Category Archives: China-Koreas

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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Breakthrough Or Blunder, Trump-Kim Talks Trouble China

Composite image of North Korean leader Kim Jong-un (left) and US President Donald Trump.

CHINA HAS LONG held that talks are the only way to de-escalate tensions between North Korea and the United States. It now has talks — or at least the promise of them — following US President Donald Trump’s surprise acceptance of an offer to sit down with North Korean leader Kim Jong-un by May for a face-to-face discussion on denuclearization.

The White House confirmed the talks, as it does, by Twitter.

The downside of this development for Beijing is that it will not be at the table (unless by some chance it manages to host the talks), at least initially.

Foreign ministry spokesman Geng Shuang made the right supportive noises about ‘dialogue and discussion’ in response to the announcement in Washington by the South Korean officials who had recently met Kim in Pyongyang. However, it did not escape this Bystander’s notice that he also slipped in a call to start multilateral meetings to advance the process of peacefully resolving the Korean nuclear issue, and that China would continue to make efforts on this.

Beijing will, of course, welcome the sudden prospect of diplomacy after months of belligerent invective between ‘the Dotard’ and ‘Little Rocket Man’. It will also be conscious that that diplomacy may be short-lived; it is difficult to be certain of Kim’s motives, and the history of arms control negotiations involving Pyongyang argues for caution about possible outcomes.

The previous attempt to get Pyongyang to disarm by negotiation was the Six-Party Talks involving the two Koreas, China, Russia, the United States and Japan that followed North Korea’s first nuclear weapons test in 2006. The deal on the table was that Pyongyang would shut down its nuclear and programme in exchange for aid and sanctions lifting. However, what could not be agreed was how to verify the North’s compliance. The talks broke down in 2008. Pyongyang resumed nuclear testing the following year, and Beijing signed on for the first time to sanctions against North Korea.

This time around, Beijing perhaps as much as Washington will be wary that Kim is again just buying time. And its red line remains no North Korean regime collapse that ends up with US or US-allied forces on its border.

The risks in bilateral talks between North Korea and the United States, should they turn out well (at this point a long shot, to our mind), is that North and South collectively end up more aligned with the United States and less with China, providing Washington leverage to use North Korea as a strategic balancing power in the region, a role that would give Kim some of the aggrandisement he craves.

The Global Times, a voicepiece on international affairs for the Party, noted that “as a major power, it is unnecessary for China to worry about North Korea ‘turning to the US’” — a comment that suggests Beijing is worried about just that.

Talks driven by Seoul, Pyongyang and Washington sideline Beijing, not a comfortable position for ‘a major power’.

Perhaps the best analogy for the latest developments is a chess match. Kim has just made an audacious move, which he will have thought through carefully. Trump has responded instinctively. We do not yet know if one or both men have played the breakthrough winning move or have blundered badly.

If Trump comes to feel he has been deceived or belittled, he will likely retaliate punitively. And that may be the worst outcome from Beijing’s perspective of a match at which, for now at least, it is on the sidelines.

For one, it would test Beijing’s commitment to implementing its 1961 Friendship treaty with the North that obliges it to intervene on Pyongyang’s side in the event of military ‘aggression’.

While we have been here before with the Six-Party Talks, what may different this time is that the North now has nuclear weapons that can reach the mainland United States. Historically, after they have acquired a nuclear arsenal, ‘rogue’ nuclear states, move onto legitimising their nuclear status and then finally to casting off the sanctions they incurred along the way.

If Kim is preparing to take the second step and Trump thinks he is stopping Kim from taking the first, where does that leave Beijing?

Arguably it still maintains the most leverage of any of the involved parties over its neighbour. But how can it use that to broker a compromise that provides the regional stability that it most desires within a multilateral framework to deliver it in which it can play a leading role when it is not in the room?

In that regard, much may turn on the personal relationship between Trump and President Xi Jinping, who again talked on the phone on Friday with Xi nudging Trump to develop bilateral talks with Kim into multilateral ones.

As we have noted before, Beijing has two sets of relationships to manage, one with Pyongyang and the other with Washington. Both have highly unpredictable players on the other side — and now both those wild cards are going to sit down together.

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China Caught Between Smuggled Oil And Trade Wars

BOTH CHINA AND Russia deny Western accusations that their vessels have been involved in ship-to-ship transfers of oil on the high seas to North Korean tankers in likely contravention of UN sanctions against the Pyongyang regime for its missile testing programme.

Since November, South Korea has detained two ships — one Hong Kong- and the other Panama-registered, alleged to have been involved in such transactions while the UN Security Council has blocked three North Korean- and one Palau-flagged ships from docking at international ports on suspicion of carrying or transporting goods banned by sanctions.

The United States has a list of six more such vessels it wants internationally sanctioned, five China-flagged and one Hong Kong-flagged. Last week, Beijing blocked Washington’s efforts at the UN to have the six ships blacklisted.

In September, the UN cut North Korea’s allowed imports of refined oil to 2 million barrels a year. Its latest round of sanctions further cut the annual quota to 500,000 tonnes and 4 million barrels of crude oil, required the repatriation of all North Korean contract workers abroad within 24 months, and a crackdown on ships smuggling banned items including coal and oil to and from the country.

The United States had wanted a complete ban on oil imports and a freeze of the overseas assets of the government and its leader, Kim Jong-un. That it did not get them, seems to have frayed the patience of the ever-mercurial US President Donald Trump. He told the New York Times last week,

“I have been soft on China because the only thing more important to me than trade is war…If they’re helping me with North Korea, I can look at trade a little bit differently, at least for a period of time. And that’s what I’ve been doing. But when oil is going in, I’m not happy about that.”

Trump had earlier tweeted that China had been “caught RED HANDED” (his all caps) allowing oil into North Korea.

The prompt for that public accusation was a Chosun Ilbo report quoting South Korean government sources as saying that U.S. spy satellites had detected Chinese ships transferring oil to North Korean vessels about 30 times since October. Which is a very roundabout way for a US president to make an accusation based on his own country’s intelligence, especially since U.S. State Department officials have confirmed Washington had evidence that vessels from several countries, including China, had engaged in transshipping oil products and coal to North Korea.

China had long turned a blind eye to smuggling to North Korea but in 2017 started to crack down on it as it shifted stance and began to turn the economic screws on Pyongyang.

The question now is whether Beijing is still turning a selective blind eye. Or is North Korea’s smuggling network, which includes bartering via Russian ports and forging the nationalities and destinations of ships, so well organised that it is beyond being able to be shut down?

The broader concern is that either way Trump will take it as an excuse to move onto his confrontational anti-China trade agenda in 2018. Trump has long argued that foreign countries are taking advantage of America and that America needs to fight back — and that is a message he wants to use to rile up his base support, in 2018 ahead of the US mid-term elections, and again in 2020 when he will be running for re-election as president.

The White House is split on the wisdom of starting a trade war. However, the word from our man in Washington is that the ‘America First’ economic nationalists among Trump’s advisors are currently ascendant and pushing to strike early ahead of the mid-terms while the president himself is itching to slap tariffs first on Chinese electronics and then on steel and aluminium.

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Song Seeks To Open Diplomatic Doors In North Korea

Song Tao, head of the International Department of the Communist Party of China, seen in Moscow in March 2017.

THE PARTY, NOT the government runs China’s relations with North Korea. As head of the Party’s international department, Song Tao (above) is about as senior as it gets in regards to dealing with Pyongyang.

His four-day visit to North Korea is purportedly to brief North Korean party officials on the outcome of the Chinese Communist Party’s recently concluded 19th Party Congress. If he does, it will be, no doubt, be to reiterate the part in General Secretary Xi Jinping’s work report that implied that China is still more than a quarter of a century from military parity with the United States, and, by extension, that if Kim Jong-un thinks he can take on the United States in a war and win, he better think again.

Beijing certainly does want any hostilities on its doorstep. Stability is its primary goal in the nuclear standoff in the Korean peninsula. Kim will not stop his nuclear missiles programme until he has the deterrent that will ensure the continuation of his regime. Washington, for its part, is determined that he will not reach that point.

The only conceivable compromise that will lower tension on the peninsula is for China and the United States to accept that North Korea will develop long-range nuclear weapons (as they have) and work to draw it into the international arrangements that prevent those weapons being used in anger.

Although there has been no mention of it in state media, Song may have met Kim on Sunday with the likely aim of ‘opening the door’ to some semblance of diplomatic exchanges involving Washington and Pyongyang. Beijing thinks the most promising avenue for those would be around a trade-off of North Korea suspending its nuclear and missile tests in return for the suspension of large-scale US-South Korean military exercises.

Song’s trip comes just a week after the Beijing leg of US President Donald Trump five-nation Asia tour. Trump pressed China to do more to rein in North Korea. China, however, does not have as much sway over Pyongyang as Washington seems to believe, though it has more than it will publicly admit.

It has, however, been tougher on sanctions against North Korea than its previous track record in this regard would have led one to expect, and it is strictly enforcing the UN-imposed sanctions on imports of coal, iron ore and seafood from North Korea as well as shutting down banking links.

What effect this is having is difficult to ascertain in any detail, although all the reports reaching us suggest that the economy is being squeezed hard. It had grown by 3.9% in 2016, partly on baseline effects caused by the previous year’s drought, partly because of higher military spending and partly because more entrepreneurial activity had been allowed.

Growth likely slowed from that last year and may be barely 1% this, renewed drought exacerbating the impact of sanctions. In July, the UN Food and Agriculture Organization said it was the worst drought since 2001 and that food security would worsen, requiring cereal imports.

A North Korean bulk carrier, the Km Dae, has been making regular trips over the past few months (five since late June) from Nampho to the port of Yingkou, one of six ports ostensibly closed to North Korean shipping. Nampho is the port North Korea has in the past used to receive international food aid. What the vessel was carrying in either direction is unknown, though there are some reports that it docked at a berth in Yingkou used for the coal trade.

Another mystery is why North Korea has not conducted a missile or nuclear test for two months. During that time China has held its Party Congress and Trump has visited Asia, two events that on past experience Kim would have latched on to make some noise.

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