The Chinese Communist Party (C.C.P.) and the Chinese government, as well as many foreign policy experts, have been frustrated with the D.P.R.K. for a long time. But they have been reluctant to use China’s trade with the North Korea to put pressure on it and risk its collapse. We constantly blame Beijing for “propping up” the Pyongyang regime. The P.R.C. is indeed the economic lifeline of North Korea, whose reckless rhetoric and behavior has isolated it from almost every other country. But China’s economic ties with the D.P.R.K. consist almost entirely of trade, not aid. My U.C.S.D. colleague, Steph Haggard, and Marcus Noland (the Peterson Institute for International Economics) are the real experts on the China-D.P.R.K. relationship. In their books and blog, North Korea: Witness to Transformation, they present the most accurate data we have about these economic connections, and only a small proportion consists of aid.
China does business with North Korea largely on the basis of international market prices. In March 2011, the University of California Institute on Global Conflict and Cooperation brought the first group of D.P.R.K. economic officials to the U.S. for a two week study visit on market economics and the U.S. economy. In fall 2011, I met in Pyongyang with one of the foreign trade officials who had been on that visit. He mentioned to me that he had just been in Beijing negotiating a purchase of wheat. As he described the transaction, the D.P.R.K. paid for the wheat with iron ore. And the ore’s price was determined by the price China pays other large suppliers of iron ore, like Australia. The price of the wheat was also set according to international prices, i.e. the price on the Chicago Mercantile Exchange on the day of the transaction.
It’s impossible to know how strictly China is enforcing the United Nations sanctions against the D.P.R.K. Is it carefully inspecting the trade at the border? And financial transactions through Chinese banks? China’s international reputation would benefit if it would make its enforcement more transparent by allowing Chinese and foreign journalists to report on what is actually happening at the border and in the banks.