You are here: Home » International » News » Politics
Business Standard

How China could use trade to force North Korea to play nice with the West

About half of North Korean exports and imports go directly to and from China

Greg Wright | The Conversation 

China, flag,
Photo: Shutterstock

got the world’s attention – and President Donald Trump’s – when it said on July 4 that it had successfully launched an intercontinental ballistic missile for the first time. The weapon, potentially equipped with a nuclear warhead, could reach Alaska.

President Trump’s initial reaction included blaming for letting things get this far. He tweeted that Chinese with rose 40% in the first quarter,” implying that is reluctant to punish for continuing to pursue nuclear weapons.

Is he right to call out China’s relationship with North Korea, which formally goes by the Democratic People’s Republic of Korea?

While the poor quality of the data on between these countries should lead one to be skeptical of any sweeping claims, Trump’s overall sentiment is probably correct. has increased its with in recent decades and has likely done very little on that front to try to forestall this trading partner’s nuclear ambitions.

Yet a quick look at the data, however murky, shows just how much leverage has, if it wishes to use it.

North Korea’s primary patron

In general, exports from one country to another can be mostly explained by the distance between them and the sizes of their markets, a pattern that holds for and

Geographically, they share a large border, which makes a natural partner for also abuts South Korea, which doesn’t with its rival, and shares a tiny border crossing with Russia, with whom it trades a little (more on that later).

China’s large market, proximity and willingness to with has led to a situation in which the latter has become highly dependent on with its primary patron. About half of North Korean exports and imports go directly to and from and much of the rest of its is handled indirectly by Chinese middlemen.

North Korea’s dependence on its northern neighbor has grown hand-in-hand with the nascent superpower’s increasing economic dominance of East Asia, which began 15 years ago when joined the World Trade Organization. Since then, both Chinese gross domestic product as well as its annual trade with North Korea have increased nearly tenfold, to around US$11 trillion and $6 billion, respectively.

And today, is responsible for more than 80 percent of both North Korea’s imports and exports.

imports pretty much everything from China, from rubber tires (1.8 per cent of the total) to refined petroleum (4 percent) and apples and pears (1.3 per cent), with no single category dominating. Meanwhile, coal makes up about 40 percent of its exports to China, followed by “non-knit men’s coats” (7.2 per cent).

Time to use that leverage?

However, recent events have led to some uncertainty about the extent to which is willing to use this economic leverage to rein in North Korea’s military ambitions. It appears that is willing to use these close economic ties to serve its own diplomatic purposes but it’s unclear whether that includes using this economic leverage to rein in North Korea’s military ambitions.

On the one hand, China claims that coal imports from North Korea have recently been stopped as part of an effort to punish the regime for recent missile tests and the suspected assassination of Kim Jong-nam. If true, this would be an important signal of China’s willingness to support US concerns about the missile program as it would represent a loss of about a third ($930 million) of North Korea’s import revenue.

However, there is evidence that coal shipments in fact never ceased. And in any case, China may have dramatically increased its imports of iron ore from to offset the lost coal revenues.

This is consistent with the idea that carefully considers the resources and revenue that are available to the North Korean regime at any moment, and uses as a lever to control them. In this way, walks a fine line between providing too many resources, and thus allowing the regime to prosper, and not enough resources, such that is in danger of collapsing. Ultimately, may be used as a lever to do some light scolding, but China’s overwhelming concern is preventing North Korea’s collapse.

Further evidence that has tight control over the North Korean economy comes from a recent report from C4ADS. The research group found close, and often common, ownership ties between most of the major Chinese companies who do business with This suggests that with is highly centralised and thus easily controlled.

Russia: North Korea’s other ‘friend’

Of course, China’s not the only country trades with, but the others pale in comparison. Other top export destinations, after China, include India ($97.8 million), Pakistan ($43.1 million) and Burkina Faso ($32.8 million). In terms of imports, India ($108 million), Russia ($78.3 million and Thailand ($73.8 million) also sell stuff.

Russia in particular may be beginning to complicate things for US efforts to isolate the regime. While still little, Russian trade with North Korea increased 73 per cent over the first two months of 2017 compared with the same period of the previous year. This may be part of a coordinated effort with to obstruct attempts by the US to pressure on its military ambitions.

 

The Conversation logo

But whereas is legitimately worried that an economic crisis in could lead to a flood of refugees or all-out war, Russia likely sees engagement with in much simpler terms, namely as an additional way to gain geopolitical advantage relative to the US.
 


Greg Wright, Assistant Professor of Economics, University of California, Merced

This article was originally published on The Conversation. Read the original article.

The Conversation

First Published: Fri, July 07 2017. 08:18 IST
RECOMMENDED FOR YOU