NORTH KOREA AND CHINA: THE FUTURE OF THEIR TRADING RELATIONS
By Rishi Shah
With tensions high and North Korea dominating the headlines, it is important to know what the foremost trading relationship North Korea has is. China is the sole reason for the survival of North Korea, with the majority of food, energy and other
necessities originating from China. With the recent harsh onslaught of sanctions bought on by the UN, China has shown relatively harsh and fierce opposition to this. The advancement of North Korea is heavily reliant upon China with bilateral trade increasing tenfold between 2000 and 2015 and peaking in 2014 at $6.86 billion.
Recently however, this long-standing relation has changed. In accordance with the latest bout of UN sanctions, China has ordered all North Korean firms in China to close. In addition, it has begun to ban the exports of some petroleum products and textiles. Although this may not seem like a major move, it has the potential of bringing North Korea to the negotiating table. Oil is a necessary component of all nations; lack of it would bring any nation to a standstill. Due to the repeated infringement of nuclear conduct, China is the main provider of refined petroleum to North Korea. It provides 63% of all petroleum with Mexico at 24% and Russia at 9.9%, thus with the depleting supply of China oil exports to North Korea, Kim Jong-Un will be forced to begin negotiating to restart the trade of oil into his nation.
Observing the current, high intensity dialogue between Donald Trump and Kim Jong-Un, to me it seems highly unlikely of a rapid solution this crisis. The more plausible outcome, is that Kim Jong-Un will continue his nuclear programme, which he is very determined and headstrong about, while a hoard of sanctions continues to fall on the country. China accounts for more than 90 percent of North Korea’s total trade volume, an astounding figure by all accounts. Figure one (below) shows the increasing reliance of North Korea on China. With a multitude of countries severing all ties with North Korea, it is inevitable for their dependence on China to increase. In the future I believe an indirectly proportional relationship will form whereby the more nuclear tests North Korea conduct and the more sanctions they infringe, a fall in trade links will result between the two countries. Depending on how hard Kim Jong-Un resists this will eventually force North Korea to submit and form agreements to rekindle trade.
However, China meanwhile, will attempt all that they can to ensure no military action takes place. Comparing the USA and their allies to North Korea, the result of any military action will lead to mass devastation on both sides but also the destruction of North Korea. This will inadvertently lead to the mass influx of refugees into China, which the nation may not be able to handle. This will lower the standard of living for the current citizens and will also lead to complete and utter chaos. It is obvious that for all parties involved, a diplomatic solution is needed. Chinese-North Korean trading relations remain crucial in achieving this diplomatic solution. The one unknown in this situation is what Kim Jong-Un’s response will be to the cutting of Chinese trade, as he is known to enforce a harsh regime on his citizens, so he may force them to live without many necessities and push his citizens into deprivation.
There are many possible solutions, with China being central to most. It will be very interesting to see what the future brings and how the trading relations mentioned in this article will cope.