US Reminds China It Is Still Taking Care Of Business

JUST BEFORE FORMER US President Donald Trump left office, he signed into law the Holding Foreign Companies Accountable Act (HFCAA), which allows the delisting of any foreign — for which read Chinese — company publicly traded in the United States that does not let US regulators inspect its finances to the same extent required of US companies.

US-listed Chinese companies must disclose their non-US operations’ audits, which Chinese regulations prohibit auditors from sharing.

The law also targets alleged Chinese government control of such companies and was part of Trump’s broader strategy to limit Chinese companies’ access to US capital and technology.

On March 8, HFCAA was used for the first time. The US Securities and Exchange Commission provisionally listed five Chinese companies that it said were not in compliance — biotech firms BeiGene and Zai Lab, Yum China, which runs KFC and Pizza Hut fast food outlets, ACM Research, a semiconductor process equipment manufacturer, and pharma firm HutchMed China.

As the accounting scandal involving Luckin Coffee in 2020 showed, there are legitimate investor reasons for HFCAA, and its wheels turn exceedingly slowly. Delisting will not necessarily follow. The firms have opportunities to come into compliance. Even if they do not, 2024 is the earliest delisting would occur.

So the timing may be coincidental, but this Bystander doubts it.

Concern about Russia using China to end-run Western sanctions over Ukraine is growing within the Biden administration. The SEC’s announcement follows warnings by US Commerce Secretary Gina Raimondo that the US could ‘essentially shut down’ any Chinese companies that defy US sanctions by continuing to supply chips and other advanced technology to Russia.

Semiconductor Manufacturing International Corp, a chipmaker Raimondo mentioned, could become a new Huawei.

Delisting the five companies named would not necessarily impact US efforts to isolate Russia technologically. and certainly not in time to disrupt wartime supply lines.

However, the threat adds to the signals to China and its companies to tread carefully when it comes to US sanctions (and Chinese firms will be careful not to put their exports to the US and EU at risk by overtly violating them), or exploiting the situation created by the war in Ukraine.

This week, Bloomberg reported that some of China’s state-owned energy and commodities giants, including China National Petroleum Corp, China Petrochemical Corp, Aluminum Corp of China and China Minmetals Corp, are considering the opportunities for investment in Russian counterparts such as Gazprom and Rusal.

As well as providing economic support to a strategic partner, any deals would bolster Beijing’s efforts to improve its energy and food security. China is already the leading market for Russia’s exports, taking 13.5% of the total. That will only grow as Western sanctions that China has no intention of honouring bite on Russia.

Trade deals announced shortly before the invasion of Ukraine when Russian President Vladimir Putin was in China for the Beijing Winter Olympics last month now seem even more like a prelude to the future.

That future will be about trade deals in which Russian commodities fulfil China’s needs for energy and food, and China meets Russia’s needs for technology and advanced manufactures containing it like aircraft.

Update: Reuters news agency reports that discussions between Washington and Beijing on resolving the audit issue are progressing ‘relatively smoothly‘, although it sounds as if there is still a fair way to go to bridge the gap between the two sides.

Footnote: Around 250 Chinese companies listed on US exchanges could fall foul of HFCAA, according to another little-known Trump-era agency, the US-China Economic and Security Review Commission, which advises on the US national security implications of China’s bilateral economic activities. A steady addition of small batches to the SEC’s provisional list would accelerate the relocation of listings from the United States to Hong Kong.

China Expands Its Sanctions Deterrence Arsenal

BEIJING’S FAST-TRACKING of an Anti-Foreign Sanctions Law suggests it feels an increasing need for urgency in creating mechanisms for retaliating against Western sanctions on China.

With US President Joe Biden using this weekend’s G7 summit to again urge Western countries to co-operate to counter China’s growing influence, the urgency is, if anything, more pressing.

The National People’s Congress Standing Committee passed the law on June 10 without the formality of the third reading that would usually be required. Nor were drafts circulated to relevant parties for consultation, as is typically the case. The contents of the final law are not yet public. That ambiguity alone will have a chilling effect on multinational companies. 

The fast-tracking follows the expansion last week by the Biden administration of the US blacklist of Chinese companies off-limits to US investors as part of Washington’s attempts to deny China capital and technology.

The Anti-Foreign Sanctions Law adds to a growing arsenal of trade-related laws and regulations China has adopted, but not yet used, in its confrontations with the sanctions-happy United States and, latterly, the EU. These include the Unreliable Entity List, Export Control Law and Rules on Unjustified Foreign Measures.

While these new trade weapons are at this point being used primarily for deterrence, they will create (an intended) uncertainty for multinationals with China subsidiaries. Custom and practice suggest that their use will be politically driven but neither transparent nor consistent. 

Collectively they ratchet up the pressure on multinationals to choose between the penalties from their home countries for violating sanctions against China and the penalties China can now impose on them for complying.

This, in turn, Beijing hopes will create domestic pressure that will influence Washington and Brussel’s cost-benefit calculations when it comes to considering new sanctions on Chinese firms.

Biden Expands Scope Of Financial Sanctions Against Chinese Firms

The CHANGE IN the United States’ listing of Chinese companies that could face financial sanctions is more than merely administrative.

Under the Biden administration, the US Treasury’s Office of Foreign Assets Control, the agency responsible for economic and trade sanctions, will create the list based on connections to China’s defence and surveillance technology sectors.

Under the Trump administration, the US Defense Department kept a Congressionally-mandated list that targeted companies owned, controlled or otherwise affiliated with the People’s Liberation Army. This list will continue and is likely to be expanded when its delayed update is released.

President Joe Biden signed an executive order on June 3rd, authorising the new list. It broadens the focus of US sanctions policy from curtailing the technological modernisation of the PLA to having a means of addressing human rights issues.

Listing bans US investment in the companies’ debt and equity securities. There will be a 60-day grace period to August 2nd before sanctions take effect. US individuals and institutions already invested in the firms—either directly or via mutual and index or other funds—have one year to divest.

The new executive order also puts the listings on more secure legal ground and removes some of the ambiguities that investors had complained about with the Trump regulations.

The change will also likely grow the number of sanctioned companies. A few of the companies previously alleged to have connections to the PLA may fall off, but added surveillance technology companies will more than replace them. The Treasury’s list starts with 59 names.

Spokesperson Wang Wenbin took the moral high ground when asked about the new list at the Foreign Ministry’s regular daily press briefing:

The US should respect rule of law and the market, correct its mistakes, and stop actions that undermine the global financial market order and investors’ lawful rights and interests.

Wang was careful to frame most of his comments in relation to the previous administration’s measures, but Beijing is likely to respond proportionately.

The executive order came shortly after a resumption of high-level economic talks between the two countries. Vice Premier Liu He talked to US Treasury Secretary Janet Yellen via video on June 2nd.

Beijing is keen to get the bilateral relationship back onto an even keel where it can. It would like to deal with economic and trade issues on a pragmatic basis, and use that as an anchor for the broader relationship.

Yet it is becoming increasingly clear that Biden is not changing the direction of Trump’s China policies, as much as Beijing clings to a slither of hope that he will.

Sanctions Ahoy In The South China Sea

WE HINTED YESTERDAY that the United States might look to impose sanctions on those companies and banks building the infrastructure supporting China’s efforts to bring under its sway those Southeast Asian countries through which the Mekong River flows. Washington has now gone down a similar path with regards to the South China Sea.

Yesterday, the US Commerce Department added two dozen Chinese firms to its ‘entity list’ for ‘helping the Chinese military construct and militarize the internationally condemned artificial islands in the South China Sea’. Listing bars US firms from selling to the blacklisted firms without a special licence.

In parallel, the US State Department said it was imposing visa restrictions on individuals involved in the island-building and militarisation of the waters. It expanded the remit to include ‘coercion against Southeast Asian claimants’.

Foreign ministry spokesman Zhao Lijian brushed off Washington, saying,

The participation of Chinese companies and individuals in domestic construction activities is legitimate, lawful and beyond reproach.

Meanwhile, China reportedly launched two land-based ‘carrier killer’ missiles into the South China Sea in the direction of the disputed Paracel Islands and said that a US U-2 spy plane had entered a declared no-fly zone during a Chinese live-fire exercise in the Bohai Sea near the coast of northern China.

According to Defence ministry spokeman Wu Qian,

China firmly opposes such provocative actions and has lodged solemn representations with the US side.

All as to be expected.

Nonetheless, Beijing is unlikely to be dissuaded in its South China Sea ambitions. It views them as essential to secure its southwestern sea lanes — just as its growing network of road, rail and river links in Southeast Asia is to provide alternatives.

Sanctions are unlikely to prove any more of a deterrent than they have been with Hong Kong or the Uighurs in Xinjiang. The horses have already bolted. In the South China Sea, however, military exercises always risk accidents. The intensifying political sensitivity of the area will make de-escalating flashpoints more difficult.

Washington’s China Hawks Run Free

THE IMPOSITION OF sanctions by the United States on Carrie Lam, Hong Kong’s chief executive, and ten other current and former officials in the city, is likely more symbolic than substantive. It is rare if not unprecedented, however, for the United States to sanction a head of government. To this Bystander, still spinning from the seemingly daily ratcheting up of US-China tensions by Washington, it feels that they mark the crossing of a threshold, with the China hawks in the US administration having been given free rein and no longer holding back.

The sanctions, imposed under the executive order US President Donald Trump signed in July to punish Beijing for imposing a national security law on Hong Kong, will mean that the eleven will have any property in the US seized and their financial assets frozen. Lam, for one, says she has no assets in the US; this Bystander would hazard that the rest do not either at this point, if they ever did.

The others sanctioned include Hong Kong’s police commissioner, Chris Tang, and his predecessor, Stephen Lo, Justice Secretary Teresa Cheng, Security Secretary John Lee, Xia Baolong, head of the Chinese State Council’s Hong Kong and Macau affairs office and Luo Huining, director of the Hong Kong liaison office.

The sanctions announcement followed hard on the US president ordering US firms to stop doing business with WeChat, the messaging app owned by Tencent, and with the ByteDance-owned video-sharing app, TikTok. The twin executive orders are stayed until September 20, five days after the deadline that the White House has given to Microsoft to conclude an agreement to acquire TikTok’s operations in the United States, Australia and New Zealand.

Decoupling TikTok is in the vanguard of the United States’ ‘Clean Network’ initiative to drive Chinese owned apps and components out of US businesses and those of US allies. It was conceived to thwart Chinese telecoms companies Huawei Technology and ZTE in 5G markets. Announcing the initiative’s expansion earlier this week, US Secretary of State Mike Pompeo, one of the administration’s most hostile China hard-liners, said:

The Clean Network program is the Trump Administration’s comprehensive approach to guarding our citizens’ privacy and our companies’ most sensitive information from aggressive intrusions by malign actors, such as the Chinese Communist Party.

On another front, the Trump administration also announced recommendations that would lead to the long-threatened delisting of Chinese companies from US stock exchanges unless Beijing allows US regulators adequate access to their audited accounts.

Meanwhile, the imminent arrival in Taipei of US health secretary Alex Azar, the highest-level US cabinet official to visit since Washington cut ties with Taipei more than 40 years ago, may prove the most incendiary of Washington’s recent provocations.

That may finally test Beijing’s patience. So far, its public response has been firm but measured, as it has been to each successive provocation from Washington. Wolf diplomacy has been held back. Yang Jiechi, the Politburo member who is the Party’s leading foreign policy strategist, gave an olive-branch speech on US-China relations on Friday, following on speeches and interviews given by Foreign Minister Wang Yi in the same vein. Large-scale purchases of US agricultural produce have also been made to keep the US-China Phase One Trade Agreement alive, with the first round of high-level progress-monitoring talks still possible.

One interpretation of the intensifying of the US administration’s actions is that the president believes continuing to pile pressure on China will be a winning tactic in the run-up to the November election in which he is trailing Democratic candidate Joe Biden in the polls. Another is that the China hawks in the White House, fearful that Trump will not be re-elected in November, are putting in place a web of containment measures that will carry over into the new administration, embedding a de facto ‘cold war’.

Strong anti-China policies would resonate with voters in the United States, where unfavourable views of China have climbed rapidly among both parties over the past year, according to the latest survey by the Pew Research Center published at the end of last month. Eighty-three per cent of Republicans and 68% of Democrats said they had an unfavourable view of China, record highs for both groups. However, only one-third of Democrats say that it is more important to get tougher with China than to build a stronger relationship with it, against two-thirds of Republicans. At 38%, Republicans are also twice as likely as Democrats to describe China as ‘an enemy’.

Beijing’s strategy of taking it on the chin until November in the hope of a change of administration in the US makes sense in that light, as do US intelligence reports that Chinese disinformation campaigns are being deployed in the Biden cause. If it could ever be done, it would make for a fascinating case study to see how they negated Russian disinformation the intelligence reports say is being used to promote a Trump re-election.

US Adds To Sanctions Armoury With Hong Kong Law

US PRESIDENT DONALD TRUMP has signed the Hong Kong Autonomy Act into law. This affords him sweeping powers to impose financial sanctions on officials, financial institutions and Chinese state entities that his administration deems to be aiding and abetting the new national security law Beijing has imposed on Hong Kong.

He has also signed an executive order that would end preferential trade treatment for the territory. Exports from Hong Kong will now be subject to the same tariffs the United States imposes on goods from the mainland.

The scope of the new sanctions will be far broader than the Magnitsky Act financial sanctions announced on July 9 on four Chinese officials it charges are responsible for human rights violations against the predominantly Muslim ethnic Uighurs in Xinjiang.

They will also make it more difficult for US and European firms to preserve all of their operations in Hong Kong, especially those that require confidentiality and data protection. The Catch-22 is that Hong Kong’s national security law makes it illegal to comply with US sanctions against Hong Kong and China.

Coming the same day as Trump administration officials were celebrating the exclusion of Huawei Technologies from the United Kingdom’s 5G network, the new sanction powers are only likely to hasten the day when companies will have to choose between doing business with the United States or China. The day Hong Kong is just another big city in southern China is even closer to hand.

Update: The Foreign Ministry has condemned both the signing of the Hong Kong Autonomy Act into Law and the removal of Hong Kong’s special trade status as ‘gross interference’ in internal affairs. China promises retaliatory measures for both.

Beijing Measures Its Response To US Xinjiang Sanctions

BEIJING’S RESPONSE TO the Trump administration’s sanctions on four Chinese officials held to be responsible for human rights abuses against Uighurs in Xinjiang is about as proportionately reciprocal as it gets.

China says it will bar entry to two Senators, Marco Rubio and Ted Cruz, one Congressman, Chris Smith, and the US State Department’s religious freedom ambassador, Sam Brownback. The grounds are the quartet’s criticism of Beijing’s treatment of people of faith.

Rubio co-chairs the Congressional-Executive Commission on China, a US government agency that monitors human rights and rule of law issues in China, which is also sanctioned.

Foreign Ministry Spokesperson Hua Chunying was similarly restrained in responding to a question from the Global Times at her daily briefing today:

It must be stressed that Xinjiang affairs are purely China’s internal affairs. The US has no right and no cause to interfere in them. The Chinese government is absolutely determined in its resolve to safeguard its sovereignty, security and development interests, to combat violent terrorist, separatist and religious extremist forces, and to oppose any external interference in Xinjiang affairs and China’s internal affairs.

Her restraint slipped moments later, however, in response to a different question about a tweet by the US State Department alleging the use of Uighur slave labour in the making of some products:

I also have some Uighur friends who I know are very happy in Xinjiang, breathing freely and enjoying their life, living in a completely different way than African Americans like George Floyd. We sincerely hope that those American politicians will really care about the serious racial issues in their own country and make efforts to protect the human rights of their ethnic minorities.

Hua also left open the door for further sanctions “as the situation develops”. That could be around the TikTok video-sharing app that Trump’s trade advisor, Peter Navarro, has hinted may be banned in the United States, where it is hugely popular, because of its Chinese ownership.

Separately, the US State Department has expanded its travel advisory for China to warn US nationals that they are at heightened risk of arbitrary arrest and of detention and exit bans. An e-mailed version sent on July 11 to US nationals in China said, “Security personnel may detain and/or deport US citizens for sending private electronic messages critical of the PRC government.” Both the new internet law and Hong Kong’s national security law can be applied extra-territorially and to non-Chinese citizens.

None of which suggests much interest in Washington in repairing tattered ties, even if there is any substance to the suggestions that Beijing would like to prevent relations sinking even lower than they have.

Update: China has imposed sanctions on the US defence manufacturer Lockheed Martin in response to Washington’s approval for Taiwan to buy parts to refurbish its Lockheed Martin missiles.

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.

North Korea’s Double Dilemma For China

IT IS GETTING ugly on the Korean peninsula, and it was not looking all that pretty to begin with.

However exactly powerful a nuclear bomb North Korea tested over the weekend and whatever the white metallic thing was that the country’s leader Kim Jong-un was photographed posing with — and standing far too close to if it was truly a missile nose cone fitting nuclear device —  it is clear that it is too late to stop Pyongyang ‘nuclearising’.

That poses a what-to-do dilemma for US President Donald Trump, who had said that he would not let Pyongyang get this far with its missile programme. It poses an even bigger one for China, which the Western powers, at least, are blaming for not being tough enough on its ally, while from Beijing’s point of view, it is being asked to take all the risk of dealing with Pyongyang while the United States would get most of the benefit.

As this Bystander has noted before, Washington may overestimate Beijing’s sway over Pyongyang. This weekend’s nuclear test marked the third occasion on which North Korea had upstaged President Xi Jinping at a moment when he wanted to project a particular, and strong face of China to the world.

This weekend was meant to be about Xi presenting the BRICS, with China in the vanguard, as the progressive alternative to an increasingly protectionist West. He will not have appreciated Kim hogging the limelight. That Kim feels confident enough to do that to his only ally, again, implies that North Korea is no dutiful vassal state.

That is not to say that Beijing can do nothing more. It can. It remains North Korea’s primary source of oil and could choke that off, just as it has cut off other trade. It has so far resisted the United States’ pressure to impose such a sanction. It fears that doing so could cause a collapse of the regime that would send millions of refugees flooding across the border into northeastern China and, the far bigger concern, trigger a sudden regime collapse in North Korea that would leave US or US-allied troops hard against its border.

Beijing has in the past cut off oil supplies to North Korea on two occasions. Both times Pyongyang returned to the negotiating table in short order, if only for a while.

There are at least two reasons that Beijing will be reluctant to do so again. First, it does not want to be seen at home or abroad to be knuckling under US pressure. Trump has repeatedly lambasted Beijing for not doing more on sanctions (and when it did, then slapped sanctions on some Chinese companies and has subsequently threatened a trade boycott of any country that trades with North Korea, hardly the thank-you that would encourage further co-operation on this front).

Second, it still does not want to cause a sudden shock that would trigger an economic collapse in North Korea. Instead, it will take incremental back-door steps to cut back oil supplies.

There are signs of this already happening. State-owned China National Petroleum Corp. (CNPC) stopped shipping diesel and gasoline to North Korea in May and June. Ostensibly, this was a corporate decision made on the basis of uncertainty over getting paid. However, such as decision would not have been taken without the express consent of the Party committee within CNPC, and that consent, in turn, would not have been given without express consent and more likely direction from higher up.

Last year, China shipped more than 96,000 tonnes of gasoline and nearly 45,000 tonnes of diesel, worth a combined $64 million, to North Korea. Most of it came from CNPC, but this Bystander would hazard that more and more of China’s other energy companies will discover they have misgivings about trading with Pyongyang and slowly but steadily the oil supply will be choked off.

The statement from the foreign ministry condemning the weekend’s bomb test offers further signs of Beijing’s hardening position towards Pyongyang. While it still called for a resolution to the situation through dialogue, its language was far harsher towards North Korea than in the statements that had followed the five previous nuclear tests.

Denuclearising the peninsula is probably less of a concern for Beijing than Washington, though Beijing would be more than happy for North Korea not to have an independent nuclear deterrent, and especially if its absence bought a removal of the THAAD missile defence system from South Korea as well.

Its priority is to have as much stability on the peninsula as there can be. South Korea response to Pyongyang’s nuclear test (live-fire missile exercises), the planned deployment of a US nuclear-powered aircraft carrier in near waters and a Seoul-Washington agreement in principle to increase the 500-kilogramme permissible payload on South Korea missiles will all destabilise the peninsula more than stabilise it, not to mention discomfort Beijing.

In this environment, 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. Beijing’s preferred option is to work through the United Nations to mitigate the volatility and to put the United States on the track of recognising that North Korea’s nuclear ambitions can no longer be contained, only managed.

The UN Security Council met today, and its member countries will be working on a new set of tougher sanctions expected to be presented for a vote at the beginning of next week. There is still a gulf to bridge between the Chinese and US positions. Meanwhile, China will be applying its own economic squeeze on North Korea to get Kim back to any sort of negotiating table before he provokes the United States into taking actions that will trigger the regime chaos that Beijing so fears.

US Imposes More North Korea Sanctions On Chinese Firms

THE UNITED STATES has given another turn to the financial-sanctions screw it is driving into North Korea. The US Treasury has added six Chinese and Russian individuals and ten organisations with financial ties to Pyongyang’s weapons program to its list of entities banned from conducting business with U.S.-linked companies and individuals.

Most notable among the latest additions is Mingzheng International Trading Ltd, which Washington considers a front company for North Korea’s state-run Foreign Trade Bank, which itself has been subject to American sanctions since 2013. In June, the US Department of Justice filed suit against Mingzheng for laundering money on behalf of blacklisted North Korean entities, seeking to seize $1.9 million of the firm’s funds.

These latest sanctions appear to target coal importers and agencies supplying North Korean labour to foreign countries in its continuing attempt to sever Pyongyang’s supply lines of hard currency needed to fund its nuclear and missile programmes. In the same vein, the US had sanctioned Bank of Dandong, bank, along with Dalian Global Unity Shipping and two Chinese citizens, Sun Wei and Li Hong Ri, in June.

The United States charged that “at least 17%” of the $786m in customer transactions conducted through Bank of Dandong’s  US correspondent accounts from May 2012 to May 2015 involved “companies that have transacted with, or on behalf of, US and UN-sanctioned North Korean entities”.

The bank which is mainly owned by municipal agencies, is small in the order of banks; its assets were only $10.7 billion as of the end of 2016. A bond issuance prospectus last year revealed that the bank a 1% stake in Dandong Xinliu Group, a state-owned company engaged in trade with North Korea.

Unlike the UN sanctions recently announced, which required lengthy negotiations with Beijing, this latest round appears to have been imposed unilaterally by the United States, as evidenced by China’s reaction which was to say the Washington should “immediately correct its mistake”.

For his part, Kim Jong-un has ordered a step-up in the production of warheads and solid-fuel rocket engines for long-range ballistic missiles, taking some of the wind out of the sails of United States officials who have started to suggest that the possibility of a resumption of talks on a negotiated settlement might be appearing on the horizon.