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North Korea nuclear crisis

Chinese bank ban ‘threatens to tighten chokehold’ on trade with North Korea

Ban applies across the board but cash and barter system offer ways around the sanctions, analysts say

PUBLISHED : Sunday, 10 September, 2017, 12:53pm
UPDATED : Monday, 11 September, 2017, 4:48pm

Beijing has reportedly ordered Chinese state banks to suspend accounts held by North Koreans, a move that could put a tighter stranglehold on trade between the two countries.

Branch offices of at least three major Chinese banks – Bank of China, China Construction Bank and Agricultural Bank of China – in the border city of Yanji, Jilin province, had suspended transactions through accounts held by North Koreans, Tokyo-based Kyodo News reported on the weekend.

The branch offices in Yanji had also banned North Koreans from opening new accounts, or making deposits or remittances, the report said.

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But the accounts were not yet frozen, allowing the account holders to make withdrawals.

South Korea-based news website DailyNK also said four major Chinese state banks – Industrial and Commercial Bank of China (ICBC), Bank of China, China Construction Bank and Agricultural Bank of China – had banned North Koreans living in China from opening up new accounts and ordered existing accounts to be closed.

The ban affects all North Koreans on the mainland, from consular officials to labourers and traders.

Chinese analysts said traders might still be able to find loopholes to bypass the ban but China’s decision would batter already weakened trade with its neighbour.

Zhang Liangui, a North Korea specialist at the Central Party School, said big transactions, such as Chinese oil exports to North Korea, would be particularly hard hit because banks were integral to the trade.

But Lu Chao, director of the Border Study Institute at the Liaoning Academy of Social Sciences, said there were other ways for North Koreans to dodge bank sanctions, including using cash and bartering goods.

“Though these transactions still appear in customs data, they require far less foreign currency,” Lu said.

Beijing’s decision comes as it grows more frustrated with Pyongyang’s nuclear and missile programmes – North Korea conducted a sixth nuclear test about a week ago.

China also faces pressure from the United States to do more to bring North Korea to heel, with calls in Washington for the US to impose “secondary sanctions” on Chinese banks that hold money for companies doing business with North Korea.

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The UN Security Council is expected to vote on Monday a set of new sanctions against North Korea. The US has been pushing for a full ban on oil supplies to the country, North Korea textile exports, North Korean guest workers overseas, as well as an asset freeze.

This is not the first time China has tightened its financial sanctions against North Korea.

Last year, an ICBC branch in the border city of Dandong froze accounts belonging to North Koreans.

In 2013, several Chinese banks, including Bank of China, stopped doing business with Foreign Trade Bank, North Korea’s main foreign exchange bank.