Category Archives: China-Koreas

China Resumes Freight Rail Link To North Korea

CHINA AND NORTH KOREA have reopened the railway across the Yalu River, separating the two countries.

A freight train crossed from North Korea into Dandong on Sunday, returning the next day laden with supplies, according to reports from South Korea subsequently confirmed by foreign ministry spokesman Zhao Lijian:

After friendly consultations between the two sides, freight in goods in Dandong has resumed.

Japanese reports say a Chinese locomotive went to Sinuiju in North Korea. It picked up a dozen boxcars, took them to Dandong and then hauled them back to Sinuiju laden before returning with the same number of empty boxcars.

Pyongyang cut the rail link about a year and a half ago when it closed the country’s borders due to Covid-19 fears. Since then, only a tiny volume of trade has been conducted, via sea. There have been several reports since that the rail link was about to reopen.

The border closure exacerbated North Korea’s most severe economic contraction in more than two decades, with reports emerging of widespread hunger and North Korea’s leader, Kim Jong Un, making rare admissions of the country’s difficulties in recent months.

The suspension of trade with China, which has long provided a lifeline to its neighbour, probably dealt a greater blow to Kim than the international sanctions to deter his nuclear weapons program.

The question now is whether the restarting of the trade, albeit on a small scale, will ease the pressure on Kim to return to the stalled disarmament talks. The Biden administration has just imposed additional sanctions on Pyongyang, which has stepped up its ballistic missile testing in recent weeks.

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South Korea Draws Vietnam Into Its Orbit

Chart showing value of South Korea's exports to and imports from Vietman, 1991-2019

FOR CHINA’S NEIGHBOURS, trade and investment relations with each other gain importance as Beijing deepens its involvement in regional trade arrangements. Those between South Korea and Vietnam are a case in point.

South Korea is now a larger foreign investor than China in Vietnam. In raw numbers, more South Korean firms do business there than in China, though they are mainly small and medium-sized enterprises.

For the giant South Korean conglomerates, Vietnam has become an important link in their supply chains. Witness that electronic components such as semiconductors and displays accounted for 89% of Vietnam’s exports to South Korea in 2019 (the latest full-year figures available).

The two have different histories with China and some uneasy mutual history dating back to the Vietnam and Korean wars. Trade did not start to blossom until Hanoi and Seoul established diplomatic relations in 1992. As our chart shows, it bloomed after they signed a bilateral trade agreement in 2015.

Vietnam, with an 8.9% share of the total trade (again on the 2019 data), is South Korea’s third-largest trading partner after China (25.1%) and the United States (13.5%). It ranked third as an export market, again behind China and the United States, worth $48.5 billion, and fifth for imports ($21 billion) after China, the United States, Japan and Saudi Arabia.

It is also South Korea’s fastest-growing trade partner, with trade having expanded by half as much again in the three years to 2019. The two nations are looking for bilateral trade to top $100 billion by the year after next.

On the services side, pre-Covid, Vietnam became a major tourist destination for South Koreans, with visitor numbers rivalling those coming from China.

On the investment side, as mentioned above, South Korea is Vietnam’s largest foreign investor. More than 9,000 projects, worth upwards of some $70 billion, account for 18% of Vietnam’s total foreign direct investment (FDI). Like China, Vietnam offers South Korea’s conglomerates political stability, reasonable geographical proximity, cultural familiarities and cheap, educated labour for manufacturing. Samsung, for example, makes a lot of smartphones there.

The country will remain attractive to South Korean investors despite rising costs and the supply chain headaches now being experienced due to Hanoi’s hapless handling of the Delta variant. Vietnam’s growing popularity with foreign investors, including non-South Korean firms looking for supply chain alternatives to China under what is now being called ‘strategic decoupling’, is putting pressure on the country’s rents, ports and infrastructure. Skilled labour is growing harder to hire and consequently and more expensive.

The tension between China and the United States, which is the backdrop to the growing trade and investment relationship (and defence co-operation) between South Korea and Vietnam, means there is always a risk of blowback against US allies. That is more of a concern for South Korea than Vietnam. South Korean firms well remember the state-inspired consumer boycott against them five years ago to express Beijing’s displeasure at Seoul allowing the installation of a US anti-missile system.

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Starving North Korea Looks To Reopen Trade With China

NORTH KOREA’S TRICKLE of trade across its border with China, its only significant trading partner, has been suspended for more than a year and a half, with Supreme Leader Kim Jong Un concerned about importing Covid-19, which would quickly overwhelm North Korea’s rickety health system.

Now, Japan’s Nikkei news reports, preparations are being made to reopen the rail line across the Sino-Korean Friendship Bridge connecting Dandong in Liaoning province and Sinuiju in North Korea to bring in shipments of food and pharmaceuticals to alleviate the chronic hunger prevalent in North Korea.

In June, Kim all but admitted food shortages for the first time. Extreme heat followed by recent flooding in the east of the country, which North Korean state media say has inundated farmland destroying crops, will only have exacerbated malnutrition.

That preparations are being made to reopen a trade corridor does not mean it will necessarily happen. The Nikkei says Kim has since April pulled back from restarting trade at the last minute several times. The same could happen again now that China is grappling with the largest virus outbreak since the first wave last year.

A quarantine facility for cargo at a military airfield close to the border was due to have been completed this month, but has run into sanitizing problems; the Nikkei quotes unnamed South Korean intelligence sources saying that this was the ‘great crisis in ensuring the security of the state and safety of the people’ that Kim mysteriously referred to in late June. It also says that Ri Pyong Chol, a former general and relative of Kim’s wife, Ri Sol Ju, is believed to have been demoted from the Politburo standing committee as a result.

Kim may also turn to Russia for imports. The Russian Embassy in Pyongyang says its ambassador, Alexander Matsegor, agreed at a meeting with North Korea’s external economic affairs minister in Pyongyang last Tuesday to work on an accelerated resumption of trade, given the severe economic situation.

Failure to restart trade with China or Russia would leave Pyongyang with its least palatable option, reopening negotiations with Seoul and Washington for aid or sanctions relief.

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China Reimposes Wuhan-like Lockdown In North-East

The main railway station at Jilin, seen in 2011. Photo credit: 阳之下光. Licenced under Creative Commons Attribution-Share Alike 3.0.

JILIN IS REVERSING the lifting of lockdown restrictions amid a flare-up of new Covid-19 cases in the north-eastern province that shares borders with North Korea and Russia.

In Jilin city, the province’s second-largest city with a population of 4.5 million, transport was shut down again Wuhan-like from 6 am on Wednesday. (The photo above is an archive one of Jilin railway station.) City residents may only leave if they can show they have tested negative for Covid-19 within 48-hours of intended travel, and it is not clear that they can get back. Schools have reclosed and several residential compounds have been quarantined. Authorities have also closed places of entertainment and tourist spots and banned group dining.

Nearby Shulan, where there is also a cluster of new cases, was closed off on Sunday. Contact tracing has established connections between the two outbreaks.

Both places are some 150 kilometres north of the nearest border with North Korea. However, the main road from the provincial capital Changchun to the point where the Chinese, North Korean and Russian borders meet runs through Jilin, which also has road connections north through Shulan to Harbin in neighbouring Heilongjiang province, a hub for Chinese-Russian commerce, and which had reported 386 cases of imported infection as of Monday. Travellers arriving in Harbin from along that road now face 28 days of mandatory quarantine.

Inevitably a new cluster of cases has heightened fears of a spillover of infection from either neighbouring country. The epidemic continues to grow in Russia, which now has approaching one-quarter of a million confirmed cases. Heilongjiang is imposing 35 days of quarantine on travellers from Russia.

North Korea has yet to confirm any Covid-19 infections. However, the suspicion is widespread that there are cases, reinforced by the recent exchange of messages about the virus between North Korean leader Kim Jong Un and President Xi Jinping. North Korea’s economy relies on illicit trade back and forth across the Yalu and Tumen rivers that separate it from China, providing a difficult to detect corridor of disease transmission.

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New Coronavirus Cases At Home And In North Korea Worry Beijing

A NEW CLUSTER of Covid-19 cases has been reported in Wuhan. The five cases are the first non-imported ones since April 3. This would appear to be evidence that as lockdown restrictions are lifted, a rise in infections is likely. Worryingly, the latest cases were all previously classified as asymptomatic.

Separately, Shulan city in Jilin province, near the borders with Russia and North Korea, has reported 11 new cases. Neighbouring Heilongjiang has also seen a spike in the number of imported cases, but this is mainly accountable for by Chinese citizens travelling back from Russia. Nonetheless, North Korea’s economy relies on illicit trade back and forth across the Yalu and Tumen rivers that separate it from China. Such back channels of potential infection will concern Beijing, now desperately trying to ensure the primacy of its global narrative about its victory over the pandemic.

Officially, there have been no reported cases from North Korea. However, air quality assessments suggest that there has been a significant increase in cremations, implying the country has not escaped the global pandemic. Supreme leader Kim Jong-un’s three-week disappearance from public view may have been a period of self-isolation. Such a judgement is speculative, given how little is known externally about what is going on inside the hermit kingdom.

China sent a three-person team of senior officials to Pyongyang a couple of weeks back, presumably to assess the situation and Kim’s health. President Xi Jinping has lately expressed concern about the situation in North Korea, offering help in response to a message that he received from Kim congratulating him on China’s handling of the outbreak.

There is a lot of signalling in that message about the primacy of Beijing for Pyongyang. Equally, China does not want the coronavirus to destabilise the Kim dynasty, an outcome that would be worse than the disease.

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Mr Xi Goes To Pyongyang

IT HAS BEEN 14 years since a Chinese leader has visited North Korea. President Xi Jinping’s arrival in Pyongyang on his first visit since assuming power will provide a welcome boost to his North Korean counterpart, Kim Jong Un. It also comes ahead of the G20 summit in Osaka towards the end of this month, when Xi will meet US President Donald Trump.

While trade and technology will top their agenda, Xi will find it a useful bargaining chip to have the latest word from Pyongyang on the denuclearization of the Korean peninsula, a process in limbo since the collapse of the Hanoi summit between Kim and Trump in February.

Xi will also want to reassure himself that sanctions-hit North Korea remains potentially stable despite the tensions over denuclearization and economic deprivation. Some assistance on the latter by way of humanitarian aid and tourism (an area not yet subject to sanctions) will likely be forthcoming.

There is also much signalling going on here: from Pyongyang to Washington that North Korea still has China’s support, and from Beijing to Washington that denuclearization is not a bilateral issue and that China remains a critical player.

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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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China Can Be Content With The Trump-Kim Singapore Summit

 

North Korea leader Kim Jong Un (left) and US President Donald shake hands in the summit room during the DPRK–USA Singapore Summit, June 12, 2018. Photo credit: By Dan Scavino Jr. [Public domain], via Wikimedia Commons.

THE SINGAPORE SUMMIT between US President Donald Trump and North Korea leader Kim Jong Un was a quick-fire and highly choreographed affair, genuinely historic in just happening, but long on symbolism and short on substance.

It may turn out to provide the basis for the eventual denuclearisation of the Korean peninsula, though an equally long-term success would be the integration of North Korea into the international order as a nuclear power that played by international rules and norms.

Alternatively, it may all fall apart in time, as history provides some precedent.

But potentially it is a ‘reset moment’, although this Bystander is not alone in having no idea what Kim’s long-term game is.

For now, China will be pretty happy with where things stand. Kim has given nothing away that would concern Beijing. Meanwhile, the US president has tacitly followed the ‘suspension for suspension’ approach Beijing suggested all along once it was clear that the dormant six-party talks framework was going to be replaced by bilateral talks between Washington and Pyongyang.

Trump’s statements at a post-meeting press conference that the US would suspend its joint military exercises with South Korea and that the president would like US troops to leave the peninsula eventually (neither of which proposal was in the statement the two leaders signed at their meeting) would have delighted China. Beijing has long wanted a scaled-down US military presence in the region.

So, too, would Trump’s promise of security guarantees for the North Korean regime — China wants no outcomes that lead to either the unification of the Koreas or the collapse of the Kim dynasty, either outcome of which risks putting US or US-allied troops on its Manchurian border.

It will, no doubt, take the occasion when it arises to remind Seoul that Trump considered the joint exercises, or ‘war games’ as he called them, too expensive. From there, it will not be too far a stretch to put the idea in Seoul’s mind that the US president could have been suggesting that South Korea would be too expensive to defend in general.

Senior US officials, alive to the broader security implications of that for Japan and in the South China Sea, were quick to row back on that.

Most importantly for Beijing, no detailed plan or process for managing North Korea’s nuclear and missile programmes was laid out at the summit. The only commitment was to hold follow-on summit implementation negotiations, led by U.S. Secretary of State, Mike Pompeo, and an unnamed ‘relevant high-level [North Korean] official’.

This opens the door for all the interested parties, especially China, to turn that into an international effort for what will necessarily be a detailed and painstaking process of inspection and verification if the US aim of ‘complete, verifiable and irreversible denuclearisation’ is to be achieved. The considerable volume of regional diplomacy that has been underway for some months is, in a sense, preparation for that.

“A good beginning is half done,” a foreign ministry spokesman, said of the summit, adding that China wished to “support the two sides to implement the consensus reached by their two leaders, promote follow-up consultations, further consolidate and expand the achievements, and make the political settlement of the peninsula issue a sustainable and irreversible process”.

In other words, it wants a seat at the table. China has a pivotal role to play in as much as it has the critical hand on dialling up or dialling down the enforcement of international sanctions on North Korea.

Pompeo will visit Beijing on Thursday when Beijing’s ‘support’ will immediately be made available.

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China Is Back In The Korea Game

China’s President Xi Jinping (right) greets North Korean leader Kim Jong-un at the Great Hall of the People in Beijing during Kim’s visit to China from March 25 to 28. Photo credit: Xinhua/Ju Peng.

THIS BYSTANDER WAS was reminded this week that it was then South Korean president Park Geun-hye who was invited to the grand military parade in Tiananmen Square in 2015, not neighbouring North Korea’s still newish leader Kim Jong-un. Beijing considered North Korea an anachronistic problem state, and except for the oldest generations of Party cadres, held it in disdain.

Relations between Beijing and Pyongyang remained cold to the point that by last November, China was enforcing international sanctions against North Korea’s missile and nuclear programme with a severity never before applied. As China accounts for 90% of North Korea’s trade, that hurt.

US President Donald Trump’s bellicosity towards Kim (and vice versa) then gave cause for China to patch up its relations with North Korea. The prospect of a US military strike against North Korea threatened not one but two of China’s red lines — no regime collapse in North Korea that would send millions of refugees flooding into northern China and no US or US-aligned troops up against its borders.

When in May, Trump boldly accepted an invitation from Kim for direct talks, temporarily sidelining China from what had long been six-party discussions over the peninsula’s future, Beijing swung into action, seeing the gains in influence it had made in the region, in part as a result of the Trump administration’s broader regional disengagement, being at risk.

Kim left his country for the first time, taking his armoured train to Beijing, where President Xi Jinping accorded him full pomp and ceremony. As the Kim-Trump summit in Singapore on June 12 approaches, Kim has been back to Beijing. There were close discussions before US Secretary of State Mike Pompeo visited Pyongyang in April and again earlier this month and North Korean delegations are in Beijing in number.

China is clearly signalling that Kim will not go into the meeting with Trump alone; he still has a powerful friend in China.

Beijing will also undoubtedly have been coaching Kim on dealing with Trump in person. Beijing is finally getting a handle on the mano-a-mano dynamics of US foreign policy under the Trump administration (learning now starting to be seen to good effect in the US-China trade dispute, too).

Beijing will also be doing what it can to ensure that any deal Trump and Kim strike is acceptable to it. It will not necessarily want to position itself as the guarantor of an agreement ensuring the security of the Kim regime in return for whatever ‘denuclearisation’ Kim and Trump agree on, but it will want any deal internationally embedded. Ideally, it would like a six-party treaty signed off at an international level and enshrined at the UN.

It is unlikely to get all that but will be satisfied by a deal that gets the Korean question sorted out, or at least contained for a generation in so far as that means stability on the peninsula. A cardinal principle of its foreign policy is not to have more than one troubled front on its borders at any time.

To that end, it has also been warming relations with Japan, primarily, and India.

Full denuclearisation is less of a priority for China than it is for the United States. The crunch question is not about dismantling the North’s nuclear weapon building capacity but whether or not there will be some capacity for North Korea to retain what is already has.

The Trump administration will try to get Kim to agree to remove as many nuclear weapons as possible as quickly as possible. However, Kim will push actively to keep some warheads.

The deal will thus likely be a thin one, with North Korea keeping some of its nuclear capacity for some time but not expanding it, and accepting international inspections for verification of compliance.

The other factor in play is sanctions, which Kim will want lifting (or at the very least for China to stop enforcing). He will, though, have to make concessions on exporting cyber terror and weapons technology.

Kim is now politically secure at home and can turn to prioritising economic development, though he has not entirely quashed domestic opposition to this.

Beijing has a strategic interest in his primary partner being China, not South Korea. Stability, not reunification (South Korean President Moon Jae-in’s objective) is what Beijing wants to see on the Korean peninsula.

There is plenty of risk to all sides in the Trump-Kim summit. Trump is unpredictable, and Kim is an unknown quantity in such a setting. However, both men have invested a lot in getting a deal — any deal. Beijing is now doing what it can to make sure it is not a bad deal but also one that would enable North Korea to be integrated into Chinese-led regional structures more efficiently.

A failure of the talks would be the least welcome outcome. In that event, Trump would most likely resume his bellicosity and resort to US military action. China and North Korea have a mutual defence pact that runs until 2021, so theoretically Beijing would have to come to Pyongyang’s aid if Washington attacked. It is highly unlikely in practice that it would.

However, it could also play into Beijing’s hands if a breakdown in talks further damaged US credibility in Asia, opening more space for Beijing’s plans for security and economic partnerships in the region. There is opportunity as well as risk for Beijing in the outcome of the Singapore summit.

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Kim Jong-un’s Astute Shuttling

China’s President Xi Jinping (right) greets North Korean leader Kim Jong-un at the Great Hall of the People in Beijing during Kim’s visit to China from March 25 to 28. Photo credit: Xinhua/Ju Peng.NORTH KOREAN LEADER Kim Jong-un’s not-so-secret three-day visit to Beijing on March 25-28 dropped two markers ahead of Kim’s proposed meeting with US President Donald Trump in May.

The first is that China remains an integral part of any political settlement on the Korean peninsula. Beijing has long advocated multilateral talks to achieve that settlement. Kim’s proposal and Trump’s acceptance of a bilateral summit initially put Beijing on the back foot. The visit restored its balance. Special representative Yang Jiechi’s talks in Seoul with South Korean President Moon Jae-in on Friday offer further evidence.

The second marker dropped by Kim’s Beijing visit is Pyongyang’s signal to Washington that Kim does not go into the meeting with Trump alone; he still has a powerful friend in China.

The atmospherics were one of the most notable aspects of the visit beyond the fact that it happened at all. The cordiality extended by President Xi Jinping to Kim belied the fact that neither had found reason to visit the other since coming to power (2011 in Kim’s case, 2012 for Xi) and that relations between the historically close neighbours were at a low ebb not least because of China’s unprecedented imposition of international sanctions on the Pyongyang regime because of its nuclear and missile tests.

Kim played his part in this show of restored fraternity to perfection, striking a delicate balance between the deference to be expected of a ‘little brother’ while remaining his own man.

This Bystander reflects on how adept Kim’s father and grandfather were at playing off China and the former Soviet Union against each other. We wonder if that gene has passed to the latest generation as Kim shuttles between summits with Xi, Trump and Moon regardless of what his true intentions remain.

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