Why China is reluctant to apply pressure on Pyongyang
By Richard McGregor and Anna Fifield
Financial Times
July 24, 2006In the tense aftermath of North Korea’s missile tests this month, an official of the reclusive state travelled to Beijing to meet Hu Jintao – a chance, one might have thought, for a robust exchange of views in the midst of a diplomatic storm.
But his encounter with China’s president unfolded in an almost surreal fashion. Yang Hyong-sop, a vice-president of North Korea’s parliament, was shown on Chinese television sitting stiffly in an over-stuffed armchair, straining to read from a piece of paper held high in both hands. Mr Hu, while calling for peace and stability on the Korean peninsula, did not use the word “missile” once.
North Korea’s test-firing of seven missiles provoked a flood of familiar demands from around the world that China, its fraternal neighbour and main source of energy and food, “fix” the problem. But such calls rest on the assumption that Beijing has the ability to change Pyongyang’s behaviour and is willing to use its leverage.
“Can China say jump and make North Korea jump? I don’t think they can,” says a Beijing-based diplomat. Many Chinese academics agree. “My basic assessment [of China’s influence] is: not that much,” says Jin Linbo, of the China Institute of International Studies in Beijing.
Beijing won global kudos in September when it persuaded Pyongyang to return to the so-called six-party talks, also involving the US, Russia, Japan and South Korea, to persuade it to drop its nuclear programme. Beijing’s success bolstered the view, once held with especially great conviction in parts of the Washington political establishment, that China held the key to resolving the nuclear issue.
But Pyongyang’s defiance over the missile tests and the frustrating nuclear negotiations – now suspended and once again awaiting North Korea’s return to the table – have been a sobering reminder of a more complex reality.
Like the US and Japan, China is opposed to North Korea gaining nuclear weapons, but it is an objective Beijing weighs against its other interests on the peninsula, to maintain the status quo and avoid instability on its borders. Beijing is conscious that any attempt to bring North Korea to heel would be risky: a paranoid Pyongyang could turn against its neighbour and deprive China of a vital buffer between it and South Korea, which is still host to about 27,000 US troops.
“When push comes to shove the difficulty that the Chinese have is related to a classic North Korean tactic – creating leverage out of weakness,” says Scott Snyder, a Korea expert at the Asia Foundation currently at Stanford University. “The difficulty with the Chinese situation is that the means they have to try to use their leverage is also something that if not handled carefully can be used against them,” he says. “The Chinese fear is ‘what if Kim Jong-il does go and do something crazy and collapses on us?’ And the North Koreans probably have ideas about what they could do to escalate that [fear] further.”
In China itself, North Korea’s recalcitrance is aggravating but comes as no surprise. The missile tests, conducted despite Chinese objections, and the frosty diplomatic encounters in their aftermath, provide fresh evidence of what has long been a wary, difficult relationship. “China does not expect North Korea to do so much – it knows the limits of the special situation on the Korean peninsula,” says Mr Jin.
On the face of it, such an assessment seems strange, as North Korea’s dependence on China has grown exponentially in recent years – the result of increasing international isolation, dwindling support from Russia after the collapse of the Soviet Union, and devastating floods and famine in the 1990s.
North Korea’s trade with the outside world is estimated to have reached $4bn last year, with China accounting for $1.58bn of that, according to the Korea International Trade Association in Seoul. The Bank of Korea, the South’s central bank, estimates that China accounts for 77 per cent of the growth in North Korea’s trade volumes since 2000. Without this, North Korea would probably have recorded negative growth rather than its annual average of about 2.1 per cent.
Chinese products worth $1.1bn flowed into North Korea last year, and made-in-China goods now make up almost 80 per cent of goods on sale in North Korean markets. North Korea is running a $500m trade deficit with its giant neighbour, which is probably accounted for as energy and food subsidies, economists say. Chinese food aid overseas soared by 260 per cent year-on-year in 2005, with nearly all the growth coming from cereal shipments to North Korea.
“What are the Chinese getting in return?” asks Marcus Noland of the Institute for International Economics in Washington. “In almost every case the North Koreans are supplying natural resources – mainly low-grade coking coal and iron ore, but also ginseng and marine products like sea urchins.”
“China is so resource-hungry and is the midst of such a commodity boom that even low-grade North Korean iron ore is worth something, it can be swapped for a bunch of used radios and TVs,” Mr Noland says.
Meanwhile, Chinese investment in North Korea dramatically increased from $1.3m in 2003 to $90m in 2005, accounting for about 85 per cent of all foreign investment. Most of it comes from ostensibly private companies, although many analysts say the majority are at least partially state-owned. A recent International Crisis Group report estimated that more than 150 Chinese companies had started operating in or trading with North Korea since 2003.
China is steadily trying to encourage trading at border cities, particularly over the “friendship bridge” between Dandong and Sinuiju at the western end of the border. After Mr Kim’s visit to China in January, there have been increasing signs that the Sinuiju Special Administrative Region project, frozen in 2002, is starting up again. Under the direction of central authorities, Pyongyang loyalists and foreign currency management groups are rapidly being moved into Sinuiju, one of a number of economic zones in North Korea designed to attract foreign investment while quarantining it safely in a small part of the country.
In the east, North Korea has been working with China and Russia to create a 10 sq km free-trade region in the Hunchun area, giving China access to the sea through the North Korean city of Rajin. A 50/50 Chinese/North Korean joint venture, the “Green Pathway” project is expected to cost about $77m and construction on a road has begun.
China, in short, has become North Korea’s economic lifeline, but such patronage has not translated into instant political clout. And nor does Beijing seem willing to test too strenuously the limits of its influence.
North Korea’s reliance on China is “very, very high”, says Cho Myung-chul, who taught economics at Kim Il-sung University in Pyongyang before escaping to South Korea, where he now works at the Korea Institute for International Economic Policy.
“The US and Japan and others are saying that China should exert more influence over North Korea, but China is not that type of nation and has no experience or history of doing so,” Mr Cho says. China’s foreign policy was founded on the principle of “non-interference” in other states, something that has been bent in the past decade but not ditched altogether. Beijing believes the principle has served it well in repelling criticism of it by the west.
China and North Korea have long been fond of saying the two countries are “as close as lips and teeth”, but such rhetoric masks a much more tense history. Kim Il-sung, Kim Jong-il’s father, always played the Soviet Union and China off against one another. In the early nineties, North Korea’s xenophobic siege mentality, a feature of the regime since its birth, was accentuated by Beijing’s decision to establish diplomatic ties with Seoul. China’s willingness to push ahead with market reforms also grated with its determinedly Stalinist neighbour.
“North Korea’s media criticised China in a big way. They were very unhappy,” says Li Duanqiu, a North Korean expert in Beijing. “They were trying to completely negate the benefits of Chinese economic reform.”
Mr Cho, the economist, says North Koreans are generally distrustful of their larger neighbour. “Historical factors are one reason but also, the goals of the two countries are different – they are two different countries that need to cope with different national interests, so their foreign strategy is also different,” Mr Cho says. “So North Koreans feel that they cannot completely trust China.”
Pyongyang’s record on economic reform alone is evidence enough of the limits of China’s influence. For two decades, China has offered itself as an example of a single-party state with a thriving market economy and urged its neighbour to follow, but North Korea spurned such reforms. “I used to speak with them about China’s reforms but they didn’t want to listen,” says Cui Yingjiu, a retired Beijing professor who studied economics with Kim Jong-il in Pyongyang in the 1960s.
Mr Cui and other Chinese academics detected a change in North Korea’s attitude in the late 1990s, following the country’s famine. Kim Jong-il’s trip to a dazzling Shanghai in 2001 also influenced his thinking on the economy, they say, but only at the margins.
In July 2002, North Korea finally introduced some tentative market-based principles into its economy, allowing a degree of price and wage flexibility, permitting markets to expand and devolving management decisions to state companies.
Such changes require agile political and economic management, of the kind that China has displayed for decades but North Korea has not. As a result, the most obvious impact of these reforms has been triple-digit inflation and even wider social disparities, without a corresponding wealth effect.
Kim Jong-il’s foremost political skill remains playing a weak diplomatic hand to maximum effect. In the same way that he does with the west, Kim Jong-il has cultivated uncertainty and an element of distrust in his ties with China to keep his neighbour off-balance. Such behaviour ensures that the supplies of oil and food continue to flow across the border, whatever else he may do.
China still worries about the worst-case scenario: that North Korea could collapse and leave Beijing with a costly, destabilising refugee problem. It is a fear that Kim Jong-il is happy to nurture and it seems to have effectively kept China at bay, regardless of what the US or Japan might think Beijing could or should do.
The danger for Beijing is that Kim Jong-il might unilaterally change the status quo that it has struggled so hard to maintain. When that moment comes, China might be finally left with no choice but to take on its troublesome neighbour.