China’s Measured Sanctions Squeeze On North Korea

LATEST CUSTOM’S DATA for trade with North Korea in the first five months of this year provide a snapshot of how China has used sanctions to regulate its trade with North Korea and thus Beijing to calibrate the economic pressure it exerted on North Korean leader Kim Jong-un to dial down his nuclear and missile testing programmes. (The darker blue columns in the chart show the 2017 figures; the light blue ones the data for 2018.)

Chart of China-North Korea trade, Jan-May, 2017 v Jan-May, 2018. Source: Chinese Customs data, China Bystander.

Between January and May, total trade, at $887.4 million, was 56.8% lower than in the same period of 2017, indicating the application of sanctions, which China began to enforce serious last November. However, the impact on imports and exports shows a telling contrast. China’s purchases from North Korea were down 87% to $94.3 million but what China sold to North Korea, decreased by less than half that, by only 40% to $793.1 million.

Given that China is North Korea’s main supplier of energy and food, that suggests that while Beijing was comfortable with choking off North Korea’s export earnings, it was less so in imposing sanctions that might put social stability in North Korea at risk.

The Singapore summit between Kim and US President Donald Trump has prompted discussions, particularly among South Korean firms, about the prospects of restarting business operations in North Korea, especially improving transport and infrastructure links as political leaders have suggested. However, sanctions remain a high barrier.

North Korea remains littered with the remains of joint ventures that had hoped to prosper on the back of the 2006 round of promises by North Korea that would suspend its nuclear programme. The US intelligence agency, the CIA, has listed 350 joint ventures involving foreign companies (three-quarters Chinese) established in North Korea between 2004 and 2011 and notes that most had shut down even before last September when the U.N. Security Council banned joint ventures following Kim’s sixth nuclear test that month.

There is also the joint industrial park in Kaesong, North Korea’s third-largest city, just north of the border with South Korea, where 120 South Korean companies used to operate before it was closed by Seoul in 2016 after a long-range North Korean rocket launch.

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