Beijing turns screw on Kim with 90pc cut in exports
CHINA has stopped the supply of crucial goods to North Korea in an attempt to pile on economic pressure as leaders from Seoul and Pyongyang prepare for their diplomatic summit.
The leaders of North and South Korea are to meet on April 27 for the first time in more than a decade, the two countries announced on Thursday after preliminary talks between officials.
Hopes are also mounting for talks between the United States and the politically isolated North.
An analysis of Chinese customs data by Aberdeen Standard Investments has revealed that China’s exports of refined petroleum to North Korea have plummeted in the last five months.
Other products have also been hit. North Korean steel imports from China have fallen dramatically, along with car imports. Economists believe that the data may explain recent dramatic shifts in policy by North Korea.
Kim Jong-un, the North Korean leader, provoked widespread international debate this week with a trip to meet Xi Jinping, the Chinese president, in Beijing.
Alex Wolf, a senior economist at Aberdeen Standard Investments told The Daily Telegraph that the data suggested a blocking of the flow of exports into North Korea from China was a case of “using pressure to bring Kim closer to the [Chinese political] fold”.
The economic move would have considerably strengthened China’s position as a power broker in any talks.
Mr Wolf said that, if petroleum exports continued at this level for a year, they would total 3,393 tonnes – just 3.7 per cent of the amount exported last year from China to its neighbour.
Such a cliff-edge drop in exports “given the timing of it, and the meeting and a flurry of diplomatic activity, [with the US and South Korea]” made it highly likely to be a political decision by China, Mr Wolf said. Donald Trump, the US president, has repeatedly called on China to do more to put pressure on North Korea.
Seasonal variations could be playing a part in the decrease, and Chinese economic data demanded a cautious approach, Mr Wolf said, but these factors would not account for such as stark drop off. He added that while there might be some illegal shipments of goods these could not easily compensate for the 90 per cent fall in exports.
There was also little incentive for such illegal activity given that the data suggested China was going much further than UN sanctions on exports to North Korea required.
“China wants to play a central role in ‘resolving’ this crisis, but wants to do it on its own terms,” said Mr Wolf.
Freya Beamish, the chief Asia economist at Pantheon Macroeconomics, said such aggressive economic behaviour would fit with the impression many expert observers had of Mr Xi’s strategic position. She said Mr Xi was “not a fan” of the North Korean regime, and was likely to do anything necessary to open up the state.
It was highly plausible that hard economic pressure would be applied, Ms Beamish said. However, this would “not be so hard that it was destabilising”, given that China’s leaders are fearful of economic hardship triggering a flood of refugees from North Korea.
Should China’s strategy not work, North Korea could punish its people economically, withdraw from talks and increase its nuclear capabilities.
“The upside risk is that [as some observers have suggested] Kim sees himself as the Great Reformer, rather than a supreme leader,” Ms Beamish said. This may be why Mr Kim had allowed the black markets of North Korea to expand so freely, she added. The Chinese economic model offers a way for Mr Kim to pursue this ideal by “opening up and reforming on the one hand, but continuing to have strong state control on the other,” Ms Beamish said.