This post has been updated, 7:05 p.m.
The Trump administration on Thursday announced sanctions against Chinese entities accused of aiding North Korea’s illicit nuclear and missile programs. The action is a sharp turn in President Trump’s approach to China and the beginning of a new and unpredictable effort to use sticks instead of carrots with Chinese President Xi Jinping.
The new sanctions against one Chinese bank, one Chinese business and two Chinese individuals are not a total surprise. Last week, Trump tweeted that he appreciated Xi’s efforts on North Korea but “it has not worked out.”
Trump officials presented the new sanctions as focused on North Korea and not Beijing. “We are in no way targeting China with these efforts,” Treasury Secretary Steven Mnuchin said at a news conference Thursday. “We appreciate their work and hope they will continue to work with us.” He said administration officials would be meeting with Chinese officials on the sideline of the Group of 20 meeting to discuss further ways to stop North Korea’s illicit activities.
But behind the scenes, officials said that the decision to unveil the new sanctions came after a good faith effort to identify Chinese firms the United States believes are undermining international sanctions against the Kim Jong Un regime and press Xi’s government to take action.
The United States submitted a list of such firms to China and gave Beijing 30 days to respond, officials said. Beijing did respond, with a report on actions it claimed to be taking, but the Trump administration found the response to be insufficient. Today, the Treasury Department was set to announce it was moving forward without Beijing’s cooperation.
“Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a finding that Bank of Dandong, a Chinese bank that acts as a conduit for illicit North Korean financial activity, is a foreign bank of primary money laundering concern, and FinCEN has proposed to sever the bank from the U.S. financial system,” the Treasury Department said in a notification.
In addition, Treasury’s Office of Foreign Assets Control (OFAC) designated two Chinese individuals and one Chinese company “in response to North Korea’s ongoing WMD development and continued violations of UN Security Council resolutions,” the notification stated.
Lawmakers and experts praised the move as a sign that Trump’s previously announced policy of “maximum pressure” on Pyongyang was now materializing.
“It’s a great step forward and this shows that maximum pressure is not just rhetoric,” Senate Foreign Relations East Asia Subcommittee Chairman Cory Gardner (R-Colo.) told me. “I hail this first decision, but there are more sanctions that need to be done. This is a dial that now we’ve started turning and we need to amp it up.”
Last year, the Obama administration placed sanctions on and indicted the chief executive of Dandong Hongxiang Industrial Development, a company accused of undermining North Korea sanctions. But Thursday’s actions mark the first time the Trump administration has directly confronted Chinese sanctions busting.
The goal is still to convince Xi that working with the United States to increase pressure on North Korea is in China’s interest, experts said. So far, Xi hasn’t shown signs he agrees and these limited efforts are not likely to change his overall calculus.
“The reality is that China has not taken what is the most important step, which is shutting down North Korean access to Chinese banks and front companies that enable them to launder money and continue their illicit activities,” said Bonnie Glaser, senior fellow at the Center for Strategic and International Studies. The sanctions announced Thursday “are not enough, we still need China to act.”
These sanctions are a good but limited step, she said, but show that the Trump administration has changed course and is now heading down the road of increasing pressure on third-party countries that allow their people and businesses to do illicit transactions with the North Koreans.
“The real problem with these banks in Northeast China is, you can shut them down and they just pop up somewhere else and we’ll just be playing whack a mole,” said Glaser.
And although the Trump administration may be thinking that confronting China on North Korea can be accomplished without upsetting other parts of the U.S.-China relationship, that is not likely what will happen. That’s because other contentious bilateral issues are also heating up, including the South China Sea and Taiwan.
“There will be a much more contentious relationship going forward,” said Glaser. “The trajectory of the relationship is going to be towards more strategic competition.”
But supporters of the policy place the blame for that potential development squarely on the Chinese side. Asked if Trump’s actions will threaten greater tension in the U.S.-China relationship, Gardner said: “That’s a risk that China has apparently deemed is okay.”