North Korean Economy Watch

Andrei Lankov writes in the Korea Times:

So after months of rumors and a couple of false reports, Kim Jong-il finally departed for China. This time his visit produced a palpable irritation in Seoul. Suspicions about Pyongyang’s involvement in the Cheonan disaster are mounting, so some South Korean politicians saw China’s willingness to invite the North Korean leader as a sign of tacit support for Pyongyang’s policy. This led to an outpour of critical statements, which are certain to have no impact on China’s actions, of course.

To start with, China ― in spite of all rhetoric of “eternal friendship” ― is no admirer of Kim Jong-il’s regime and is frequently annoyed by the North Korean antics. China does not want Pyongyang to go nuclear, since nuclear proliferation threatens China’s own privileged position of a “legitimate” nuclear power. China also worries that North Korea’s nuclear program might trigger a nuclear arms race in East Asia, producing a nuclear Japan and perhaps, a nuclear Taiwan. Moreover, China rightly sees the North Korean economic system as irrational and wasteful.

Nonetheless, China supports North Korea. Throughout the past few years when South Korean and U.S. aid dried up, famine in North Korea was prevented, above all, by free or subsidized shipments of grain from China. China is the largest investor in and trading partner of North Korea. Why do Chinese continue to invest money into supporting the regime which they do not particularly like and do not see as their reliable ally?

From time to time some people in Washington and Seoul express their hope that China can be somehow persuaded to stop its support of the North or to use its supposed leverage to influence Pyongyang policy (like, say, pressing North Korea into denuclearization). After the second North Korean nuclear test in 2009, China chose to support the U.N. sanctions and there were statements that China finally was “in the same boat as the United States.” Alas, this is wishful thinking. China is not in the same boat, and will never be. There are good reasons why China supports the North, and these reasons are likely to remain valid for the foreseeable future.

Yes, China does not want a country in its neighborhood to acquire nuclear weapons. Neither it is happy about military provocations of any kind. However, there are two other concerns which are far more important for China to keep the region stable and to keep Korea divided.

Stability is a keyword for the Chinese policy. China concentrates on economic growth and needs a peaceful and predictable environment in order not to be distracted from this goal. Hence, any crisis in the vicinity of China is an anathema for the Chinese strategists and should be avoided at all cost.

Another, arguably less important, goal is to keep Korea divided. Taken into consideration the current balance of power, unification is likely to lead to absorption of the impoverished North by the rich South. For China it might mean the emergence of a stronger U.S. ally ― or, at least, another “unruly democracy” ― right on its border. China can survive such a turn of events, to be sure, but it would prefer to maintain North Korea as a strategic buffer zone.

Alas, in order to really influence North Korea’s behavior, one has to play hardball. Subtle measures will not work, since the North Korean government does not care that much about economy or even about survival of its own population. In order to have an impact, China would have to virtually close the border completely and stop all trade with the North. A senior South Korean diplomat described this problem in a private conversation by a good allegory: “China does not have leverage when it comes to dealing with the North. What China has is a hammer.”

But China must have a mighty good reason to wield this hammer since such extreme pressure can easily lead to a system collapse. This collapse will make the situation very volatile. Crowds of refugees, the nuclear weapons and material getting to the black market, numerous diplomatic complications ― those are not the problems China is eager to deal with. Finally, collapse is likely to produce a unified Korea which is not China’s most preferable outcome.

Therefore, China prefers to spend some resources keeping the North Korean regime afloat in order to maintain the status quo and prevent or, at least, postpone a major crisis. It also wants to minimize the risk of North Korea being involved in excessively dangerous actions, but this goal is of secondary importance.

At all probability, this time we will see another repetition of the old game. Chinese will insist that North Korea should come back to the six-party talks (Beijing’s pet project), and also should restrain itself. Kim Jong-il will claim his sovereign rights to run his state as he pleases while inquiring how much aid he is going to get for some minor concessions. The Cheonan affair is unlikely to be discussed at all ― even if Chinese bring up the question, the North will deny responsibility, claiming that all accusations are results of the “smear campaign waged by the South Korean warmongers.”

And what will be the net result? Perhaps, we can see the contours of a likely deal: North Korea will promise to go back to the six-party talks while China will reward Pyongyang for this by aid and subsidized trade. So, China will be satisfied with maintaining both its international prestige and stability in its neighborhood while the long-delayed six-party talks will finally restart, to continue for a while, until the next crisis. Will the talks ever produce their intended result ― the “complete and verifiable elimination of North Korea’s nuclear weapons programs?” Of course, not. But has that not been clear for years?

Read the full story here:
Why does China continue to support North Korea?
Korea Times
5/6/2010