Senior-level dialogue between China and North Korea resumed this summer when head of the Chinese Communist Party (CCP) International Department Wang Jiarui became the first senior foreign visitor to meet Kim Jong Un. Previously, there had been a great deal of speculation regarding the absence of leadership exchanges since Kim Jong Il’s death. Several other high-level exchanges followed. Discussions focused on reconciling priorities and Chinese support for Kim Jung Un’s consolidation of power. Although more subdued, there were also several high-level exchanges between China and South Korea as they celebrated the 20^th anniversary of diplomatic ties, initiated talks on establishing a bilateral free trade agreement, held the second round of strategic defense talks, and sparred over South Korean concerns about human rights.

Interactions

After a nearly eight-month hiatus in high-level interactions, senior-level dialogue between China and North Korea resumed on Aug. 2 when  Kim Jong Un met Chinese Communist Party (CCP) International Department head Wang Jiarui in his first official meeting with a senior foreign visitor.  Wang was also the first foreign visitor to meet Kim Jong Il in early 2009 following Kim’s stroke in the fall of 2008. Prior to Kim Jong Un’s meeting with Wang, there had been a great deal of speculation regarding the absence of leadership exchanges between the two countries following Kim Jong Il’s death, especially given the unprecedented intensity and breadth of leadership exchanges between the two in 2011.  Wang’s visit to Pyongyang was bracketed by two other high-level exchanges. In late July, Minister of People’s Security Ri Myong Su led a Workers’ Party of Korea (WPK) delegation to China to meet CCP counterpart Meng Jiangzhu, Secretary of Political and Legislative Affairs Zhou Yongkang, and Jiangsu party secretary Luo Zhijun. In mid-August, Jang Song Taek (Kim Jong Un’s uncle and head of the WPK Administrative Department) led a 50-person delegation to China for the third meeting of the joint steering committee for the Rason Economic and Trade Zone and Hwanggumphyong and Wiwha Islands Zone.  In Beijing, Jang held separate talks with President Hu Jintao, Premier Wen Jiabao, and Wang Jiarui.

Despite joint claims of progress in the cross-border economic projects, North Korea’s limited implementation of reform and opening in line with Chinese conditions continues to be an obstacle to the expansion of Sino-DPRK economic relations.  North Korea’s failure to inform China in advance of its plans to launch a satellite in April in conjunction with the 100^th anniversary of Kim Il Sung’s birth and the 13-day detention of Chinese fishermen in May had suggested heightened political tensions although the value of bilateral trade continued to increase rapidly in the first part of 2012.

China and South Korea marked the 20^th anniversary of normalization of relations in rather subdued fashion on Aug. 24.  The lack of enthusiasm can be attributed in part to an impending leadership change in both countries, but also reflects the emergence of hard political issues, including the four-month detention in China of a prominent South Korean human rights activist, Kim Young-hwan, who charged upon his return to Seoul that he had been tortured by Chinese authorities.  The second bilateral strategic defense talks were held in China on July 31 between Deputy Chief of the PLA General Staff Ma Xiaotian and ROK Vice Defense Minister Lee Yong-gul, who also met Defense Minister Liang Guanglie in Beijing.  China’s State Councilor and Minister of Public Security Meng Jianzhu met President Lee Myung-bak, Foreign Minister Kim Sung-hwan, and other senior officials in Seoul on July 12-14.  Bilateral FTA talks were officially launched in May, with the three rounds of talks so far producing indeterminate results.  PRC Vice Premier Wang Qishan visited South Korea on June 27-29 in conjunction with the Yeosu Expo that ran from May 12 to Aug. 12 and met Minister of Strategy and Finance Park Jae-wan.  Sino-South Korean exchanges also occurred in the context of regional meetings, including the fifth China-ROK-Japan trilateral summit on May 13-14 in Beijing and the July 11-12 ASEAN Ministerial Meetings in Phnom Penh, where Chinese Foreign Minister Yang Jiechi met counterparts from both South and North Korea.

Reconciling Chinese priorities in North Korea: stability, reform, and denuclearization

North Korea’s detention of 28 Chinese fishermen on May 8 and the reported demand for ransom appeared to mark the peak in a period of political strain in Sino-DPRK relations since Kim Jong Un’s assumption and consolidation of leadership.  While Beijing referred to the case as a maritime issue, some analysts regarded the incident as Pyongyang’s strategic retaliation against China’s open criticism of North Korea’s April rocket launch and nuclear ambitions, as well as China’s passivity regarding North Korean defectors seeking asylum in South Korea.  Beijing’s cautious management of the issue reflected a desire to avoid an escalation of diplomatic tensions with North Korea’s new government.  Reports of North Korea’s claim to “nuclear-armed state” status in its constitution did not elicit a strong reaction from Beijing, where the Foreign Ministry spokesperson on June 1 reiterated China’s calls for the “common interest” of denuclearization.  Instead, North Korean Foreign Minister Park Ui Chun is reported to have shouted at counterpart Yang Jiechi in their Phnom Penh meeting over a Global Times editorial that opposed North Korean nuclear developments on the grounds that they might have a domino effect that would lead to nuclear weapons acquisition by South Korea, Japan, and Taiwan.  At the same time, rumored Chinese efforts to restrain North Korea from conducting a third nuclear test in the weeks following North Korea’s failed rocket launch appear to have been successful, at least for the time being.

The first signs of recovery in China-DPRK high-level exchanges began with Ri Myong Su’s five-day visit to China in late July.  Chinese official reports of this visit emphasized the need for joint efforts on public security cooperation while explicitly stating Beijing’s concern with stability.  According to the Chinese state media, Zhou Yongkang, also a member of the CCP Politburo, expressed hopes that “the DPRK would maintain stability and realize social and economic development under the leadership of Kim Jong Un and the party,” and called for strengthening cooperation against cross-border crime to “help maintain the security and stability of the two countries and their border areas.”  During Minister Ri’s talks with PRC counterpart Meng Jianzhu, they pledged to strengthen communication and cooperation between public security ministries based on the signing of agreements on law enforcement in 2011.

Wang Jiarui’s meeting with Kim Jong Un a week later provided Beijing with an opportunity to consolidate relations with the Kim Jong Un leadership.  Wang pledged to maintain high-level contacts, strengthen party exchanges, strengthen “practical cooperation,” enhance strategic communication and coordination on global and regional issues, and maintain Korean Peninsula and regional peace and stability.  Although these goals were largely a reiteration of Hu Jintao’s framework for Sino-DPRK relations outlined during his 2010 and 2011 summits with Kim Jong Il, there was no explicit mention in Wang’s comments of deepening economic and trade cooperation despite a mutual recognition of economic development as the WPK’s domestic priority. The subsequent visit to China by Jang Song Taek, chief of the WPK Central Administrative Department and also a member of the WPK Political Bureau and vice chairman of the National Defense Commission, suggested that conditions in Pyongyang remain a primary obstacle to reforms that might lead to the expansion of Chinese trade and investment.  In reference to the joint economic zones, Premier Wen called for “improving laws and regulations” and indicated that both sides should “let the market play its role creating favorable conditions for land and tax.” President Hu acknowledged the growth in bilateral trade, investment, and economic ties, but also expressed hopes for “exploring new ways of cooperation.”

The consolidation of the Kim Jong Un regime and Chinese support

China’s political and economic engagements with the North remain tied to the ongoing consolidation of Kim Jong Un’s power in Pyongyang.  The expansion in high-level exchanges from July immediately followed Kim Jong Un’s appointment as marshal on July 18, which was after the dismissal of Ri Yong Ho as chief of General Staff of the People’s Army and promotion of Hyon Yong Chol to vice marshal.  At the time of People’s Security Minister Ri Myong Su’s visit to China, the DPRK state media officially identified Ri Sol Ju as the wife of Marshall Kim Jong Un on July 25. On the same day, it also reported that she met PRC Ambassador to North Korea Liu Hongcai at a Pyongyang theme park.  In his meeting with Wang Jiarui on Aug. 2, Kim was accompanied by Vice Premier Kang Sok Ju, WPK Secretary and Director of the United Front Department Kim Yang Gon, and Vice Director of the WPK International Affairs Department Kim Song Nam.  Wang’s dinner reception hosted by Ambassador Liu was attended by Jang Song Taek, Director of the Korean People’s Army (KPA) General Political Bureau Choe Ryong Hae, WPK Secretary and Director of the International Affairs Department Kim Yong Il, Chief Secretary of the Pyongyang WPK Committee and Chairman of the Pyongyang City People’s Committee Mun Kyong Dok, Korean Central News Agency President Kim Pyong Ho, and WPK Vice Department Director Ri Su Yong.

Ambassador Liu’s return to Beijing ahead of Jang Song Taek’s trip to China in August suggested Beijing’s top-level treatment of Jang as Kim Jong Un’s uncle and patron.  On Aug. 15, the North Korean media released a picture of Kim Jong Un attending a completion ceremony of an amusement park in Pyongyang accompanied by Ambassador Liu, aunt Kim Kyong-hui, and Director of the People’s Army General Political Bureau Choe Ryong Hae, regarded as the most influential person in the DPRK military.  The South Korean media has depicted such images as reflecting both the close family ties within the Kim regime and its reliance on China. South Korean observers have also speculated that one purpose of Jang Song Taek’s visit to Beijing was to set up a trip to China by Kim Jong Un. Such a visit would require Chinese officials to decide how to handle complicated protocol and public affairs issues, given Kim Jong Un’s relative youth and the public impression created if Kim were to meet with Chinese leaders.

China’s economic engagement of the Kim Jong Un regime

Recent DPRK media reports of parliamentary chief Kim Yong Nam’s visit to Vietnam and Laos were seen by some observers as indicating Kim Jong Un’s willingness to learn from other communist neighbors that have undertaken market reforms, and may have been an attempt by North Korea to diversify its economic ties in an effort to limit its dependence on China.  There have been contradictory reports on progress on the Hwanggumphyong and Wihwa Island economic zone since its establishment in June of 2011.  The PRC Foreign Ministry spokesman refuted Japan’s Kyodo News claims on June 25 that China seeks to put the project on hold given its limited economic value.  After the Aug. 14 meeting of the joint steering committee, the PRC Ministry of Commerce spokesperson confirmed that the project will enter a stage of investment, citing “preliminary achievements” such as the renovation of a road linking Jilin’s Quanhe port and Rason’s Rajin port, cross-border transportation of goods through Rajin port, Chinese tours to the North, and a pilot area for high-efficiency agriculture.  Doubts remain, however, over the extent to which the North Korean side will adhere to the joint principle of “government-guided, enterprise-based, market oriented, mutually beneficial” cooperation stressed by its Chinese counterparts.  China’s Commerce Ministry on Aug. 16 affirmed that the DPRK has “amended” its laws for the zones, reportedly a source of disagreement over the past months.  Despite their uncertain prospects, cross-border economic projects remain a key driver of bilateral political exchanges at the local level.  Jang’s itinerary also reportedly included tours of Jilin and Liaoning provinces and meetings with provincial party secretaries Sun Zhengcai and Wang Min.

A new trend in Sino-DPRK economic ties, meanwhile, is the inflow of North Korean labor to China.  On July 1, the Los Angeles Times reported on an agreement under which China is hiring about 40,000 North Korean laborers to work in China, with annual cash remittances of about $2,000 per person likely to go largely to a new regime faced with international sanctions.  According to Chinese government data, the number of DPRK visitors to China increased by 31 percent from 116,000 in 2010 to 152,000 in 2011, of which 75 percent were businessmen and laborers.  Tourism programs to North Korea for Chinese remain an additional source of hard currency for the Kim Jong Un regime.  Chinese and DPRK companies on Aug. 17 jointly launched a new tourist route between Yanji and Rason according to the Yanji Tourism Administration, carrying travelers between the two cities on a daily basis.  Jilin’s tourism authorities have pointed to a recent boom in cross-border tourism since China’s launching of its first charter flight from Jilin to the North in July.  In late June, China launched a cruise tour to Mount Kumgang, the site of an inter-Korean tour program for South Korean tourists that closed after the 2008 shooting death of a South Korean tourist by a North Korean soldier.

China’s interests in both North Korean reform and denuclearization appear to remain largely contingent on concerns over North Korea’s domestic stability during political transition in Pyongyang.  On June 12, the PRC Foreign Ministry spokesperson denied Japanese media reports that China violated UN sanctions by exporting to North Korea the missile launch vehicles of the type that appeared during the military parade in Pyongyang last April in honor of Kim Il Sung’s 100^th birthday.  In addition, a Yonhap report indicated that China held a river-crossing exercise on the Yalu River border with North Korea on June 12 involving more than 100 Chinese soldiers, raising speculations over Chinese preparations against a potential refugee crisis on the Sino-DPRK border.

Chinese and South Korean approaches to Northeast Asian peace and stability

The strengthening of China’s ties with Pyongyang followed a period of renewed Chinese criticism of South Korea’s alliance with the US and its approach to regional security.  On June 28 in response to US-ROK military exercises held on June 23-25 in the Yellow Sea and joint naval exercises by the US, South Korea, and Japan off Jeju Island on June 21, the PRC Defense Ministry spokesman criticized the “intentional” strengthening of military alliances. After the second US-ROK Defense and Foreign Ministers’ Meeting (2+2) in Washington in mid-June, where the two sides agreed to strengthen missile defense cooperation, a PLA Daily commentary on June 29 stated that the move would undermine global arms control and disarmament, worsen the DPRK nuclear issue, lead to a regional arms race, and have an “immeasurable negative impact” on the establishment of a multilateral security mechanism in Northeast Asia.  Such remarks appeared to resonate with a Xinhua editorial earlier that month affirming the role of the Shanghai Cooperation Organization (SCO) as a “regional stabilizer” rather than a “bullying military alliance.”  The US-Japan-ROK military drills began a week after the SCO’s own Peace Mission 2012, its ninth counterterrorism joint military exercise involving 2,000 military personnel from member states.  In an interview ahead of the 12^th SCO Summit in Beijing on June 6-7, President Hu Jintao affirmed the SCO member states’ support for dialogue as “the only proper choice” for resolving the Korean nuclear issue, calling for denuclearization of the peninsula through the Six Party Talks.

China also reacted strongly to developments surrounding South Korea’s negotiations for a military pact with Japan that would facilitate intelligence exchange on North Korea, the plans for which were laid aside on June 29.  Debates among Chinese analysts appeared in a PLA Daily report on May 31 attacking the deal as “an embarrassment of failure.” According to Zhang Lianggui of the Party School, “exerting pressure” on North Korea is the primary goal of the agreement, the negotiations for which appeared to be driven further by North Korea’s April rocket launch.  Lin Zhiyuan of the PLA’s Academy of the Military Sciences relates South Korea’s emerging military cooperation with Japan to the “shift of the US strategic focus” to Asia, and points to “insurmountable obstacles” to a trilateral military alliance including regional reactions and domestic opposition in both South Korea and Japan.  A July 8 report by a Korea Institute for National Unification analyst argued that expanding military ties with Japan could give Seoul “leverage against China” given Beijing’s “favorable attitude” toward Pyongyang, suggesting that China may shift its stance if it recognizes that its North Korea policy will only strengthen South Korea’s ties with the US and Japan.

Sino-South Korean cooperation, on the other hand, has maintained progress in the trilateral context with Japan.  At the fifth China-ROK-Japan summit in Beijing on May 13, the three leaders agreed to launch trilateral free trade agreement (FTA) talks in 2012, signed an investment agreement, released joint declarations on the “trilateral comprehensive cooperative partnership,” and agreed to strengthen agricultural and environmental cooperation.  Such agreements, while in their preliminary stages, have been achieved despite recent strains in the three neighbors’ bilateral diplomatic relationships which continue to cast doubts over whether the focus of trilateral cooperation can reach to the region’s core security priorities.

Assessing the 20-year Sino-ROK diplomatic relationship

The occasion of China and South Korea’s 20-year anniversary of diplomatic relations in August has drawn mixed assessments.  Progress in political and security ties remains limited when assessed against the wildly successful Sino-ROK economic partnership. An outcome of the second Sino-ROK bilateral strategic defense talks on July 31 was an agreement to establish a hotline between defense chiefs, adding to naval and air force hotlines established in November 2008 to prevent accidental clashes and facilitate disaster cooperation. Although the defense hotlines demonstrate efforts to strengthen military cooperation for regional stability, the defense talks were only launched last year after a period of historic tensions over North Korea and other regional security issues that have set back efforts envisaged under the cooperative strategic partnership forged in 2008.  The ROK Farm Ministry confirmed on July 31 that China and South Korea have agreed to reduce fishing quotas in each other’s exclusive economic zones (EEZs) from 2013 in an effort to preserve maritime resources.  Fatal clashes in the Yellow Sea over illegal fishing have remained a major source of diplomatic strain, driving public protests in South Korea at the time of President Lee Myung-bak’s visit to Beijing last January.  The ROK Foreign Ministry reportedly postponed submitting a claim on an East China Sea shelf beyond its EEZ to the UN given opposition from Japan and China. South Korea’s similar claim in 2009 immediately sparked a dispute over sea territory demarcation with China, which followed up with its own claims to the Okinawa Trough and Ieodo.

PRC State Councilor and Public Security Minister Meng Jianzhu’s three-day visit to Seoul in July was the first official visit to South Korea by a Chinese public security minister since normalization. Focused on strengthening law enforcement and consular cooperation, Meng’s meetings raised hopes for the release of four South Korean activists detained in China in March for assisting North Korean defectors and endangering Chinese “national security.”  Although the activists were released a week later, tensions worsened over Kim Young-hwan’s claims following his return to South Korea that he was tortured while under Chinese custody.  Despite Seoul’s calls for an investigation, the PRC Foreign Ministry did not make its first official response rejecting the allegations until July 31.  China’s handling of North Korean refugees reemerged as a diplomatic issue earlier this year with increasing pressure from South Korean activists critical of China’s current tilt toward the DPRK regime.  South Korea’s Unification Ministry officials have attributed the 43 percent drop from last year in the number of DPRK defectors to South Korea during the first five months of 2012 to tightened security on the China-DPRK border since Kim Jong Il’s death.  The release of Kim Young-hwan, known as a former leader of a leftist movement in South Korea before joining the Network for North Korean Democracy and Human Rights, exemplifies China’s tendency to be relatively cautious in its handling of high-profile and internationally-publicized cases related to North Korean refugees.  Kim Young-hwan’s case presents potential legal challenges and costs to China’s international image, and has also raised domestic debates in South Korea that feed into perceptions of the relationship with Beijing.  Lawmakers have criticized the foreign ministry’s handling of the issue while others have cautioned against drawing attention to the activities of rights activists in China.

Growing asymmetry in the Sino-South Korean economic partnership

PRC and ROK commerce ministers agreed in the formal launch of bilateral FTA negotiations in May to pursue trade liberalization beyond each side’s commitment to the WTO and address sensitive areas including South Korean agriculture and fisheries and Chinese manufacturing.  China and South Korea seek to expand the bilateral trade volume to $300 billion by 2015 from $221 billion in 2011, a 17 percent increase from 2010 according to South Korean data.  In the latest round of free trade talks on August 22-24, both sides agreed to remove tariffs on products within 10 years of implementation of the FTA, but have yet to reach agreement on the level of tariff concessions and classification of “sensitive” items.  ROK Deputy Trade Minister Choi Seok-young recognized “significant differences of opinion” following the conclusion of talks with PRC counterpart Yu Jianhua on July 2-4, focused on service and manufacturing criteria and domestic legal procedures.  The July talks were held a week after South Korea held initial discussions in Taipei on a bilateral investment treaty with Taiwan, which South Korean officials have clearly separated from trade talks with China.  Some South Korean policymakers have indicated that an FTA with China would strengthen South Korean competitiveness against Taiwan in the Chinese market since the signing of China-Taiwan Economic Cooperation Framework Agreement (ECFA) in 2010.

Difficulties in China-ROK trade talks undermine the prospects of trilateral FTA talks with Japan to be launched later this year.  Although Premier Wen, at the three-way summit in May, called the trilateral FTA negotiations a “driving force” for East Asian economic integration, the outcome of talks will likely depend on the bilateral trade relationships.  While ROK-Japan trade talks have been stalled since 2004, both rounds of China-ROK trade talks this summer incited protests by thousands of South Korean farmers who called attention to the perceived economic and health threat from Chinese agricultural products.  Broader prospects for the China-ROK-Japan FTA will depend in part on US-China economic and political competition and corresponding US-led efforts under the Trans-Pacific Partnership.

During their meeting in Yeosu on the occasion of the Yeosu Expo’s “China National Day” celebrations on June 28, PRC Vice Premier Wang Qishan and ROK Minister of Strategy and Finance Park Jae-wan identified electronics, communications, car manufacturing, tourism, the green economy, and the marine sector as key areas for strengthening the strategic cooperative partnership.  While South Korea has benefited from China’s cheap labor and domestic market, China’s emerging competitive advantage and economic leverage is an increasing source of South Korean concern. A Samsung Securities report on July 27 warned that China’s expected industrial restructuring over the next decade would boost Chinese competitiveness and pose challenges for South Korean firms rather than present opportunities.  According to an annual IMF report for China released on July 25, a 1 percent decline in Chinese investment would reduce South Korea’s economic growth by 0.6 percent given the direct impact faced by South Korean exports.  Korea International Trade Association (KITA) data show that since normalization in 1992, ROK exports to China have increased at an annual rate of 23 percent, more than double the average 11 percent growth rate for other overseas markets.  China’s shifting emphasis on domestic demand also appears to be hurting South Korean exports, which grew 14.8 percent in 2011 but declined by 1.6 percent between January and May 2012.  The Korea Institute for International Economic Policy estimates that an FTA with China could boost South Korea’s real economic growth by 2.28 percent over 10 years.  However, the potential annual loss of over 3.3 trillion won ($2.9 billion) for South Korea’s farming industry is almost 4 times higher than estimated losses from the Korea-US FTA.

Recent developments in Jeju showcase the growing importance of Chinese-driven tourism and investment, which supports the island’s development efforts led by the Jeju Free International City Development Center (JDC).  The number of Chinese visitors in Jeju has increased more than tenfold since 2000, and accounted for 59 percent (396,000) of all overseas visitors to the island in the first half of 2012. Under an agreement signed with JDC on July 11, China’s Greenland Group has planned investments in the Jeju Healthcare Town project totaling KRW 1 trillion, including a medical R&D center and recreational and residential facilities.  China opened a consular office on Jeju Island in July as part of an agreement reached between President Lee Myung-bak and Premier Wen Jiabao in 2010 to promote bilateral exchange.

Managing North Korea: reform or denuclearization?

Consultations on the future of North Korea remain the central priority in Sino-South Korean relations as both countries face leadership transitions in the coming months.  The two-decade old Sino-ROK diplomatic relationship is clouded by concerns over not only the relative weakness of political and security ties but also the shifting structure of the economic partnership. A new South Korean administration will seek to place the Sino-South Korean relationship on a more mutually productive path without weakening the US-ROK security alliance.

South Korean cooperation with China will be necessary in the context of South Korean efforts to stabilize the inter-Korean relationship, promote reform, and denuclearize North Korea. China and South Korea need to cooperate to facilitate North Korea’s economic reform and achieve its denuclearization.  But differences over human rights of North Korean refugees and those who assist them or the reemergence of competition for favor or market share from Pyongyang could easily prevent the level of cooperation necessary to neutralize nuclear North Korea as a source of provocation or as a security threat.  Beijing’s emphasis on reform has been consistently clear in its economic policies toward the North, but this emphasis has also emerged as a point of friction in Sino-DPRK relations.  It remains unlikely that China will push for reforms to the extent of challenging North Korea’s political stability, and China certainly prioritizes North Korea’s stability over denuclearization. Kim Jong Un’s apparent consolidation of power and prioritization of efforts to solve North Korea’s economic problems, could open a new chapter in North Korea’s relations with both South Korea and China, but a reforming and nuclear North Korea might also become a more active object of competition in the Sino-ROK relationship.