Chinese figures show trade is up with North Korea, but questions abound
By ANNA FIFIELD | The Washington Post | Published: July 13, 2017
TOKYO — North Korea's trade deficit with China has risen to its highest level, as trade between the two countries continues to rise, suggesting there is little distress in the North Korean economy despite rounds of international sanctions on Pyongyang designed to punish it for its weapons program.
The latest official trade numbers from Beijing suggest that China, as President Trump tweeted last week, is not using its economic leverage over its defiant neighbor.
"This growth shows that China is not willing to turn the screws on North Korea," said Kent Boydston, an analyst at the Peterson Institute for International Economics who closely follows the trade data.
The Trump administration has been calling on Beijing to use its economic leverage over its errant neighbor to make the Kim Jong Un regime stop firing off missiles and bellicose threats. But, after North Korea launched a missile technically capable of reaching the United States last week, Trump suggested he had given up on China.
The latest release from China presents a muddied picture.
The Chinese customs department released figures that showed significant growth in overall bilateral trade in the first six months of the year.
The value of imports from North Korea fell to $880 million in the six months ending in June, down 13 percent from a year earlier, according to the figures. Notably, China's coal imports from North Korea dropped precipitously, with only 2.7 million tons being shipped in the first half of 2017, down 75 percent from 2016.
But a 29 percent spike in Chinese exports to North Korea - North Korea bought $1.67 billion worth of Chinese products in the first six months of the year - helped push total trade between the two countries up 10 percent between January and June, compared with the same period last year.
But the customs office did not release a full breakdown of the trade data, and previous releases have sent confusing signals.
"The numbers are not making sense, and my instinct is to think that the Chinese are underplaying what they're doing," said Boydston, who recommends taking the figures with a "large dose" of salt.
But the overall picture suggests that North Korea is buying increasing amounts of products from China.
By Boydston's calculations, the trade deficit widened to $600 million in May, the highest on record. "North Korea is somehow able to finance buying all these Chinese products," he said.
This is puzzling to economists because North Korea has no access to the international financial system, which other countries tap to fund their trade deficits. Furthermore, there have been no major fluctuations in the North Korean won, suggesting stability in the economy.
Beijing was quick to pour cold water on the suggestion that the overall rise in trade suggested it was not complying with U.N. Security Council resolutions designed to punish Pyongyang for its nuclear tests and missile launches.
The growth in bilateral trade "should not be used as basis for questioning China's solemn attitude towards the implementation of the Security Council's resolutions," Huang Songping, a spokesman for Chinese Customs, told reporters in Beijing.
Monthly figures were more representative of the trend, he said, and China's imports from North Korea had been "falling sharply for four consecutive months since March," including by 36 percent in March and 42 percent in April.
"The trade growth between China and North Korea in the first half of the year was mainly driven by exports," Huang said, adding that the exports were mainly labor-intensive products such as textiles, which are not banned under U.N. resolutions.
China has been pledging to curtail trade with North Korea as part of international actions against the Kim regime, but government officials and analysts alike are skeptical about how far China will go.
China said in February it would suspend coal imports from North Korea, potentially cutting off a major financial lifeline for Pyongyang, although analysts caution that Chinese figures should be viewed with some skepticism as they are sometimes manipulated for political purposes.
About 90 percent of North Korea's exports go to China, and coal has been the single biggest export item. But there has been skepticism about China's ban, with coal ships and train cars being seen going back and forth between the two countries.
Furthermore, as coal exports have reportedly fallen, shipments of iron ore to China have spiked. Previous releases of Chinese customs data showed that China bought the same amount of iron ore in the first five months of this year as it did in all of last year.
Asked about the surge in China's imports of North Korean iron ore and in China's ethanol exports to North Korea in recent months, Huang said that trade with North Korea for civilian use was allowed despite the sanctions.
"We have carried out the U.N. resolution strictly," Huang said. "If this is for civilian use and not banned, after we have verified that they are for civilian use, we can still trade." Huang said the price fluctuation of commodities could also potentially boost the trade figure as measured by value.
As the United States has searched for ways to punish North Korea for its repeated defiance of international bans on its nuclear weapons testing and ballistic missile launches, it has repeatedly turned to China. Trump has urged Chinese President Xi Jinping to use China's economic dominance to sway North Korea on nuclear testing. But after suggesting that Beijing was not acting to punish Pyongyang, Trump last week suggested he had given up on Xi.
"Trade between China and North Korea grew almost 40% in the first quarter," Trump tweeted the day after North Korea launched its first intercontinental ballistic missile. "So much for China working with us - but we had to give it a try!"
Xi has made no secret of his disdain for Kim and is clearly frustrated at North Korea's weapons testing and actions such as the assassination of Kim Jong Nam, the leader's half-brother who had been protected by China.
But many North Korea analysts suggest China will not take any action that could seriously undermine the regime because Beijing's top priority is stability. It does not want a flood of millions of hungry refugees coming over its northeast border if the Pyongyang regime collapses, and it certainly does not want the 28,000 U.S. troops currently stationed in South Korea to be able to move all the way up the peninsula to the border with China.