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What Beijing could do to break North Korea's web of weapons buying inside China

Key Points
  • China could use its anti-corruption, anti-drug and anti-counterfeiting policies to disrupt North Korean purchases of weapons materials inside China, a Korea expert said.
  • John Park, director of the Korea Working Group at the Harvard Kennedy School, said China is loath to take direct action against North Korea but could use the policies it has promoted to end the trafficking in weapons parts.
  • Corrupt Chinese officials and business people use legitimate commercial channels to move illicit weapons parts to North Korea, Park said.
The scenarios for US response to North Korea

The Chinese government could exert pressure using existing policies on drugs, corruption and counterfeiting to disrupt the sophisticated web of business connections that transfers weapons materials from China to North Korea, according to a top Korean expert.

John Park, director of the Korea Working Group at the Harvard Kennedy School, said the Chinese government is loath to take direct action and create a hostile situation with neighboring North Korea, but it could use programs it has in place to stop the embedded network of North Korean agents from continuing to procure the parts for nuclear weapons and transmission systems. Park said he will testify before the House Financial Services Committee on the topic on July 19.

"If they did go after the corrupt party officials and Chinese companies that are in fact engaging in criminal activity in selling these components to North Korean clients, these are banned items even under Chinese law," Park said. He co-authored a report on the intricate web North Korea has built to procure weapons parts, based in part on interviews with North Korean defectors conducted between 2008 and 2012.

"These procurement networks are between corrupt party officials and Chinese middlemen on one side, and North Korean clients on the other," Park said. He said the network has grown as legitimate North Korean-Chinese trade has opened a door for commercial interests to take advantage of existing relationships and channels.

How North Korea dodges sanctions

"When you establish business partnerships like these, they're like a commercial channel. When you look at the flow of goods in commercial channels, the vast majority is legal items, though you can move some of the illicit goods because you've already established the channel."

The North Korean "customers" for weapons parts are embedded in businesses and even the North Korean embassy. "In many cases, these individuals are dual-hatted as diplomats," he said.

President Donald Trump has appeared to lose patience with China's efforts to stop North Korean leader Kim Jong Un's nuclear ambitions. North Korea fired off an intercontinental ballistic missile Tuesday, which it said could hit the "heart of the United States." Washington warned that it would use "the full range of capabilities" against the growing threat.

"So much for China working with us — but we had to give it a try!" Trump tweeted, just before he left for a foreign trip. Trump is expected to meet with Chinese President Xi Jinping on the sidelines of the G-20 meeting in Germany later this week.

China's likely weapon against North Korea would be economic, since Beijing fears a destabilized North Korea could create its own domestic crisis by unleashing a massive refugee flow across the Yalu River, separating the two countries.

The Chinese government has tried to crack down but failed, Park said. For instance, the government in 2013 created a more than 200-page book for law enforcement and the private sector on the items that North Korea could be seeking. Instead of stopping the sales, Park said the book was basically used as a sales brochure in the business sphere that has been built up around the weapons program.

"We know those efforts failed. ... Those parts were still going through," he said.

China could use its anti-corruption policies to go after Chinese individuals involved in the trade, he said. It could also use its anti-counterfeiting program, especially since North Korea is increasingly creating fake Chinese currency, in addition to its well-known production of U.S. $100 bills, he said.

Park said there is an argument to be made against sanctions, since "the way North Koreans are evading and innovating on business practices in China makes sanctions less effective."

North Korea, unlike other states that have built nuclear weapons, does not have a sophisticated military-industrial complex, and it is instead piggybacking on China.

"They're free riding off the Chinese financial and industrial infrastructure," he said, noting, for instance, that Pyongyang was able to acquire what it needed for a transporter erector launcher as a result.

"These are coming out of Chinese factories or Western factories that are running inside of China. The high-end industrial equipment and things like that usually come from European companies that have production lines inside of China," he said. Legitimate manufacturers have unwittingly been used to provide North Korea with components through middlemen, Park said.

Another way China could slow the sales is to beef up security on its border. He said the Chinese government could launch an assault on "ice," or the meth that comes into the country from North Korea, and possibly weed out some parts sales in the process.

Going after narcotics traffickers is not unprecedented. Park said the Chinese and U.S. governments cooperated to crackdown on drug sales from Afghanistan into China, and China could target meth. "It's a cheap and potent form of meth," he said. "It would be a dual-use benefit to use those mechanisms ... North Korea has almost pharmaceutical-scale production lines for this product."

Park said using the policies against corruption, counterfeiting and drugs would be something the government could utilize to move quickly and achieve its policy goals.

"These are measures the Chinese authorities can implement right away because they're Chinese laws," he said.

In a recent report, C4ADS said the scope of the illicit trade in China is surprisingly small, and there appears to be a high barrier of entry for Chinese companies. It said North Korea, which does 85 percent of its trade with China, did business with 5,233 Chinese companies from 2013 to 2016. That is less than a tenth of the number of Chinese companies that did business with South Korea, and many of those companies doing business with North Korea have subsidiary relationships with each other.

The report noted that a disproportionate amount of trade is centralized among a smaller number of large trading companies.

"In the face of continued pressure and growing political will, the international community has struggled to understand how the Kim regime has remained steadfast in the development of WMD's [weapons of mass destruction]," according to the report. It was authored by David Thompson, a senior analyst at C4ADS.

"The answer lies in large part with North Korea's overseas networks, that have grown into a complex overseas financing and procurement system over the past decade, earning hard currency through reported schemes as diversified as sales of military equipment, cyber crime, printing of counterfeit currency, rhino horn smuggling and narcotics trafficking," according to the report.

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