North Korean leader Kim Jong-un visits construction sites in Pyongyang. Photo: AFP
by Tom Holland
by Tom Holland

The real reason China won’t exert economic pressure on North Korea

US Secretary of State Rex Tillerson thinks that if only he can enlist Beijing’s support, sanctions will compel Kim Jong-un to give up his nuclear arsenal – here’s why he’s wrong

Speaking on Thursday ahead of his first trip to Beijing, US Secretary of State Rex Tillerson acknowledged that Washington’s policy towards North Korea had failed.

That’s putting it mildly. After more than 20 years of US efforts aimed at halting Pyongyang’s nuclear weapons programme, the North Korean regime is closer than ever to developing a credible strike capability. This month, it fired four medium-range missiles into the Sea of Japan in an exercise apparently aimed at demonstrating its targeting ability.

That test followed the underground detonation last September of a nuclear device with twice the force of the US atom bomb dropped on Hiroshima in 1945. Suddenly, the day when Kim Jong-un can mount a nuclear warhead on a missile that can threaten North Korea’s neighbours, and even the continental United States, no longer seems so far away. As Tillerson said on Thursday: “It is clear a different approach is required.”
US Secretary of State Rex Tillerson, left, gets in a UH-60 Blackhawk after arriving at US Osan Air Base in Pyeongtaeck, South Korea. Photo: AFP
Yet the former oil executive had little new to offer on the policy front. “We look to China to fulfil its obligations,” he said. Like his predecessors, Tillerson appears to think that if only he can enlist Beijing’s support, then US-backed economic sanctions can compel Kim to give up his nuclear arsenal.

This approach is no more likely to succeed now than at any other time since the mid-1990s, when Kim’s father first began launching missiles in the direction of Japan.

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Firstly, it is doubtful how much diplomatic influence Beijing really wields in Pyongyang. Certainly North Korea is not the obedient client state of China that US President Donald Trump’s campaign statements allege. Kim has yet to make an official visit as North Korea’s leader to Beijing, and has never met China’s President Xi Jinping (習近平).

US Secretary of State Rex Tillerson, left, with President Donald Trump. Photo: AFP
Nor does Kim have much incentive to heed Chinese calls to halt his weapons programme. To the North Korean leader, nuclear missiles are the one guarantee of his regime’s security in a hostile world. Giving them up would be political suicide.

Secondly, although US policymakers are right that China is largely responsible for supporting the North Korean economy, and that Beijing could exert enormous economic pressure on Pyongyang if it chose, strict sanctions are a tool China remains extremely reluctant to employ.

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For Beijing, the results of imposing an economic blockade on North Korea would be far worse than the consequences of doing nothing. The cure would be worse than the disease.

Today, China is by far North Korea’s largest trading partner, accounting for more than 90 per cent of its foreign trade. According to South Korean government estimates, in 2015 China bought US$2.5 billion worth of North Korean exports – largely coal and iron ore.

People watch footage of a missile launch at a railway station in Pyongyang. Photo: AFP
However, that figure certainly understates the true depth of the two countries’ economic ties. The South Korean estimates, which are derived largely from China’s own trade figures, show North Korea running a persistent trade deficit of between US$500 million and US$1.5 billion a year. Considering that North Korea cannot borrow internationally to finance this apparent deficit, it must have other sources of foreign currency income. The bulk of these are likely to be the thriving black market trade across the Yalu River which marks the Chinese border, and remittances from North Koreans working in China.

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If Beijing were to rigorously sever these ties, it would very likely bring the North Korean economy – and Kim’s regime – to its knees. But China’s leaders have no appetite for such a drastic course of action. That much is clear from recent developments. Last month Beijing announced a ban on imports of coal from North Korea in accordance with United Nations sanctions agreed last year. Yet, according to reports from South Korea, North Korean coal ships continue to unload their cargoes unhindered at Chinese ports.

US Navy sailors take part in joint operations with South Korean forces in the latest show of force against the North. Photo: AFP
As Beijing sees it, the consequences of cutting off economic ties and precipitating the fall of the North Korean regime would be disastrous. Either the result would be complete chaos, with millions of North Korean refugees crossing the Yalu River into China’s depressed North Eastern provinces, or it would be a successful reunification led by South Korea, an eventuality which would in time lead to the emergence of a new American-allied economic powerhouse, complete with US military bases, right on China’s border.

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The first outcome is unpalatable, the second intolerable. As Beijing’s intemperate reaction to US plans for a missile shield in South Korea to reduce the threat of Kim’s missiles demonstrates, China’s leaders are far more suspicious of US strategic aims in Asia than they are worried about the destabilising potential of North Korea’s nuclear weapons programme.

Tom Holland is a former SCMP staffer who has been writing about Asian affairs for more than 20 years