China tightening trade with North Korea

TUMEN, China — In a concrete building on the northern edge of this city across the border from North Korea, young pony-tailed women wearing hoodies sew sportswear.

The building has no flashy logo or company name on the outside, only a blue-and-red flag flickering high on a nearby pole. Across the street, a dormitory sits on a weed-strewn lot.

The estimated 300 women are among an unknown number of North Korean workers in China earning cash for their country’s isolated economy and providing cheap labor for Chinese businesses.

Despite big plans, there has been no major increase in production at the two-story factory since it opened nearly a year ago, according to locals. They suspect that Chinese officials have slowed the number of guest worker visas issued to North Korea.

It is one of the less-visible signals that Beijing has apparently sent recently to express its frustration with the government in Pyongyang for its bellicose talk and repeated nuclear and missile tests.

China’s role in influencing its troublesome ally is among the most important items on the agenda for meetings this week between President Obama and Chinese President Xi Jinping in the California desert town of Rancho Mirage.

Analysts said they expected Obama to give Xi credit for taking some public steps to press North Korea to abandon, or a least slow, its nuclear program. In March, Beijing broke precedent by supporting new United Nations sanctions that further restrict North Korea’s banking and trade in certain goods, as well as travel.

And last month, China’s largest state-owned bank said it had suspended all transactions of North Korea’s main foreign exchange bank, cutting off what U.S. officials say was a “key financial node” in facilitating Pyongyang’s nuclear activities.

North Korea in recent days has made overtures to improve relations with South Korea, offering talks on the reopening of a joint business park and other ventures. The South quickly accepted.

But how much China had to do with that is unclear. And experts don’t know the extent of visa reductions for North Korean workers, although some believe the move could be part of the Chinese response to international concern over Pyongyang’s actions.

“It’s an opportunity to show they are clamping down,” said John Park, a specialist in Chinese-North Korean relations at Harvard University’s Belfer Center for Science and International Affairs.

A number of foreign relief agencies have pulled out of North Korea because of escalating tensions and expanded sanctions, raising questions about the flow of vital food supplies in the impoverished nation. Yet North Korea watchers believe China continues to provide enough support — and allow back channels such as North Korean state trading companies — to sustain Pyongyang’s ruling elite with luxury items and other goods.

Recent travelers to Pyongyang report few outward signs of economic distress or change. The capital’s food markets are well stocked, said one regular visitor, noting that one store even had imported cream cheese from the United States.

Analysts said they expected Obama to urge Xi to take a harder line on North Korea and to seek information on the recent visit to Beijing by North Korea’s third highest-ranking official, Choe Ryong Hae.

“I see Obama’s talking points as, ‘These people are trouble, you are the primary lifeline, and you have no broader strategic economic interest in North Korea,’” said Marcus Noland, a senior fellow at the Peter G. Peterson Institute for International Economics in Washington. “‘Why don’t you get tougher with these guys?’”

Chinese views on North Korea are complicated by history and geopolitics. Although Beijing may be exasperated and a bit puzzled by Pyongyang’s unpredictable leader, Kim Jong Un, Chinese analysts don’t see a fundamental shift in China’s support. The conventional thinking is that Beijing wants North Korea to remain a buffer between it and U.S.-backed South Korea.

North Koreans have worked in China for years, but an October 2009 deal opened Chinese borders for them to come in as trainees in garment, construction and other manual work. Their numbers in China have been estimated in the tens of thousands, which generates much-needed cash for North Korea. The program has served China’s interests as well, providing a pool of cheap labor to its lagging northeast region.

Pyongyang’s nuclear tests and recent North Korean seizures of Chinese fishing boats clearly have generated bad feelings toward that country, but Korea expert Zhang Liangui of the Central Party School in Beijing believes that “simple sanctions” won’t be enough to change behavior.

In 2012, China accounted for 84% of North Korea’s entire global trade of about $7 billion. In the first four months of this year, bilateral trade between China and North Korea was down 2.5% from the same period in 2012, according to the General Customs Administration of China.

The drop is small but nonetheless contrasts with the rapid growth of trade in recent years, with China sending increasing amounts of fuel, machinery, trucks and grain to North Korea, while buying more coal, iron ores and other metals from its partner.

In recent years, China had encouraged more business with North Korea. Beijing built a new expressway in China’s northeast Jilin province that runs along the North Korean border in what could help expand economic links between the two regions.

Chinese officials lately have tightened border trade. Chinese customs agents, for example, are making it tough to transport so much as a single box of liquor into North Korea, whereas before they would routinely wave through truckloads of alcohol, people at the border say.

In North Korea’s special economic zone called Rason, where Chinese, Russian and other investors have established factories and farms, the drop in activity is apparent.

“A month ago, we went to a restaurant and there were five to six waitresses waiting for us,” said one businessman who requested anonymity out of concern it would affect his work in North Korea. “Previously we had to shout for their service because too many Chinese were overflowing there.”

don.lee@latimes.com