Korea also expressed concern over the structures that China says are placed in waters disputed between them for fishing purposes. (Reporting and writing by Ju-min Park; Jihoon Lee; Eduardo Baptista, Josh Smith, Himani Sarkar; editing by Himani Sakar).

(source: Reuters)