China takes on North Korea

China has ordered North Korean companies to shut down their operations in the country.

China has begun implementing the sanctions that were unanimously passed by the UN in September 2017.

Background

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.

In September 2017, North Korea conducted its sixth nuclear test to date. It was the nation’s most powerful test yet. According to reports, the country detonated a hydrogen bomb that could be mounted on an intercontinental ballistic missile.

The UN has imposed sanctions on the isolated nation twice in a matter of few months. The latest round of sanctions that have been imposed is among the harshest to be imposed on the nation. There is now a ban on textile exports and a call to reduce oil imports by 30%. There is also a ban on hiring North Korean workers overseas. There are currently 100,000 North Koreans employed outside of the country.

Analysis

In September 2017, reports emerged that Beijing ordered Chinese state banks to suspend accounts held by North Koreans. 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. Additionally, North Koreans have been prevented from opening new accounts.

State Department Assistant Secretary Susan Thornton has said that China is making progress when it comes to imposing sanctions on North Korea. Thornton told a Senate Committee, “We are working closely with China to execute this strategy and are clear-eyed in viewing the progress - growing, if uneven - that China has made on this front.” The US has also noted that they have viewed a shift in policy when it comes to China’s dealings with North Korea.

China has also announced that it will limit energy supplies to North Korea and stop buying its textiles. Most recently, in compliance to the UN sanctions, China has ordered North Korean companies in the country to stop operations.

South Korea’s National Security Adviser Chung Eui-Yong has warned that the country expects increased provocative activities from North Korea in October 2017.

Assessment

We believe that the UN sanctions will be effective only if China cooperates in ensuring that the embargo with North Korea is fully implemented. We feel that the announcement by China is that it would shut off gas and limit shipment of refined petroleum products would have intended consequences and prompt North Korea to come to the negotiating table. We believe that the US too will be willing to discuss issues directly with North Korea and find a way to resolve this issue. It has been North Korea's desire to sit at the grand table and discuss issues directly with the US Government.