Post a Comment On: China Matters

The North Korean nuclear crisis is, at its heart, a struggle between Beijing and Pyongyang.

As I’ve previously argued, North Korea’s ballistic missile and nuclear antics are an effort to demand attention, respect, and assistance from the PRC.

Certainly, I don’t think anybody seriously believes that Kim Jung Il expected to be able to extort concessions from George Bush and John Bolton prior to the U.S. mid-term elections with a piece of nuclear blackmail.

North Korea’s weapons programs are meant to discommode China with the threat of a Asian arms race and the specter of Japan becoming a pro-active regional security force with US backing, and remind Beijing of the necessity of advancing North Korea’s interests on the world stage—in this particular case, getting China to support lifting some onerous U.S. financial sanctions.

Well, I believe China’s looked at its options and opportunities and decided that the best riposte to North Korea’s nuclear program is to strip Pyongyang of its independence in national defense and foreign affairs—in other words, assert virtually the same suzerainty that China imposed on the peninsula before the Japanese occupation in 1895.

A little background:

Chinese-North Korean relations are poisonous, in fact possibly terminally dysfunctional.

Two nations that once shared a battlefield against the United States are now fundamentally split by diverging interests.

Beijing gives priority to its relations with South Korea and its plans for the future economic integration of the peninsula under Beijing’s aegis.

North Korea desperately struggles to create a future in which it shares in the prosperity of the region but keeps its sovereignty, independence, and regime intact.

An excerpt from Dr. Andrew Scobell’s study, China and North Korea: From Comrades-In-Arms to Allies at Arm's Length, available at the U.S. Army War College website, gives the idea of the fraught character of North Korean—Chinese relations:

Tensions reportedly emerged in the late 1990s over either unmet North Korean demands for Chinese aid or Chinese pressure on North Korea to reform. According to one account, in early 1996 Pyongyang asked for a substantial amount of grain and Beijing responded by offering only a tenth of this. Kim Jong Il was reportedly incensed and threatened to “play the Taiwan card” unless China was forthcoming on an even broader set of demands...

According to another account, a team of Chinese agricultural experts, who visited North Korea in the spring of 1997 under the auspices of the UN Development Program, recommended that their hosts adopt Chinese style reforms without delay. Pyongyang responded by calling Deng Xiaoping a traitor to socialism. Beijing took umbrage and threatened to halt its food aid. Pyongyang responded by initiating talks with Taiwan on the subject of opening direct air links between Taipei and Pyongyang. After the Chinese dropped its threat, the North Koreans broke off talks...


Here’s some more from an article by Alexandre Mansourov of the Asia Pacific Center for Security Studies, entitled Giving Lip Service with an Attitude: North Korea's China Debate:

Overall, North Korean officials consider the sporadic trickle of economic aid from China to be pathetic. They say every time Beijing offers a grant-in-aid to Pyongyang, it is accompanied with numerous political conditions (which, to be fair, are rarely implemented). For comparison, they often refer to the Asian financial crisis and say that when an American ally, South Korea, found itself in deep trouble in 1998, Washington provided Seoul with US$57 billion in international financial assistance without many reservations or pressure, thereby saving the ROK’s economy from financial meltdown.

Moreover, Kim’s regime seems to support the widely held popular belief that during the arduous 1990s, Chinese merchants actually took advantage of the North Korean economic difficulties by plundering the DPRK’s natural resources, including its timber saw mills, coal mines, and ore deposits, as well as collecting its idle factory machinery and inoperable plant equipment such as iron and metal scrap, in exchange for the daily necessities and consumer goods of questionable quality and second-hand nature. Official grumbles and local public complaints both stress that “the Chinese can do more to help us, but they don’t; and what they give us is of dubious value and low quality, especially the expired medicines, rotten food, worn-out clothes, poorly distilled hard liqueur, and very bad cigarettes.”

China has been a bad patron. Well, North Korea’s been a pretty bad client.

One element that is undoubtedly poisoning the relationship is the fact that North Korea has racked up a US$ five billion dollar trade deficit with China over the last ten years. Assuming that China is unwilling to be paid in high quality counterfeit banknotes or illicit drugs, the PRC is probably carrying Kim Jung Il’s tab. And Mr. Kim doesn’t strike me as a particularly grateful, conscientious, or scrupulous debtor.

As a result, China is apparently forcing North Korea to pay for the nose for its support. Petroleum is provided to North Korea for hard currency—no surprise there. The Nautilus Institute theorizes that North Korea is selling coal to China at “friendship” rates. A defector reported that the Chinese are insisting that old debts be cleared before new business can be done.

Bad behavior on both sides has been exacerbated by China’s important and ever-growing relationship with South Korea. The volume of trade between China and the South is about forty times greater than that between China and North Korea.

The LA Times did a good job of describing the PRC relationship with South Korea (Mark Magnier, N. Korean Threat Different for China, Los Angeles Times print edition, October 13, 2006).

“South Korea is the big prize in all of this,” said Ralph Cossa, executive director of the Honolulu-based Pacific Forum…

…Since relations between Beijing and Seoul were normalized in 1992, China has watched approvingly as anti-American sentiment has grown in South Korea, U.S. troop levels have declined, China has supplanted the United States as Seoul’s largest trading partner and trendy young Koreans have dropped their English-language classes in droves to study Mandarin.

In Beijing’s plans for a prosperous, pro-Chinese Korean peninsula, cooperation with the South Korean powerhouse looms large.

In an interview this year, China’s director of the Korean Peninsula Research Center of the State Council, Li Dunqiu opined:

Lee: There are some lawmakers in South Korea who believe Korea should make a strategic partnership with China over America in the 21st century.

Dunqiu: They are correct. In the 21st century, Korea needs to come closer to China. First, China and Korea share common interests that are larger than those between Korea and the U.S.

In East Asia, America just wants to maintain its hegemonic order. The U.S. has little regard for stability, prosperity and common development in the region. The main reason is that essentially the U.S. itself isn't located in the region. On the other hand, China pays closer attention to these issues than the U.S. does.

In Beijing’s romance with Seoul, North Korea’s current regime is at best an inconvenience and irritant and at worst a dangerous, disruptive force.

I think the North Koreans are furious about China’s malign neglect, and not simply because of injured pride and frustrated ambition.

It needs to be understood that North Korea contains the kernel of a viable state with an independent foreign policy. And that’s what it wants: to return to the international order, to prosper, and have alternatives to Chinese “vassalage”.

North Korea is a lot like South Korea: high population density, limited arable land, dependent on imports of grain and petroleum to keep its economy going. North Korea possesses a wealth of problems and inflicts enormous suffering on its population, but the need to import food and fuel is not by itself a sign of failed-state-itis.

China is incorrectly described as “providing 70%” of North Korea’s energy needs in the LA Times article cited above, a misconception which I believe is fairly common.

According to the Federation of American Scientists, North Korea has significant reserves of coal and hydropower and continues:

Oil accounts for about 6% of total North Korean primary energy consumption, and is largely limited to non-substitutable uses such as motor gasoline, diesel, and jet fuel. Oil is imported from China and the Soviet Union by pipeline, and from Iran by sea.

North Korea relies on coal for power generation, exports over $100 million of coal to China per annum, and even exports electric power to China on occasion, presumably when it is desperate for a quick shot of foreign exchange. Last year it imported about $286 million dollars worth of petroleum products from China, mostly crude.

In contrast, South Korea imports 70% of its grain and 97% of its energy needs—a combined tab of about $20 billion per year—to keep its economy humming.

The difference, of course, is that South Korea is integrated into the global capitalist economy and easily generates the hard currency needed for its imports. North Korea went the other way, allying with a socialist bloc that collapsed catastrophically in 1989 and now has to scramble to come up with the foreign exchange to finance its imports.

North Korea has been working desperately to find a new niche—and has been, at least, partially successful.

It’s politically convenient to define North Korea as a failed state (see a backgrounder from the Council for Foreign Relations for the bleak conventional view) but, according to some people, the North Korean economy is looking up!

A headline one can’t expect to see in the United States but was carried in the Sydney Morning Herald (H/T to Asia Pundit) pretty much says it all: North Korea Rogue State or Next Tiger? and continues:

The other North Korea is described in a Citigroup economic report, which South Korean officials handed to US Treasury secretary Hank Paulson last month on the sidelines of the IMF's annual general meeting in Singapore.

It describes state-owned enterprises which are free to chase profits and award merit-based pay. It shows Pyongyang's black markets for food and foreign exchange to be converging with its official markets. It surveys no likely internal trigger for regime collapse.

Amazingly, it concludes: "North Korea's economic reforms are probably broadly comparable to those in China in the mid- to late-1980s. In some areas, such as foreign exchange rate policy, North Korea is probably already beyond the China of the early 1990s. Actual progress in economic reforms has been way beyond our expectations."

“Actual progress in economic reforms has been way beyond our expectations.”

How about that…

Certainly, North Korea is not a worker’s paradise by any stretch of the imagination.

But it is doing its darnedest to work out of that pickle caused by the collapse of the socialist bloc.

But that’s a narrative that the United States isn’t interested in.

Neither, apparently, is China.

The North Korean economy is poised for real gains that could stabilize the regime and secure its reign. But Pyongyang has been frustrated by Beijing’s niggardly aid, and actions that look like intentional measures to strangle the North Korean economy.

There is nothing more important to North Korean in its efforts to shed its status as pariah state than access to the international finance and banking system.

I doubt that U.S. financial sanctions are aimed at the relatively insignificant amounts of counterfeit cash and other illicit transactions. They were intended to warn off banks and international investors interested in legitimate trade and investment with North Korea.

And, amazingly, the Chinese went along with it, freezing North Korean accounts at the Bank of China Macau branch.

The ramifications went far beyond these two banks.

In August 2006, the Financial Times wrote:

“I understand the Bank of China stopped dealing with North Korea as the US expanded its probe,” said Mr Park. “This is a virtual ban against dealing with North Korea by China, leaving North Korea all the more devastated,” Mr Park [a South Korean politician—ed.]said, quoting a former Bush administration official. …

North Korean and foreign businessmen dealing with Pyongyang say sanctions have shut down the regime’s ability to earn foreign currency.

Several banks have severed ties with North Korea after the BDA action, leading Pyongyang reportedly to open new accounts containing $200m-$300m in countries including Switzerland, Austria, Russia and Singapore.

“The reason North Korea is so upset about BDA is because of its impact on its bank accounts in other countries,” said Mr Park.

Was China’s action a simple gift to the United States?

Or an effort to isolate North Korea and increase its dependence on China as a source of credit, investment, and financial facilities—and diplomatic good offices?

Andrew Scobell has argued that China’s goal for the peninsula is not unification, with its threat of a capitalist, US-leaning regime stretching all the way up to the Yalu River. Instead it is “reconciliation”, with a reformed but still socialist and pro-Chinese regime deeply engaged economically and diplomatically with South Korea.

However, relations between North Korea and China may have deteriorated to the point beyond which any joint policy of shared interests, dialogue, and coordinated action may be impossible.

To me, the most revealing passage in Selig Harrison’s description of the failed negotiations between the US and North Korea in 2005 was this passage:

Significantly, however, several [senior North Korean officials], speaking off the record, pointed to North Korea's "strategic geopolitical location" and emphasized that Pyongyang wanted close ties with the United States, a faraway power, to offset pressures from its neighbors. "It would be good for the United States," one of them said, "to have us as a neutral buffer state in this dangerous area. Who knows, perhaps there are ways in which the United States could benefit from our ports and our intelligence if we become friends."

It brings to mind Kim Jung Il’s absurd stunt of threatening to establish air links with Taipei.

Don’t you think Pyongyang has made a similar to pitch to Russia? Or to South Korea in a “let’s negotiate directly and cut out the Chinese” sort of way? They are probably even trying the same line on Japan.

So, on top of disappointment and resentment, one can add duplicity and suspicion to the toxic stew of Chinese-North Korean relations. With China seduced by the power and wealth of South Korea and North Korea desperately and secretly flirting with any nation that will take a meeting, it looks like the shared interests and trust between Beijing and Pyongyang has virtually evaporated.

Because of a fundamental divergence of interests and the well-earned mutual distrust it has engendered, it appears that North Korea can no longer be persuaded that Beijing’s policy has Pyongyang’s best interests at heart.

Now China has decided it’s time to show the iron fist beneath the threadbare velvet glove.

What seems to have happened is that China has decided that the current North Korean regime is an unsuitable vehicle for the reliable promotion of Chinese interests, but that regime change or voluntary reform--on Chinese terms--is virtually impossible.

Beijing has therefore opted for a particularly stern and confrontational process of involuntary behavior modification in order to ensure that Pyongyang does not upset the Chinese applecart on the Korean peninsula.

The problem is not a matter of nukes. Its essence is sovereignty—and Pyongyang’s frantic efforts to escape its total reliance on its half-hearted and dishonest Chinese patron.

I don’t think China is worrying overmuch about North Korea triggering an arms race in Asia. Abe’s determination to assert Japan’s military presence in the region derives from the nature of his security-driven strategic alliance with the United States—and against China--and only secondarily by what North Korea does or doesn’t do.

What China worries about is North Korea acting independently on diplomatic and security issues and disrupting Beijing’s dangerous dance with its aggressive South Korean partner—and undermining its effort to situate the entire Korean peninsula securely within China’s sphere of economic, diplomatic, and military influence to the exclusion of the United States and Japan.

Whenever North Korea fires a missile or lights off a nuke, or strengthens its economy through reform, or engages in independent diplomatic initiatives, it’s an attempt to assert Pyongyang’s value as somebody worth talking to, creating a space for North Korea to act independently—and undercutting Chinese pretensions as the supreme arbiter on the peninsula.

It is this independence—rather than the nuclear and missile programs, which are simply aspects of this independence—that China wants to crush. If North Korea can’t be an obedient and tractable client, I think the Chinese decided, let it be an impotent and silent one.

So I think it’s been a misreading of China’s position to describe it as half-hearted in its conduct of sanctions against North Korea.

Certainly, China has no interest in regime change in North Korea. The valuable lesson it has extracted from America’s adventure in Iraq is that the citizens of the most despised regimes fiercely resist external efforts at nationbuilding--even by superpowers that regard themselves as omniscient and omnipotent.

China wants to keep regime changers at bay and, therefore, has resisted the forcible interdiction element that John Bolton has been trying to shoehorn into the UNSC 1718.

However, China is quite serious about applying economic pressure that will cause Pyongyang to abandon its dreams of an independent, nuke-supported foreign policy.

China, I think, would be very well pleased if North Korea gave up on its nuclear ambitions—but still retained its helpless posture as a pariah state--and slunk back to the Six Party talks to let China mediate with the international order on its behalf.

It looks like China has made the decision to make North Korea bend its knee and return to satrap status.

China’s best option for bringing North Korea to heel is a carefully modulated program of isolation—abetted, perhaps unwittingly, by the West—confrontation, and escalating pressure.

If this program requires sabotaging North Korea’s efforts to strengthen its economy and independence through reforms, export growth, and access to foreign investment and the international financial system, well so be it.

If Kim Jung Il is unwilling to acquiesce, the Chinese might also withhold the relatively modest amount of aid that would prop up his reign and revive the North Korean economy, and await the emergence of a more tractable leader.

In terms of historical parallels, China may well consider Kim Jung Il as North Korea’s Hua Guofeng: heir to a legendary national leader, trapped by a flawed but pervasive ideological and political legacy and sclerotic political and economic institutions he is unable and unwilling to rejuvenate, and ripe to be pushed aside by reformers keen to sacrifice elements of the old order in favor of a new, bureaucratic capitalist dispensation.

Mansourov observes:

Significant portions of the North Korean economic and military elites appear to admire and envy Chinese economic accomplishments. They quietly wonder why their own leaders seem to be reluctant to emulate the triumphant examples of Chinese reforms…

Andrei Lankov argues that the North Korean elites would happily bestow their loyalty upon a new, pro-Chinese clique in Pyongyang rather than face than unemployment or worse in a post-unification, U.S. leaning Korea.

However, given the toxic residue of grudging support, resentful client status, and serial duplicity by both sides—and the perception that China may have intentionally foreclosed a stable and prosperous future for the current regime in order to advance China’s selfish interests--significant elements of North Korea’s elite might very well share the general Asian aversion to hands-on Chinese political and economic tutelage.

If so, despite the failures of the regime, they might resist an urge to sideline Kim Jung Il and replace him with a ruler eager to sing from the Chinese economic and diplomatic hymnbook.

This element of defiant nationalism is something that American planners hooked on the “maniacal killer dwarf” and “failed state” image might do well to consider before we go down the whole regime-change and welcomed-as-liberators route.

That’s a calculation I believe the Chinese have already made, and that’s why they are so lukewarm on the idea that cutting off the oil supply, as the U.S. asked them to do as far back as 2003, in order to provoke economic chaos and a political crisis in North Korea.

I think the Chinese will take an extremely passive, hands-off approach to any leadership change in Pyongyang, and wait for a new leadership group well grounded in the current elite to establish itself before offering any overt assistance.

Indeed, fresh, legitimate, and reinvigorated North Korean leadership—or a prosperous North Korean economy--may be the last thing China wants.

What I believe China wants is a North Korean regime that is profoundly isolated, helpless, and totally reliant on Chinese good offices to survive.

Right now, Kim Jung Il—and the United States and Japan—are pretty much doing China’s work for it.

For China, all that’s needed now is patience—and ruthlessness.

Beijing has offered North Korea no verbal consolation, either at the diplomatic level or in its media. Hu Jintao dispatched a special envoy to meet with President Bush and, I expect, assure the United States of China’s sincere desire to put a lid on the North Korean nuclear program.

And certain Chinese actions are speaking louder than words.

The fence is going up along the Yalu to further isolate North Korea’s export trade—both licit and illicit--from the crucial Manchurian economy. Anecdotal reports in Ming Pao and the South Korean press indicate that Chinese banks are declining to remit money to North Korea, and North Korean guest workers are not receiving visa extensions.

If North Korea detonates another device, all China has to do stand aside and let foreign investment and trade—the key to the regime’s survival as an independent nation—dry up.

Ironically, by this reading, the United States could profit from the estrangement between China and North Korea by embarking on a swift rapprochement with Pyongyang.

Instead , we are doing everything within our power to force North Korea under China’s heel and, in the process, perpetuate the existence of the same failed North Korean system—and regime-- that we have sworn to destroy.