When China’s bankers talk . . . will North Korea listen?

Ruth Kirchner Oct 20, 2006

When China’s bankers talk . . . will North Korea listen?

Ruth Kirchner Oct 20, 2006

KAI RYSSDAL: The Secretary of State is in Beijing today. Trying to convince Asian allies to go along with United Nations sanctions against North Korea. And by Asian allies I really mean China. Beijing’s got the economic leverage everybody hopes North Korea’s going to respond to. More from Ruth Kirchner.

RUTH KIRCHNER: China has been getting tougher with North Korea. While State Secretary Rice was holding talks in Beijing, the four major state-owned banks said they had stopped financial transfers to North Korea under orders from the Chinese government. That goes beyond the U.N. sanctions approved last weekend. It’s widely believed that North Korea uses China as its main link to the world’s financial system.

JASPER BECKER: If China was really serious about that, this would be very punitive and would have an immediate effect on the North Korean economy.

China expert Jasper Becker says the Chinese also pour about one billion U.S. dollars per year into the North Korean economy.

BECKER: There are a lot of businessmen in China who’ve been encouraged to make very large investments in North Korea. They have been buying 50-year leases on ports, railways, power stations, department stores, gold mines, a tire factory, an iron-ore mine.

But China’s biggest leverage is oil. North Korea gets an estimated 90 percent of its oil through a pipeline across the border, and at sharply reduced prices. For the first time, Chinese experts have openly urged the government to reduce oil supplies if North Korea conducts another nuclear test.

China analyst David Zweig:

DAVID ZWEIG: That threatens the regime in a serious way, and I think that’s what China really needs to do if they’re gonna stop the North Koreans — which is really say to the North Koreans, “You do this and your regime is at risk.”

But it’s still unclear how far China is prepared to push it. In Beijing, I’m Ruth Kirchner for Marketplace.

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