According to media reports, Beijing has ordered Chinese state banks to suspend accounts held by North Koreans.
North Korea has remained defiant and has threatened “pain and suffering” ahead of a UN vote to impose fresh sanctions.
Economically, China is North Korea’s most important political ally. It is North Korea’s largest trade partner. Trade with China represents 57% of North Korea's imports and 42% of its exports. In February 2017, China announced that it will be suspending all imports of coal from North Korea until the end of 2017. Coal is North Korea’s most vital export commodity. The combined value of North Korea’s 2016 export to China, of coal, iron-ore, lead-ore and seafood, all of which are now banned, was almost $1.5 billion. This is about 60% of its total exports.
The North Korean nuclear program has been a source of concern for the US and the international community for decades. In July 2017, North Korea successfully test launched two intercontinental ballistic missiles (ICBM). In addition, the nation has also conducted its sixth nuclear test. UN imposed sanctions to hit its energy section in 2017 but North Korea has remained undeterred.
Bank of China, China Construction Bank and Agricultural Bank of China have already suspended accounts of North Koreans in their branch offices. The offices are in Yanji city, which shares a border with North Korea. The offices have also banned North Koreans from opening new accounts.
US President Donald Trump has repeatedly put pressure on China to counter the challenge posed by North Korea. China has also offered its support of fresh sanctions by the UN. However, the nation has urged US and North Korea to scale down their actions and seek resolution through diplomatic dialogue.
US has called for a vote to impose more sanctions on North Korea. The latter has remained defiant and has threatened America for initiating the sanctions. An unnamed spokesperson from the nation released a statement to the state-media, KCNA. The statement read, “In case the U.S. eventually does rig up the illegal and unlawful ‘resolution’ on harsher sanctions, the DPRK shall make absolutely sure that the U.S. pays due price. The world will witness how the DPRK tames the U.S. gangsters by taking a series of actions tougher than they have ever envisaged. The forthcoming measures to be taken by the DPRK will cause the US the greatest pain and suffering it has ever gone through in its entire history.”
North Korea for its part has maintained that its actions have been motivated by self-preservation. It believes that it is countering the nuclear threat posed by the US and wishes to “defuse the danger of nuclear war looming over the Korean peninsula and the region.”
Our assessment is that China’s unofficial bank ban is likely to damage North Korean economy far more than any new sanctions. This might arrest the flow of funds in the nation. However, North Korea has refused to back down to the pressure exerted by the international community. China’s moves could change that narrative.