China-North Korea Relations
Dick K. Nanto
Specialist in Industry and Trade
Mark E. Manyin
Specialist in Asian Affairs
Kerry Dumbaugh
Specialist in Asian Affairs
January 22, 2010
Congressional Research Service
7-5700
www.crs.gov
R41043
CRS Report for Congress
P
repared for Members and Committees of Congress
China-North Korea Relations
Summary
The People’s Republic of China (PRC) plays a key role in U.S. policy toward the Democratic
People’s Republic of Korea (DPRK or North Korea). The PRC is North Korea’s closest ally,
largest provider of food, fuel, and industrial machinery, and arguably the country most able to
wield influence in Pyongyang. China also is the host of the Six-Party Talks (involving the United
States, China, North Korea, South Korea, Japan, and Russia) over North Korea’s nuclear
program. The close PRC-DPRK relationship is of interest to U.S. policymakers because China
plays a pivotal role in the success of U.S. efforts to halt the DPRK’s nuclear weapons and ballistic
missile programs, to prevent nuclear proliferation, to enforce economic sanctions, and to ensure
that North Korean refugees that cross into China receive humane treatment. Since late 2008,
China has been not just the largest, but also the dominant, provider of aid and partner in trade
with North Korea.
This report provides a brief survey of China-North Korea relations, assesses PRC objectives and
actions, and raises policy issues for the United States. While Beijing still maintains its military
alliance and continues its substantial economic assistance to Pyongyang, in recent years many
PRC and North Korean interests and goals appear to have grown increasingly incompatible.
Increasingly, many Chinese officials and scholars appear to regard North Korea as more of a
burden than a benefit. However, Beijing’s shared interest with Pyongyang in preserving North
Korean stability generally has trumped these other considerations.
The Obama Administration’s public statements have emphasized common interests rather than
differences in its policy toward China regarding North Korea. China’s interests both overlap and
coincide with those of the United States, but China’s primary interest of stability on the Korean
peninsula is often at odds with U.S. interest in denuclearization and the provision of basic human
rights for the North Korean people. Moreover, North Korean leaders appear to have used this
interest to neutralize their country’s growing economic dependence on China; the greater North
Korea’s dependency, the more fearful Chinese leaders may be that a sharp withdrawal of PRC
economic support could destabilize North Korea. Since the late 1990s, as long as North Korea has
been able to convince Beijing’s senior leadership that regime stability is synonymous with North
Korea’s overall stability, the Kim government has been able to count on a minimum level of
China’s economic and diplomatic support, as well as some cooperation along their border region
to ensure that the number and activities of North Korean border-crossers do not spiral out of
control.
Beijing and Pyongyang are currently going through a period of amicable diplomatic and
economic relations following the negative response by Beijing to the DPRK’s nuclear and missile
tests in 2009 and China’s support of new United Nations Security Council sanctions directed at
North Korea. China’s enforcement of those U.N. sanctions, however, is still unclear. China has
enforced some aspects of the sanctions that relate directly to North Korea’s ballistic missile and
nuclear programs, but Beijing has been less strict on controlling exports of dual use products.
Chinese shipments of banned luxury goods to the DPRK continue to increase.
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China-North Korea Relations
Contents
The Issue and Interests ................................................................................................................ 1
China’s North Korea Policy......................................................................................................... 2
Development of China’s North Korea Policy ......................................................................... 4
PRC Policy Objectives .......................................................................................................... 5
Assuring Stability and the “Status Quo” on the Korean Peninsula .................................... 6
Maximizing PRC Influence ............................................................................................. 6
Reconvening the Six Party Talks ..................................................................................... 7
Assuring China’s Regional Security Interests/Territorial Integrity.................................... 7
North Korean Policy Objectives .................................................................................................. 8
Sino-DPRK Interaction ............................................................................................................... 9
Diplomatic Relations........................................................................................................... 10
Economic Relations ............................................................................................................ 12
China and Economic Sanctions ........................................................................................... 17
Figures
Figure 1. China’s Exports of Banned Luxury Items to the DPRK............................................... 19
Tables
Table 1. China’s Merchandise Trade with the DPRK, 1995-2008 ............................................... 14
Table 2. Estimated North Korean Trade by Selected Trading Partner ......................................... 15
Table 3. China’s Reported Exports of Small Arms to the DPRK................................................. 18
Contacts
Author Contact Information ...................................................................................................... 20
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China-North Korea Relations
The Issue and Interests
The People’s Republic of China (PRC) plays a key role in U.S. policy toward the Democratic
People’s Republic of Korea (DPRK or North Korea). The PRC is North Korea’s closest ally,
largest provider of food, fuel, and industrial machinery, and arguably the country most able to
wield influence in Pyongyang. This close bilateral relationship is of interest to U.S. policymakers
because China plays a pivotal role in the success of U.S. efforts to halt the DPRK’s nuclear
weapons and ballistic missile programs, to prevent nuclear proliferation, to enforce economic
sanctions, and to ensure that North Korean refugees that cross into China receive humane
treatment. China’s actions also are key in reforming the DPRK’s dysfunctional economy and
meeting the basic human needs of the North Korean people. China hosts the Six Party Talks
(6PT) on denuclearization, is able to provide credible advice to Pyongyang on issues such as
economic reform, and plays an important role on the United Nations Security Council and other
international organizations that deal with the DPRK. In general, the Obama Administration—as
was true of the Bush Administration—has emphasized common interests rather than differences
in its policy toward China regarding North Korea.
Although China is prominent in U.S. policy toward North Korea, North Korea is only one of
numerous items on the Sino-U.S. agenda. In deciding whether to criticize China when its actions
toward North Korea conflict with U.S. interests, Obama Administration officials must weigh the
possible spillover into these other areas, some of which appear to have a higher priority to the
White House than North Korea. China has become a major player on the world stage, and
cooperation with China increasingly is becoming essential in tackling a variety of global issues.
China is now the third largest economy in the world after the United States and Japan and soon
may surpass Japan to become number two in the world (or number three if the European Union is
counted as one economy). Together the United States and China account for more than half of
global energy imports and emit over 30% of global greenhouse gases. The U.S. trade deficit and
reliance on capital flows are unlikely to be resolved without cooperation from China, since it has
a $268 billion surplus in merchandise trade with the United States and holds $800 billion in U.S.
Treasury securities. This intersection of interests on the world stage extends to how the United
States and China deal with the DPRK. However, U.S. relations with China are increasingly
becoming strained over issues such as cybersecurity, antidumping measures, tighter regulation of
foreign businesses in China, and competition for influence in Asia.
North Korea has entered a phase in its strategic planning that poses particular challenges to both
China and the United States. While Pyongyang’s goals and tactics remain somewhat murky, it
appears that the DPRK has embarked on a strategy with the goal of becoming a recognized
nuclear power while also preserving the regime and providing for its security. According to a
source close to the DPRK regime, Pyongyang has embarked on a diplomatic offensive designed
to induce the United States to “learn to live in peace with a nuclear-armed North Korea.”1 During
this diplomatic offensive, the DPRK buys time to further refine its offensive nuclear capabilities
while moving toward cooperation, a warming of relations, and the provision to it of economic and
1 Kim Myong Chol, “North Korea begins ‘Plan C,” Asia Times, October 14, 2009, Online edition. Zhang Liangui,
“There is a Dangerous Component in the ‘Warm Winter’ of the DPRK Nuclear Issue,” Huanqiu Shibao (in Chinese),
December 9, 2009, p. 14, translated by Open Source Center as “PRC’s Zang Liangui Views DPRK’s ‘Plan C’ for
Nuclear Status, Document Number CPP20091230710002.
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humanitarian assistance.2 Under this diplomatic “charm offensive,” North Korea has released two
American journalists and a South Korean captive; restarted high-level diplomatic exchanges with
the United States, South Korea, and China; hinted that it may return to the Six Party Talks; and
proposed to conclude a peace treaty to replace the armistice that ended the Korean War.
This report provides a brief survey of China-North Korea relations, assesses PRC objectives and
actions, and raises policy issues for the United States.3 China’s interests both overlap and coincide
with those of the United States, but that China’s primary interest of stability on the Korean
peninsula is often at odds with U.S. interest in denuclearization and the provision of basic human
rights for the North Korean people. Beijing and Pyongyang are currently going through a period
of amicable diplomatic and economic relations following the negative response by Beijing to the
DPRK’s nuclear and missile tests in 2009 and China’s support of new United Nations Security
Council sanctions directed at North Korea. China’s enforcement of those U.N. sanctions,
however, is still unclear. China has enforced some aspects of the sanctions that relate directly to
North Korea’s ballistic missile and nuclear programs, but Beijing has been less strict on
controlling exports of dual use products. Some observers also have charged that Beijing has not
made a concerted effort to stop suspicious air traffic between North Korea and Iran.4 Chinese
shipments of banned luxury goods to the DPRK continue to increase.5
China’s North Korea Policy
U.S. government officials generally praise the People’s Republic of China (PRC) for its role as an
active member in multilateral efforts to address and halt North Korea’s nuclear weapons program.
But the exact nature of China’s security concerns, its political objectives, and the extent of its
influence on North Korean actions has remained elusive to many observers of PRC-North Korean
relations. Much of the reportage on PRC-North Korea interaction has appeared contradictory. On
the one hand, PRC officials often appear to put the lion’s share of the responsibility on the United
States to be “flexible” and “patient” with North Korea; on the other hand, China has declared
North Korea to be in breach of U.N. nuclear safeguards and has been willing to be critical of
North Korean pronouncements and actions that it finds unacceptable.6 China voted for U.N.
Security Council resolutions 1718 and 1874 imposing sanctions on the DPRK following its
missile and nuclear tests. Anecdotal evidence suggests that although some PRC officials have
grown increasingly perturbed at North Korean intransigence on the nuclear issue, senior PRC
2 Kim Myong Chol, “North Korea begins ‘Plan C,” Asia Times, October 14, 2009, Online edition. Zhang Liangui,
“There is a Dangerous Component in the ‘Warm Winter’ of the DPRK Nuclear Issue,” Huanqiu Shibao (in Chinese),
December 9, 2009, p. 14, translated by Open Source Center as “PRC’s Zang Liangui Views DPRK’s ‘Plan C’ for
Nuclear Status, Document Number CPP20091230710002.
3 For additional information on North Korea, see the following CRS reports: CRS Report RL33590, North Korea’s
Nuclear Weapons Development and Diplomacy; CRS Report RL31696, North Korea: Economic Sanctions; CRS
Report RL33567, Korea-U.S. Relations: Issues for Congress; CRS Report RS21473, North Korean Ballistic Missile
Threat to the United States; CRS Report RS21391, North Korea’s Nuclear Weapons: Latest Developments, CRS
Report RS21582, North Korean Crisis: Possible Military Options, CRS Report RL31555, China and Proliferation of
Weapons of Mass Destruction and Missiles: Policy Issues, and CRS Report RL32493, North Korea: Economic
Leverage and Policy Analysis.
4 U.S. Department of State, Bureau of Public Affairs, “Background Briefing on North Korea,” July 15, 2009.
5 See section “China and Economic Sanctions,” below.
6 Attributed to PRC U.N. Ambassador Wang Guangya, “Annan says six party talks in North Korea’s interest,” Voice of
America Press Release, February 15, 2005.
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officials continue to visit Pyongyang and receive warm welcomes.7 Beijing has stressed that a
nuclear-free Korean peninsula is one of its priorities, but it also has supported North Korea as it
has built, started, stopped, and restarted its nuclear plant.8 In the international effort to pressure
North Korea to abandon its nuclear weapons program, PRC officials are presumed to have
substantial leverage with North Korea; yet Beijing was unable to prevent Pyongyang from
conducting its first test of a nuclear weapon on October 9, 2006,9 nor its second test on May 25,
2009.10
As for concerns over proliferation of weapons of mass destruction by the DPRK, Beijing
generally discounts the threat of nuclear proliferation by the DPRK to non-state terrorist groups.
China also seems less concerned about nuclear cooperation between the DPRK and countries
friendly to China such as Pakistan, Iran, and Burma.
For years, the U.S. policy debate has been dogged by diametrically opposed opinions about
exactly what China’s real security concerns and political objectives are on the North Korea
nuclear issue. These continuing internal U.S. disagreements helped to paralyze much of the U.S.
policy process during most of the George W. Bush Administration on policy toward North Korea.
According to one view, espoused by many in the U.S. government, China is doing a credible job
with North Korea and has been a helpful host and interlocutor for the United States in the whole
process of the Six Party Talks involving the United States, the PRC, Japan, Russia, and North and
South Korea. These proponents hold that Americans can count on the sincerity of PRC leaders
when they say that Beijing’s principal priority is a non-nuclear Korean peninsula.11 In spite of the
military alliance and political roots that the PRC shares with North Korea, these proponents
maintain that PRC officials have grown weary and frustrated with the unpredictability and
intransigence of their erratic neighbor. Furthermore, some say, China may have less leverage with
Pyongyang than many suggest and risks losing what little leverage it does have if it reduces or
terminates its substantial food and energy assistance to North Korea.
The chief rival to this viewpoint holds that China is being duplicitous on the North Korea
question and insincere in its statements supporting a freeze or dismantlement of North Korea’s
nuclear weapons program.12 According to this view, Beijing actually has substantial leverage with
Pyongyang but elects not to use it in order to ensure that the North Korean issue continues to
complicate U.S. regional strategy and undermine the U.S. position in Asia. This is the reason,
7 In October 2009, PRC Premier Wen Jiabao went to Pyongyang and was given a lavish welcome at the airport by
North Korean leader Kim Jong-Il.
8 For more, see CRS Report RL31555, China and Proliferation of Weapons of Mass Destruction and Missiles: Policy
Issues, by Shirley A. Kan.
9 Faiola, Anthony and Linzer, Dafna, “N. Korea pledges nuclear test; need cited to deter threat from U.S., but no date is
set,” The Washington Post, October 4, 2006, p. A1. Kahn, Joseph, “North’s test seen as failure for Korea policy China
followed,” New York Times, October 9, 2006, p. 6.
10 Evan Ramstad, Jay Solomon, and Peter Spiegel, “Korean Blast Draws Outrage,” The Wall Street Journal, May 26,
2009, Internet edition.
11 China has repeatedly held to its general view on the importance of denuclearization, although some find meaningful
the varying apparent strengths of its assertions. In one press conference, Foreign Ministry spokesperson Kong Quan
stressed the “the Chinese side’s persistence on the denuclearization of the Korean Peninsula and on maintaining peace
and stability on the Korean Peninsula is resolute and unwavering.” Translated in FBIS, CPP20050217000174, February
17, 2005. At another press conference four days later, the same spokesperson described China’s position “that we stick
to the goal of a nuclear free Peninsula.” Translated in FBIS, CPP20050223000101.
12 Tkacik, John, “Does Beijing approve of North Korea’s nuclear ambitions?” Backgrounder No. 1832, the Heritage
Foundation, March 15, 2005.
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according to this view, that China appears casually tolerant of North Korea’s erratic and
unpredictable behavior, and why Beijing has sided so often with the North Korean position in the
Six Party Talks. Furthermore, these proponents suggest that Beijing and Pyongyang actually may
be coordinating their policies on North Korea’s nuclear weapons program, including the timing of
North Korea’s more provocative pronouncements and actions, in an effort to keep the United
States off balance.
In addition, Beijing’s first priority on the Korean peninsula appears to be stability both in the Kim
Jong-il regime and in the country as a whole. For Beijing, therefore, as long as the United States
and others are talking to the DPRK, they are unlikely to take harsher actions against Pyongyang,
and deliveries of economic and humanitarian aid to North Korea that result from the talks can
only help to ensure stability.
A significant issue for U.S. policy has been the plight of tens of thousands of North Koreans who
have been crossing back and forth over the North Korea-China border since the North Korean
famine of the 1990s. Estimates of North Koreans living in China range from 30,000 to more than
100,000. Despite being a party to relevant United Nations refugee conventions, China has not
allowed U.N. agencies, in particular UNHCR, or non-governmental organizations (NGOs) to
have access to North Koreans who are residing in China. Beijing views these individuals as
economic migrants (rather than political refugees) who cross the border illegally, primarily in
search of food.13 The Chinese government also has periodically deported North Korean border
crossers or allowed North Korean authorities to seize North Koreans in China. Those who are
repatriated may face punishment ranging from a few months of “labor correction” to execution. A
number of reports also document the difficult conditions faced by North Koreans who remain in
China.
Development of China’s North Korea Policy
North Korea exists because of the division of the Korean peninsula into south and north
occupation zones (the former administered by the United States and the latter by the Soviet
Union) in August 1945 at the end of World War II. Initially meant to be temporary, Cold War
politics resulted in the division being solidified in 1948 with the establishment of the Republic of
Korea (ROK, or South Korea) and the Democratic People’s Republic of Korea (DPRK, or North
Korea). Each country remained under the influence of its original occupying power. When North
Korea invaded the South in June 1950, the United Nations and the United States came to South
Korea’s defense. The intervention of PRC military forces late in 1950 on behalf of North Korea
marked the beginning of what later became, in July 1961, the formal PRC-DPRK military
alliance—the Treaty of Friendship, Cooperation, and Mutual Assistance—which committed either
party to come to the aid of the other if attacked.14 This military alliance, however, lacks key
13 The international instruments that provide protection to refugees include the 1951 United Nations Convention
Relating to the Status of Refugees (Refugee Convention) and the 1967 Protocol to that Convention. Parties to the
Refugee Convention have an obligation to abide by the principle of “non-refoulement,” which means that “No
contracting State shall expel or return (“refouler”) a refugee in any manner whatsoever to the frontiers of territories
where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular
social group or political opinion.” For more on the North Korean refugee issue, see CRS Report RS22973, Congress
and U.S. Policy on North Korean Human Rights and Refugees: Recent Legislation and Implementation, by Emma
Chanlett-Avery.
14 The Korean War effectively came to an end when an armistice agreement was signed on July 27, 1953. The South
Korean government refused to sign the armistice, which has not been replaced with a formal peace treaty or
(continued...)
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operational components, such as a joint headquarters, joint planning, or even joint military
exercises.
In addition to their mutual defense alliance, the PRC and DPRK in these early years were bonded
by their shared Leninist-socialist ideologies, by their wartime military cooperation, and by years
of PRC reconstruction efforts and assistance to Pyongyang after the Korean War. PRC leaders
saw North Korea as a crucial buffer state between the PRC border and American military forces
stationed in South Korea. In addition, both Pyongyang and Beijing shared what one analyst has
called the frustration of “divided nation ideologies”—the separation of North Korea from South
Korea on the Korean peninsula, and what Chinese leaders viewed as the separation of the PRC on
the mainland from the Republic of China on Taiwan.15 The shared interests and identities between
the two governments were enough to assure cordial relations for decades. But these mutual
affinities began to diverge in the early 1980s when the PRC initiated economic reforms and
market mechanisms under Deng Xiaoping’s leadership, and in 1992 when Beijing established full
diplomatic ties with South Korea. Despite these differences and ebbs and flows in the
relationship, official ties (measured, for instance, by the number of high-level bilateral meetings)
improved and economic flows increased in the 2000s, to the point where by 2009 China had re-
emerged as North Korea’s dominant economic partner, if not its lifeline. 16
While Beijing still maintains its military alliance and continues its substantial economic
assistance to Pyongyang, in recent years many PRC and North Korean interests and goals appear
to have grown increasingly incompatible. North Korea has remained insular, highly ideological,
and committed to what many find to be a virtually suicidal economic policy direction. China, on
the other hand, has rejected its past excesses of ideological zeal to become a pragmatic,
competitive, market-driven economy that increasingly is a major economic and political player in
the international system. However, from Beijing’s perspective, its shared interest with Pyongyang
in preserving North Korean stability generally has trumped these other considerations. The
perceived growing tensions between Beijing’s shared interests with Pyongyang and its increasing
differences with that government have created a complex and murky picture for U.S.
policymakers who have sought to convince Beijing to be more coercive with Pyongyang and
more cooperative with Washington in attempting to shut down North Korea’s nuclear weapons
program.
PRC Policy Objectives
PRC leaders have conflicting political and strategic motivations governing their North Korea
policy. On the side of the ledger supporting China’s continued close relations with Pyongyang
are: shared socialist political ideologies; the human and capital investment China has made in
North Korea; Beijing’s credibility as a patron and ally; increased economic ties (particularly
between China’s northeast provinces and North Korea’s northern region); Beijing’s desire for a
“buffer” against South Korea; and the potentially catastrophic consequences for China’s economy
and social structure if something goes terribly wrong in North Korea, with which China shares an
(...continued)
comprehensive peace agreement.
15 Scobell, Andrew, “China and North Korea: From Comrades-in-arms to Allies at Arm’s Length,” Strategic Studies
Institute, U.S. Army War College, March 2004, p. 2.
16 For a review of Sino-North Korea relations in the 1990s and 2000s, see Scott Snyder, China’s Rise and the Two
Koreas (Boulder, CO: Lynne Rienner, 2009), chapter 5.
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850 mile border. On the opposite side of the ledger are: Beijing’s presumed frustration at dealing
with North Korean brinkmanship and unpredictability; the financial drain China incurs by
continuing to prop up its bankrupt ally’s economy; the prospect that North Korea’s nuclear status
will provoke a nuclear arms race in Asia; and the potential for Beijing’s military involvement in
any conflict provoked by Pyongyang. Chinese leaders appear to have to continually re-calibrate
and re-balance these competing goals as events unfold on the Korean peninsula. At its very core,
though, Beijing appears to have a number of fundamental policy objectives that do not change.
Assuring Stability and the “Status Quo” on the Korean Peninsula
The political, economic, and security consequences for China of a destabilized North Korea are
serious enough for China to justify maintaining stability on the Korean peninsula as a primary
policy goal. However unpredictable and annoying the North Korean government may be to
Beijing, any conceivable scenario other than maintaining the status quo could seriously damage
PRC interests. Another collapse of North Korea’s economy (such as occurred in the 1990s) would
severely tax the economic resources of the Chinese central government and, depending on how it
dealt with the flood of refugees across its border with the DPRK, could shine a world spotlight on
how China treats the refugees and open Beijing to increased criticism from the world community.
Armed conflict between North and South Korea likewise would be disruptive to PRC economic
and social interests, in addition to risking conflict between the U.S. and PRC militaries on behalf
of their allies. Beijing would face a different set of challenges should North Korean political
upheaval mirror the demise of East Germany, in which North and South Korea would unite under
the latter’s terms. The PRC could then have a nuclear armed and democratic U.S. ally, and
possibly U.S. troops and military facilities, directly on its border without the benefit of an
intervening buffer state.
Within this context, Beijing’s continuing economic assistance to North Korea can be easier to
explain. Rather than a deliberate attempt to sustain North Korea’s nuclear weapons program or
undermine an ultimate resolution to the Six Party Talks, as some have suggested, China’s food
and energy assistance can be seen as an insurance premium that Beijing remits regularly to avoid
paying the higher economic, political, and national security costs of a North Korean collapse, a
war on the peninsula, or the subsuming of the North into the South.
Maximizing PRC Influence
Beijing’s second overarching policy goal appears to be a concerted effort to maximize its
influence on the Korean peninsula as well as its leverage in Asia and with all the relevant parties
in the Six Party Talks. In the case of North Korea, however, no one knows what kind of leverage
Beijing actually has with Pyongyang. It may be that PRC leaders are uncertain as well, given
North Korea’s penchant for the unexpected and its demonstrated willingness at times to reject
Chinese overtures, carrot and stick alike. If Chinese leaders are, in fact, unsure of the extent of
their own leverage, they appear unwilling to be more assertive in testing what those limits might
be.
In the calculation of PRC leaders, then, Beijing’s food and energy aid to Pyongyang achieves
several objectives. It not only helps to stabilize the erratic regime, but furthers China’s economic
influence over North Korea and potentially helps to encourage North Korea to reform its own
economy. Such aid also maximizes PRC leverage by raising the costs of misbehavior while
suggesting that rewards are possible for good behavior. In other bilateral relationships, Chinese
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leaders have learned the value of economic interdependence. Beijing appears to have grown more
confident that its own giant economy has the power not only to confer economic benefits but to
narrow the range of options available to its smaller economic partners. In addition to food and
energy assistance, Beijing may calculate that its willingness to provide investment and economic
benefits across the Sino-North Korean border will bring North Korean interests more in line with
those of China.
Reconvening the Six Party Talks
The PRC also is generally thought to see collateral benefit in its continued involvement with the
other players in the Six Party Talks, especially with the United States. For this, Beijing’s interests
appear to be served by having the Six Party Talks reconvene and continue—one of the hopes
expressed by China and the United States in the U.S.-China Joint Statement issued during
President Obama’s visit to China in November 2009.17 Continuation of the Six Party Talks
process allows Beijing to expand on its mediating role and offers it the potential, however slight
the prospect of a successful conclusion to the talks, of being an original crafter of a key
international agreement. Continuation of the process provides a more neutral forum for regular
conversations with Japan than might otherwise be possible given lingering Sino-Japanese
tensions. Finally, continuation of the process burnishes Beijing’s credentials with South Korea
and gives Beijing leverage with the U.S. Government as well as a wealth of opportunities for
bilateral discussions and senior-level meetings with U.S. policymakers. China also insisted on
language in U.N. Resolution 1874 that allowed for sanctions to be lifted if the DPRK returned to
the negotiating table. In late 2009, however, some observers believe that China, recognizing that
the DPRK was unlikely to abandon its nuclear weapons, began to place a greater emphasis on
U.S.-North Korea bilateral talks to address denuclearization rather than the Six Party process.
Assuring China’s Regional Security Interests/Territorial Integrity
Another logical policy goal for Beijing is the assurance of regional stability and China’s own
territorial integrity. Leaders in Beijing are aware that a nuclear armed North Korea could lead to
decisions by Japan, South Korea, and possibly Taiwan and other Asian neighbors to develop their
own nuclear deterrents and ballistic missile capabilities.18 China may also fear that the North
Korean nuclear program could spur a significant Japanese conventional rearmament.19 In keeping
with Beijing’s own domestic policy priorities, its emphasis on social stability, and its ambition to
regional dominance, it can be argued that nothing is more to be avoided than the proliferation
around China’s periphery of nuclear-armed governments more capable of defending their own
national interests when those conflict with China’s. Beijing probably anticipates that the U.S.
response to more robust security programs in the region would include an accelerated missile
17 President Obama made his first visit to China from November 15 – 18, 2009. The U.S.-China Joint Statement was
issued on November 17, 2009. http://www.whitehouse.gov/the-press-office/us-china-joint-statement
18 On October 18, 2006, Japanese officials assured U.S. Secretary of State Condoleezza Rice that North Korea’s
nuclear test would not lead Japan to consider pursuing a nuclear weapons program. Still, several high-ranking Japanese
politicians remarked after the October 9th test that Japan needs to have a frank public discussion about nuclear weapons.
Shanker, Thom and Onishi, Norimitsu, “Japan assures Rice that it has no nuclear intentions,” The New York Times,
October 19, 2006, p. 14.
19 For more on the prospects for and debate over Japan developing nuclear weapons, see CRS Report RL34487,
Japan’s Nuclear Future: Policy Debate, Prospects, and U.S. Interests, by Emma Chanlett-Avery and Mary Beth
Nikitin.
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defense program for U.S. friends and allies. Such an enhanced missile defense capability would
undermine the effectiveness of Beijing’s missile deployment threat opposite the Taiwan coast,
aimed at keeping Taiwan from acting on its independence aspirations. North Korea is thus linked
to China’s primary core interest of assuring its “territorial integrity,” which in Beijing’s definition
includes Taiwan. Beijing also realizes that the U.S. focus on the North Korean military threat
generates a hook that keeps U.S. forces tied down on the Korean peninsula and looking north
toward the DPRK rather than looking south and showing more concern over possible hostilities
across the Taiwan Strait.
North Korean Policy Objectives
The Kim Jong-il government’s over-riding policy concerns appear to be security and regime
preservation, with a secondary objective of generational leadership succession. To achieve these
ends, the government devotes considerable energy toward acquiring the resources necessary to
provide a reasonable quality of life for the country’s elite. The government’s short-term goals
include preparations for the 100th anniversary of the birth of Kim Il-sung, the founder of the
DPRK, in 2012. By then the country intends to become a recognized military and economic
power and a “great, prosperous, and powerful country.” Pyongyang feels it has already attained
the status of a politically, ideologically, and militarily powerful state, but it seeks to be recognized
by the world as a nuclear weapon state. The DPRK’s missile delivery system for nuclear weapons
is still under development. For Pyongyang, it appears that it views nuclear weapons and missiles
as the keys to its security. Its conventional military forces lack modern equipment, technology,
fuel, and experience. Without nuclear weapons, the country likely would be considered a “basket
case” holdover country from the Cold War, surrounded by nuclear powers, and able to garner
about as much world attention as Mongolia or Laos. Leaders also recognize that putting the
military first and transferring resources from the civilian to military side of the economy can only
last so long, unless there is robust growth in civilian production. Hence the goal of becoming an
“economically powerful state” is crucial both to supply the army and to fulfill a lifelong
“cherished desire” of Kim Il-sung, the founder of the country.
On January 1 each year, DPRK leaders publish their annual goals in a joint editorial carried in
several media outlets. In this editorial, Pyongyang stated that 2010 is to be a “year of general
offensive when ... all efforts should be concentrated on improving the people’s standard of
living....” The strategy outlined is to focus on light industry and agriculture including state
investment and access to more foreign markets. It recognized that heavy industry was critical to
the success of light industry and agriculture, and it cited steel, electric power, coal, rail transport,
and machine building sectors as important. Other stated goals were to strengthen the Korean
People’s Army, the workers, and the Party and to achieve national unification by improving north-
south relations. The editorial ended by stating that the fundamental task for ensuring peace and
stability on the Korean Peninsula and in the rest of Asia was “to put an end to the hostile
relationship between the DPRK and the USA” and that it is the “stand of the DPRK to establish a
lasting peace system on the Korean Peninsula and make it nuclear-free through dialogue and
negotiations.”20 Such editorials are often useful guides to the official thinking of North Korean
leaders, even if they are often rhetorical flourishes not matched by actual policy. Since early
2009, for instance, North Korean authorities have been enacting increasingly rigid restrictions on
20 “Joint New Year Editorial of Leading Newspapers in DPRK Released,” Korea Central News Agency, January 1,
2010.
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private sector activity. This crackdown continued in January 2010, despite the New Year
editorial’s emphasis on improving the people’s standard of living.
Sino-DPRK Interaction
As geopolitical realities generally dictate, China is more important to the DPRK than the DPRK
is to China. Chinese leader Mao Zedong once described the Sino-DPRK relationship to be as
close as “lips and teeth,” but in many ways the DPRK has become more of a thorn in the side of
China than a reliable ally. In recent years, China also has had to respond to the same DPRK
policy cycle as those of other countries of the world. The cycle proceeds through: (1) a period of
North Korea’s threats, bluster, and aggressive action; to (2) a period of increased dialogue, charm,
and diplomacy; to (3) a period of improved relations and increased deliveries of food, fertilizer,
and other economic assistance; and then going back to (1) a period of threats, bluster, and
aggressive action.21 China, however, is usually not the direct target of the DPRK’s negative
actions (such as testing ballistic missiles or nuclear bombs) and threats. Such actions generally
are aimed at the United States, South Korea, or Japan. Beijing, though, has to face the fact that
Pyongyang has ignored its advice not to test its nuclear bombs, and it is often called upon to assist
in dealing with this recalcitrant and calculating Pyongyang.
North Korea’s core interest of regime preservation overlaps with China’s interest in preserving
stability on the peninsula. Since the late 1990s, as long as North Korea has been able to convince
Beijing’s senior leadership that regime stability is synonymous with North Korea’s overall
stability, the Kim government has been able to count on a minimum level of China’s economic
and diplomatic support. Indeed, North Korean leaders appear to have used this shared interest to
neutralize its growing economic dependence on China, as the greater North Korea’s dependency,
the more fearful Chinese leaders may be that a sharp withdrawal of PRC economic support could
destabilize North Korea.
China also often has cooperated with North Korea along their border region to ensure that the
number and activities of North Korean border-crossers do not spiral out of control. In November
2003, China reportedly transferred responsibility for securing its border with North Korea from
the police to its army.22 Many of China’s two million ethnic Koreans live along this border, and it
is a favorite crossing point for refugees from North Korea. In 2006, China built a 20-kilometer
long fence along its border with North Korea. It is located primarily along areas where the Yalu
River dividing the two countries is narrow and the river banks low.23 Much of China’s trade with
the DPRK goes through the port of Dandong on the Yalu River. In 2002, 40% of Chinese exports
to and 11% of its imports from North Korea passed through Dandong.24
21 Some analysts surmise that China and North Korea are coordinating their actions to keep the United States off
balance.
22 Foley, James. China Steps Up Security on North Korean Border. Jane’s Intelligence Review, November 1, 2003.
23 China Erects Massive Fence on N. Korean Border After Test. World Tribune.com, October 25, 2006. Schafer, Sarah.
Threatening the Whole World, on China’s Border with North Korea, Local Villagers Fear the Fallout from
Pyongyang’s Nuclear Aspirations, Newsweek, October 12, 2006 (Internet edition).
24 Lee, Chang-hak. China’s Trade with N.K. Via Dandong Exceeds US $200 million. KOTRA, February 21, 2003.
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Diplomatic Relations
From North Korea’s perspective, its relationship with China has long been fraught with
ambivalence. While for nearly two decades China has been Pyongyang’s most reliable source of
economic and diplomatic backing, China’s periodic willingness to go along with sanctions efforts
in the U.N. Security Council and the fluctuations in Chinese assistance undoubtedly have made
North Korea wary of becoming overly dependent on Beijing, or on any other outside power.
During the Cold War, for instance, then-leader Kim Il-sung adeptly used the Soviet-Chinese
rivalry to extract considerable economic assistance from Moscow (the DPRK’s primary Cold War
patron) and Beijing. When Chinese support waned in the mid-1990s, North Korea
opportunistically turned to other outsiders, including Taiwan, for aid, particularly as it was
wracked by a devastating famine. For the decade prior to 2008, left-of-center governments in
Seoul under what was called the “Sunshine Policy,” provided considerable economic assistance
and diplomatic support for Pyongyang. Since the mid-1990s, North Korea has episodically
reached out to the United States as an important source of food aid and energy assistance. Japan
also was moving toward normalizing relations with the DPRK and providing North Korea with a
large cash settlement until the issue of Japanese citizens abducted by the North Korean
intelligence service derailed the talks in late 2004 and halted bilateral aid and trade. Indeed, since
late 2008 the degree to which China has emerged as North Korea’s dominant trade and aid partner
is unusual.
For China, the DPRK’s nuclear program has added a new dimension to bilateral relations and to
the strategic situation in the region. When the DPRK tested a ballistic missile and its second
nuclear weapon in April-May 2009, many believe it crossed a threshold with China. Until that
time, Pyongyang apparently had convinced Beijing that it was pursuing its nuclear activity
primarily as a bargaining chip in negotiations with the United States and other countries.
Following the May nuclear test and subsequent statements by North Korean leaders, it became
apparent that not only had Pyongyang been deceitful in its assurances to Beijing but that the
DPRK never intended to relinquish its nuclear weapon programs and its goal was to become a
recognized nuclear weapon state. Suddenly, China’s attitude toward the DPRK shifted and two of
Beijing’s goals with respect to the DPRK came into sharper focus—denuclearization and stability
on the Korean peninsula. Denuclearization likely would not occur, and sanctions resulting from
the nuclear activity potentially could destabilize the North Korean economy.
China’s role in hosting the Six Party Talks (6PT) creates a delicate balancing act for Beijing with
respect to its relations with the DPRK. Although denuclearization of the Korean peninsula would
be desirable for China, Beijing fully recognizes Pyongyang’s security situation and perception
that it is completely surrounded by nuclear powers or countries under the U.S. nuclear umbrella
and that South Korea, Japan, and the United States are “hostile” powers. Aside from the 6PT,
however, Beijing appears to be focusing on its primary interests of stability and regime
preservation in Pyongyang and preferring that the United States and other parties in the talks take
the lead on denuclearization. Beijing has been encouraging the United States to negotiate the
nuclear issue on a bilateral basis, although China also has encouraged the DPRK to return to the
6PT in 2010.
As an example of the mixture of interests and actions by Beijing, when China supported U.N.
Resolution 1874 condemning the DPRK’s nuclear test, Beijing insisted on certain provisions to
protect its fundamental interests of peace and stability on the Korean peninsula and preventing the
creation of a unified North and South Korea that might destroy its buffer zone with South Korea
or bring a less friendly, U.S. ally up to its border. In voting in favor of Resolution 1874, the
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Chinese representative Zhang Yesui stressed that the sovereignty, territorial integrity and
legitimate security concerns and development interests of the DPRK should be respected and that
after its return to the Nuclear Non-Proliferation Treaty, the DPRK would enjoy the right to the
peaceful use of nuclear energy as a State party. The Chinese representative also said that the
Security Council’s actions should not adversely impact the country’s development or
humanitarian assistance to it, and that as indicated in the text of the resolution, if the DPRK
complied with the relevant provisions, the Council would review the appropriateness of
suspending or lifting the measures. He also emphasized that under no circumstances should there
be use of force or threat of use of force.25 China may ease enforcement of the U.N. sanctions if
the DPRK returns to the 6PT.
As the resolution led to a tightening of sanctions and to some high-profile interdictions or
attempts to interdict shipments of suspected cargo bound to or from the DPRK, Pyongyang went
on a diplomatic offensive not only with countries of the West but with China. On October 4,
2009, the sixtieth anniversary of diplomatic relations between China and the DPRK, Chinese
Premier Wen Jiabao made a “goodwill trip” to Pyongyang, the first by a Chinese Premier in
eighteen years. He was accompanied by a large delegation of high ranking officials. Both
countries vowed to support each other and signed several documents including an agreement on
economic and technological cooperation.26 Wen also offered to expand and strengthen economic
cooperation and exchange, and the two sides reached a consensus to proceed with construction of
a new bridge over the Yalu (Amnok) River between their two countries (estimated to cost over
$150 million).27 In addition, Wen reportedly offered an economic cooperation package worth
another $50 million.28 In November 2009, a Chinese-language website reported that China is
planning a major new development zone called the Tonghua-Dandong Economic Zone, along the
North Korean border aimed at boosting trade. This zone is to include the rebuilt bridge, a new
port, a duty-free zone, warehouses, and international transit facilities. It is to cover about 350 km
or most of the Western half of the Sino-DPRK border.29
On November 23, 2009, Chinese Defense Minister Liang Guanglie visited Pyongyang, the first
defense chief to visit since 2006. This was the initial stop on a three-nation Asian tour that
included Japan and Thailand.30 The main objective of Minister Liang’s DPRK visit reportedly
was to bring “closer friendly exchanges between the Chinese and DPRK armed forces and
promote exchanges and cooperation between the people and armies of the two countries.”
25 UN Security Council Statement, SC/9679, June 12, 2009.
26 Signed at the ceremony were the “Protocol on the Adjustment of Treaties Between the Governments of the DPRK
and China” and the “Agreement on Economic and Technological Cooperation Between the Governments of the DPRK
and China,” exchange documents on economic assistance and other agreed documents in the field of economy, an
accord on exchange and cooperation between educational organs of the two countries, a memorandum of understanding
(MOU) on exchange and cooperation in the field of software industry and a protocol on common inspection of export
and import goods between the state quality control organs of the two countries, a MOU on tour of the DPRK sponsored
by the tourist organizations of China and an accord on strengthening the cooperation in protecting wild animals.
Agreement and Agreed Documents Signed between DPRK, Chinese Government, October 4, 2009, Korea Central News
Agency of the DPRK.
27 Korea Central News Agency of DPRK, Talks Held between DPRK and Chinese Premiers, October 4, 2009.
28 “China Brings Lavish Gifts to N. Korea,” The Chosun Ilbo, October 7, 2009, The English Chosun, Internet edition.
29 Michael Rank, “China Approves Tumen Border Development Zone,” North Korean Economy Watch, November 23,
2009, Archive for the ‘Tonghua-Dandong Economic Zone’ Category.
30 Associated Press, “China’s defense minister travels to North Korea,” The China Post, November 23, 2009.
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Denuclearization was not an announced goal of the visit.31 On November 17, North Korean
General Kim Jong-gak, the first vice director of the General Political Bureau and an influential
leader in the North Korean Army, visited Beijing. These military exchanges reversed the split
between the armies of the two countries after military-to-military ties were virtually severed in
the late 1950s when Kim Il-sung conducted a mass purge of the so-called pro-Chinese “Yanan
faction” in the North Korean military. After the May nuclear test, it became apparent that the
influence of the military on DPRK policy had grown, and China apparently felt the need to re-
establish communication channels with the North Korean military.32 It also must be apparent to
Pyongyang that its alliance relationship with China is not nearly as operational as the U.S.
alliance with South Korea and that strengthened military ties with China are crucial as it seeks to
increase its security.
In early 2010, there was speculation that Kim Jong-il might visit China for the fifth time. Kim
had gone to China in 2000, 2001, 2004, and 2006,33 so more than three years had passed since his
last visit. When Chinese Premier Wen Jiabao met with Kim Jong-il in October 2009, he
reportedly invited Kim to visit China again.
Economic Relations
China, with its huge economy and rapid rate of growth, plays a large role in supporting and
reforming the DPRK economy. For several years, Beijing has been trying to induce the DPRK to
undertake economic reforms similar to those pursued by China over the past quarter century. The
rise of markets and other “reforms” that have occurred in North Korea, however, have resulted
primarily from a “bottom up” process and from necessity as the central government faltered on its
ability to deliver food and living essentials through its distribution system. Still, inflows of
consumer goods from China and an increasing number of cooperative industrial projects,
primarily in the Northern Korean provinces, have created a market-based means of generating
income and distributing goods to families. North Korea’s leaders have displayed mixed reactions
to this Chinese penetration into their economy and the concomitant spread of private markets.
These market activities not only carry negative strategic ramifications (challenges to North
Korea’s philosophy of self reliance and to North Korean socialism), but, more importantly, such
Chinese-style capitalism and influx of consumer goods could have a potentially corrosive effect
upon the level of control the Kim regime has over the lives of individuals.
In late 2009, the DPRK government carried out a currency reform that actually amounted to a
confiscation of wealth by the central government and an attack on Chinese-style markets. Much
of the wealth that became worthless had been accumulated by “illegal” merchants and traders
through their activity on private markets. Under the currency reform, the government issued new
currency denominated in amounts one-hundreth of those on the old currency. An old 1,000 won
note could be exchanged for 10 won in new notes. Introduced ostensibly to control inflation, the
catch was that the amount that households could exchange was limited initially to about $40 (later
raised to about $200). Holdings of foreign exchange also were prohibited, so the currency
31 Liu Yantang, Yuan Yuan, and Sun Xiali, “Military Diplomacy Creates a Peaceful Periphery (carried in Open Source
as PRC Experts Examine China’s Military Diplomacy With DPRK, Japan, Thailand ,” Liaowang, November 30, 2009,
In Chinese, translated by Open Source, Document CPP20091209710009.
32 “Chinese Defense Minister Pledges Loyalty in N.Korea,” November 24, 2009, English Chosun Ilbo.
33 “Unification Minister Seeks Central Role in Ties with N.Korea ,” English Chosun Ilbo, January 9, 2010, Internet
edition.
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exchange effectively became a device to confiscate wealth, much of it earned by buying goods in
China and selling them in North Korean markets.34 This currency reform amounted to a rebuke,
not only of the North Koreans who had accumulated wealth through private markets but of China
who had been encouraging market-oriented reforms similar to those undertaken by Beijing.
China has become North Korea’s lifeline in its economic relations with the outside world. China
is the DPRK’s main supplier of food and energy, two strategic commodities crucial to the health
of the North Korean economy. China also has become a critical player in the implementation of
economic sanctions on the DPRK. In 2008, China provided about half of all North Korean
imports and received a quarter of its exports. North Korea’s trade with South Korea also has been
significant, but much of this can be attributed to South Korean firms that send raw materials and
components to their subsidiaries in the Kaesong Industrial Complex and ship the final products
back to South Korea.35
Since the collapse of the Soviet Union, China has been the DPRK’s largest trading partner and
supplier of concessional assistance (through subsidized trade and direct transfers). As an export
market and source of imports, however, North Korea plays a relatively minor role for China. In
2008, the DPRK ranked 64th among China’s export markets—smaller than Peru, Egypt, or
Hungary. As a source of imports, North Korea ranked 70th—below Gabon, Yemen, or Belgium.
As shown in Table 1, Sino-DPRK trade has been rising steadily. While such trade is dwarfed by
China’s trade with countries such as South Korea (total bilateral trade of $186 billion in 2008),
both imports from and exports to the DPRK have increased significantly over the past decade.
The bilateral trade is highly imbalanced with China generating a sizable surplus in its trade with
North Korea.
34 For details, see: Stephan Haggard and Marcus Noland, The Winter of Their Discontent: Pyongyang Attacks the
Market, Peterson Institute for International Economics, Policy Brief Number PB10-1, Washington, DC, January 2010.
35 This trade essentially consists of shipments of raw materials and components from South Korea to an industrial zone
in North Korea and the return of finished products from the zone to South Korea. For details, see CRS Report
RL34093, The Kaesong North-South Korean Industrial Complex, by Dick K. Nanto and Mark E. Manyin.
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Table 1. China’s Merchandise Trade with the DPRK, 1995-2008
($ in millions)
Year China’s Imports China’s Exports
Total Trade
China’s Balance
1995 63.609 486.037 549.646 422.428
1996 68.638 497.014 565.652 428.376
1997 121.610 534.411 656.021 412.801
1998 51.089 356.661 407.750 305.572
1999 41.722 328.634 370.356 286.912
2000 37.214 450.839 488.053 413.625
2001 166.797 570.660 737.457 403.863
2002 270.863 467.309 738.172 196.446
2003 395.546 627.995
1,023.541 232.449
2004 582.193 794.525
1,376.718 212.332
2005
496.511 1,084.723 1,581.234 588.212
2006
467.718 1,231.886 1,699.604 764.168
2007
581.521 1,392.453 1,973.974 810.932
2008
754.045 2,033.233 2,787.278 1,279.188
Sources: Chinese (PRC excluding Hong Kong and Macau) data as supplied by World Trade Atlas.
As shown in Table 2, in 2008 North Korea exported an estimated total of $2,801 million in
merchandise (up from $2,535 million in 2007) while importing $4,127 million (up from $3,437
million in 2007).36 This created an apparent merchandise trade deficit of $1,326 million (up from
$901 million in 2007).37 Imports from China, in particular, rose 46% from $1,393 million in 2007
to $2,033 million in 2008. North Korean exports to China of $754 million in 2008, generated a
trade deficit with China of $1,279 million. If South Korean exports to and imports from the
Kaesong Industrial Complex just across the border in North Korea are not counted, the vast
majority of North Korean trade is with China. Economic sanctions imposed by Japan and the
United States have reduced their respective trade with the DPRK to almost nothing except for
intermittent humanitarian aid.
36 Indian imports from North Korea as reported seem in error. (Items such as electrical machinery and parts, in
particular, likely actually were imported from South Korea.) After comparing reported Indian data with that for China,
2006 imports by India from North Korea of $475 million were reduced to $9 million, and 2007 imports of $173 million
were reduced to $41 million. Likewise for Indian exports of petroleum products and organic chemicals reported as
going to North Korea likely went to South Korea. (South Korea’s reported imports of such products from India are
considerably less than the reported India exports to South Korea.) Indian export data for 2004-2008, therefore, exclude
HTS categories 27 and 29.
37 The South Korea Trade-Investment Promotion Agency (KOTRA) has estimated that in 2008, North Korea exported
$1,130 million while importing $2,685 million for a trade deficit of $1,555 million. The KOTRA data, however,
exclude data for about 60 developing countries and do not include South Korean trade with the DPRK.
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Table 2. Estimated North Korean Trade by Selected Trading Partner
($ in millions)
North Korean Exports
2000
2001
2002
2003
2004
2005
2006
2007
2008
World 1,319 1,171 1,291 1,266 1,561 1,568 1,909 2,535 2,801
China
37 167 271 395 586 499 468 584
754
Japan
257 226 235 174 164 132 78
0
0
S.
Korea 152 176 272 289 258 340 520 765
930
Russia
8 15 10 3 5 7 20 34 14
India
20 3 5 1 4 8 9 41 116
Thailand 20 24 44 51 91 133 168 36
29
Germany 25 23 29 24 22 45 17 16
21
North Korean Imports
2000
2001
2002
2003
2004
2005
2006
2007
2008
World 1,859 3,086 1,973 2,051 2,616 3,388 2,908 3,437 4,127
China
451 573 468 628 799
1,081 1,232 1,393 2,033
Japan 207
1,066 133 92 89 62 44 9
8
S.
Korea 273 227 370 435 439 715 830 1,032 888
Russia
38 62 69 111 205 206 190 126
97
India
158 170 145 105 167 38 33 41
40
Thailand 189 106 172 204 239 207 216 184
48
Germany 53 80 139 71 68 63 63 34 31
Balance
-540
-1,915
-682
-785
-1,055
-1,820
-999
-901
-1,326
of Trade
Source: S. Korean data from S. Korea, Unification Ministry. Other country data from Global Trade Atlas and
U.N. COMTRADE Database. World trade data from U.N. COMTRADE Database, accessed via U.S. Department
of Commerce, Trade Policy Information System. World trade totals are mirror data derived from U.N. reporter
country trade with North Korea plus inter-Korean trade reported by South Korea, adjusted Indian data for 2006
and 2007, plus Taiwan’s trade with North Korea.
Note: Figures are nominal and not adjusted for inflation.
In 2008, China’s major imports from North Korea included ores, mineral fuels (coal), iron and
steel, woven apparel, fish and seafood, and salt/sulfur/earths/stone. China’s major exports to
North Korea include mineral fuels and oil, electrical machinery, machinery, knit apparel, plastic,
vehicles, man-made filament, and iron and steel.
A recent development has been North Korea’s increase in exports of primary products (such as
fish, shellfish and agro-forest products) as well as mineral products (such as base metallic
minerals). Pyongyang reportedly has imported aquaculture technology (mainly from China) to
increase production of cultivated fish and agricultural equipment to increase output of grains and
livestock. It also has imported equipment for its coal and mineral mines. Much of the coal and
mineral exports have resulted from partnering with Chinese firms through which the Chinese side
provides modern equipment in exchange for a supply of the product being mined or
manufactured.
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China is a major source for North Korean imports of petroleum. According to Chinese data, in
2008, exports to the DPRK of crude oil reached $414 million, and exports of oil (not crude)
totaled $120 million. Total exports of mineral fuel oil of $585 million accounted for 29% of all
Chinese exports to the DPRK. China, however, does not appear to be selling this oil to North
Korea at concessionary prices. In 2008, the average price for Chinese exports of crude oil to
North Korea was $0.78 per kilogram, while it was $0.71 for such exports to the United States,
$0.66 for South Korea, $0.81 for Japan, and $0.50 for Thailand.38
China also provides aid directly to Pyongyang. By bypassing the United Nations, China is able to
use its assistance to pursue its own political goals independently of the goals of other countries. It
is widely believed that some Chinese food aid is taken by the DPRK military. This allows the
World Food Program’s food aid to be targeted at the general population without risk that the
military-first policy or regime stability would be undermined by foreign aid policies of other
countries.39
China is the largest foreign direct investor in North Korea (not counting South Korean investment
in the Kaesong Industrial Complex). In 2007, the total foreign direct investment (FDI) into the
DPRK reported to the United Nations amounted to $67 million (excludes investment from South
Korea). Of this, China supplied $18.4 million. In 2008, of a total of $44 million, China supplied
$41.2 million.
Chinese companies have made major investments aimed at developing mineral resources located
in the northern region of the DPRK. This is part of a Chinese strategy of stabilizing the border
region with the DPRK, lessening the pressure on North Koreans to migrate to China, and raising
the general standard of living in the DPRK. Some of the Chinese investment include:40
• China Tonghua Iron and Steel Group (a state owned but partially privatized
enterprise) has invested 7 billion yuan (approximately $875 million) in
developing the DPRK’s Musan Iron Mine, the largest open-cut iron mine in Asia
with verified iron-rich ore reserves reaching seven billion tons.
• China’s Tangshan Iron and Steel Company (Hong Kong capital) is building a
steel smelting plant in the DPRK with an annual steel output of 1.5 million tons.
It is to be jointly funded by the DPRK side and is to involve joint development
and utilization of nearby iron ore.
• The China Iron and Steel Group (joint stock enterprise) reportedly is developing
a molybdenum mine in the DPRK with a goal of producing more than 10,000
tons of molybdenum concentrate per year.
• China’s Jilin Province also has cooperated with the Hyesan Youth Copper Mine,
Manp’o Zinc and Lead Mine, and the Hoeryo’ng Gold Mine in the DPRK. One
project is to transmit electricity from Jilin’s Changbai County to the DPRK in
38 Average price calculated by World Trade Atlas using Chinese trade statistics.
39 Babson, Bradley O. Towards a Peaceful Resolution with North Korea: Crafting a New International Engagement
Framework Paper presented at a conference sponsored by the American Enterprise Institute, Korea Economic Institute,
and Korea Institute for International Economic Policy, Washington, DC, February 12-13, 2004.
40 Shanghai Northeast Asia Investment & Consultancy Company. A Study Report on the DPRK Mineral Resources.
Shanghai Northeast Asian Forum website, in Chinese, December 7, 2007. Reported by Open Source Center, document
#KPP20080123032002.
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exchange for the gold, copper, and other ores. In 2007, the Luanhe Industrial
Group and another unnamed Chinese privately owned company took a 51%
controlling interest in Hyesan Youth Copper Mine.41
• China’s Heshi Industry and Trade Company (a private company) along with the
International Mining Company have set up a joint venture with the DPRK’s
So’gyo’ng 4 Trade Company called the “DPRK-China International Mining
Company.”
• China Minmetals (State controlled enterprise) established a joint venture for
mining coal with the DPRK at the Ryongdu’ng Coal Mine.
• China’s Zhaoyuan Shandong Guoda Gold Stockholding Company and the DPRK
Committee for the Promotion of External Economic Cooperation have
established a joint venture mining company to mine the gold in the DPRK’s Mt.
Sangnong and to ship all the mined gold concentrate to Zhaoyuan for smelting.
China and Economic Sanctions
In 2006, Pyongyang’s missile and nuclear tests severely strained relations between China and the
DPRK. Beijing had warned the DPRK not to conduct either of the tests and “lost face” when
Pyongyang went ahead with them anyway. As a result, for the first time China agreed to U.N.
resolutions imposing sanctions on the DPRK42 and also took measures to halt banking
transactions with certain North Korean entities and temporarily curtail shipments of petroleum.
China, however, did not agree to conduct inspections of shipments along its borders with North
Korea. After North Korea’s long-range missile test in April 2009, China agreed to stronger U.N.
sanctions on three North Korean companies. Following North Korea’s second nuclear test in May
2009, China issued a strong statement of condemnation and in June 2009 backed U.N. Security
Council Resolution 1874 that provided for additional sanctions on the DPRK that included:
• an arms embargo (which also encompasses a ban on related financial
transactions, technical training or services), with the exception of the provision
by States to the DPRK of small arms and light weapons and their related
materiel, on which States are required to notify the Committee43 in advance;
• an embargo on items related to nuclear, ballistic missiles and other weapons of
mass destruction programs;44
• a ban on the export of luxury goods to the DPRK; and individual targeted
sanctions—namely, a travel ban and/or an assets freeze on designated persons
and entities.
Data on China’s exports of arms to North Korea are generally not available. However, China does
report its trade in small arms and bombs/grenades/cartridges with the DPRK. As shown in Table
41 John C. Wu, The Mineral Industry of North Korea, in U.S. Department of the Interior, U.S. Geological Survey, 2007
Minerals Yearbook, North Korea [advance Release], Washington, DC, September 2008.
42 See UN Security Council Resolution 1718, October 14, 2006.
43 The UN Security Council Committee established pursuant to resolution 1718 (2006).
44 A list of items under embargo can be found at http://www.un.org/sc/committees/1718/xportimport_list.shtml.
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3, China’s exports of small arms and ammunition reached $3.5 million in 1996 and $2.85 million
in 1999, but they have been fairly insignificant since then.
Table 3. China’s Reported Exports of Small Arms to the DPRK
(in U.S. Dol ars)
Other
Bombs,
Total Arms
Sport
Arms
Grenades.
and
Military
Revolvers
Shotguns
and
Cartridges
Ammunition
Weapons
& Pistols
& Rifles
Parts
& Parts
1995
996,140
391,500 99,000 140,800 158,000
206,840
1996
3,460,669 1,049,500 67,680 117,228 11,080
2,187,461
1997
1,180,600
0
0
94,000
0 1,086,600
1998
383,717
0
0
0
0
383,717
1999
2,850,140
0
0
2,379,600
0
470,540
2000
151,800
0
0
97,200
35,850
18,750
2001
0
0
0
0
0
0
2002
0
0
0
0
0
0
2003
0
0
0
0
0
0
2004
63,174
0
0
0
0
63,174
2005
0
0
0
0
0
0
2006
26,100
0
0
0
0
26,100
2007
20,000
0
0
0
0
20,000
2008
27,800
0
0
0
0
27,800
Source: Chinese data downloaded through Global Trade Atlas, December 17, 2009.
Notes: Harmonized Tariff System Codes 93 (Total) and 9301, 9302, 9303, 9304 + 9305, and 9306, respectively.
As for trade in items, materials, equipment, goods and technology related to nuclear and ballistic
missiles and other weapons of mass destruction, the list of such exports covers more than 70
pages and is in considerable detail. China, however, has cooperated with the U.N. Sanctions by
cancelling a joint venture with North Korea to produce vanadium (used to toughen steel alloys
used in missile casings) and has intercepted a shipment of 70 kilograms of vanadium hidden in a
truckload of fruit crossing the border into North Korea.45
In 2008, China exported an estimated $100 million to $160 million in sanctioned luxury goods.46
Figure 1 shows China’s monthly exports of luxury goods prohibited under the U.N. Resolutions.
The resolutions did not specify exactly which Harmonized System trade categories were affected.
Therefore, the list of banned items in Figure 1 was generated using the Harmonized System
categories that appear to match most closely those categories listed by the U.S. Department of
Commerce and European countries in their export control orders. The figure indicates that the ban
45 “China foils smuggling of missile-use material to North Korea,” Chosun Ilbo, July 25, 2009, Internet edition.
46 CRS Report R40684, North Korea’s Second Nuclear Test: Implications of U.N. Security Council Resolution 1874,
coordinated by Mary Beth Nikitin and Mark E. Manyin, p. 6, Appendix.
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has had little effect on China’s exports of luxury goods to the DPRK. Following both UN
resolutions, such exports continued to rise with some month-to-month fluctuations. Note that the
food and beverage category includes only luxury food items such as prepared beef, caviar,
crab/lobster/shellfish, and alcoholic beverages. It also is apparent from the figure, that Pyongyang
seems to go on a buying spree for luxury goods in December, possibly in preparation for
celebrations and gift giving associated with the New Year. Chinese exports of luxury goods to the
DPRK averaged around $11 million per month in 2009, while total Chinese exports to the DPRK
have been in the range of $100 to $200 million per month.
Figure 1. China’s Exports of Banned Luxury Items to the DPRK
$Millions
60
UN Resolution
UN Resolution
1718
1874
50
$50.4 million in Dec. 2008 Includes:
Leather Goods $16.6 million
40
Articles of Fur 6.3 million
Crustaceans,Shellfish 5.7 million
Exercise/Pool Equip. 4.6 million
Motor Vehicles 4.5 million
Tobacco 3.0 million
Fountain Pens 2.0 million
30
Precious Stones 1.8 million
TVs, Proj ectors 1.5 million
20
Other
Motor Vehicles
Computers,Video
10
& TV Equip.
Leather & Apparel
Tobacco
Luxury Food &
0
Bev erages
7/2005
12/05
6/06
12/06
6/07
12/07
6/08
12/08
6/09
11/09
Month/Year
Source: Congressional Research Service using Chinese data accessed through Global Trade Atlas.
Notes: Includes Harmonized Tariff System categories corresponding closely to lists of prohibited luxury goods
by the U.S. Department of Commerce and the United Kingdom. The lists of banned products are not specific
and are not accompanied by HTS (Harmonized Tariff System) codes.
It is possible that China views sanctions on exports of luxury goods as “unenforceable,” since
such goods can be bought on the open market by North Korean traders (and their representatives)
who are engaged in buying a variety of other consumer goods from wholesale and retail outlets.
China also may be focusing its efforts on large, security related items rather than luxury goods.
However, China’s approval of U.N. Resolution 1874 implies that as a country it is committed to
enforcing all aspects of the resolution, including the ban on exports of luxury goods.
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Author Contact Information
Dick K. Nanto
Kerry Dumbaugh
Specialist in Industry and Trade
Specialist in Asian Affairs
dnanto@crs.loc.gov, 7-7754
,
Mark E. Manyin
Specialist in Asian Affairs
mmanyin@crs.loc.gov, 7-7653
Congressional Research Service
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