Chinese firms should plan for sanction risks amid US talk against North Korea

US Secretary of State Rex Tillerson has ended his first trip to Asia, during which reported tough talk about North Korea may draw the attention of Chinese enterprises. According to a CNN article on Thursday, it’s possible that the US may further intensify its economic sanctions on Pyongyang, making it easier to hit Chinese firms who have business dealings with North Korea with financial penalties from Washington.

Maybe it’s time to guess who will be the next firm to run into trouble with US sanctions fol- lowing Chinese telecom equipment giant ZTE Corp. ZTE agreed earlier this month to pay a $ 892 million penalty for violating sanctions restricting the shipping of US- made technology to Iran and North Korea.

US President Donald Trump tweeted in January that North Korea was “in the final stages of developing a nuclear weapon capable of reaching parts of the US” and said “It won’t happen!” With a tougher US line on North Korea exhibited by Tillerson during his Asia trip, further economic sanctions may be used to curb North Korea’s nuclear program. Among companies doing business with North Korea, Chinese firms may be the first to be affected, putting pressure on Beijing to take more active measures to curb North Korea’s actions.

China has fully complied with UN resolutions and is committed to the denuclearization of the Korean Peninsula, but this does not mean China, North Korea’s biggest trade partner, should suspend all of its business transactions with the country to create a humanitarian crisis and overthrow its regime. At the diplomatic level, Beijing needs to safeguard legitimate rights and interests of Chinese enterprises that have normal business dealings with North Korea, and to prevent US authorities from extending sanctions to Chinese firms.

Additionally, Chinese enterprises should plan for the increasing risk of getting involved in US sanctions cases. The CNN report suggested Tillerson would “tell his counterparts in China that the US is prepared to increase financial penalties against Chinese com- panies and banks that do business with North Korea.” While Tillerson did not publicly state such words during his trip, Chinese firms should be prepared to avoid repeating the story of ZTE. If frictions with Washington are inevitable, the question remaining for Chinese companies is how they can minimize their risks and losses.