China cuts ties with North Korea's main forex bank

China closes account with North Korea's main foreign exchange bank

PUBLISHED : Tuesday, 07 May, 2013, 7:28pm
UPDATED : Wednesday, 08 May, 2013, 9:32am

The Bank of China has closed the account of a North Korean lender accused by the United States of helping finance Pyongyang's controversial nuclear weapons programme.

The Foreign Trade Bank, North Korea's main foreign exchange bank, was notified of the closure and ending of fund transfers related to it, a Bank of China spokeswoman said yesterday.

No reason was given for the closure, which comes amid growing frustration in China over North Korea's nuclear weapons and ballistic missile projects.

The action by the state-controlled bank may signal that Beijing is using economic measures to deter provocations by Pyongyang. As the regime's closest ally and biggest trading partner, China's involvement is crucial to the success of any measures against North Korea's nuclear weapons programme.

Shi Yinhong , a professor and international relations expert at Renmin University, said Beijing was losing patience with Pyongyang. "Beijing is sending a signal to North Korean leader Kim Jong-un that he'd better stop ignoring China's demands and creating instability on the Korean peninsula," he said. Premier Li Keqiang told visiting US Secretary of State John Kerry last month that provocations on the Korean peninsula would harm the interests of all sides, and likened the consequences to "picking up a rock, only to drop it on one's feet".

The UN Security Council agreed in early March on new sanctions against Pyongyang after it conducted a nuclear weapons test in February.

The measures target illicit activity by North Korean diplomats, bulk transfers of cash, and banks and companies funnelling funds or materials to support the country's ballistic missile and nuclear weapons programmes.

The UN measures did not address the Foreign Trade Bank.

The Ministry of Transport issued a circular on April 25 ordering strict enforcement of UN sanctions against North Korea and saying that three North Korean companies had been added to the sanctions list.

Trade between China and North Korea dropped more than 7 per cent to US$1.3 billion in the first three months of this year, with China's imports from North Korea rising 2.5 per cent to US$590 million but exports down 13.8 per cent to US$720 million - excluding fuel, food or other aid by Beijing.

Cui Zhiying , an expert on Korean affairs at Tongji University in Shanghai, said China wanted to show that it was serious in implementing sanctions.

Additional reporting by Bloomberg, Reuters, Jane Cai