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The messy data behind China’s growing trade with North Korea

Pedestrians make their way past portraits of late North Korean leaders Kim Il Sung, left, and Kim Jong Il in Pyongyang on Dec. 1, 2016. (Ed Jones/AFP)

After North Korea tested an unprecedented intercontinental ballistic missile  July 4, President Trump took to Twitter to voice his ire.

However, his target wasn't just Pyongyang, which has  ignored multiple warnings from the international community to rein in its missile program, but also Chinese leaders in Beijing that he felt had let him down.

“Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us — but we had to give it a try,” Trump tweeted  Wednesday.

The White House did not respond to requests to clarify where Trump received this trade information from, but the Chinese government released data in April that showed that trade with North Korea had grown 37.4 percent during the first three months of this year compared with the same period in 2016.

This apparent increase in trade occurred despite China's announcement in February that it was cutting off coal imports from North Korea in accordance with sanctions imposed by the U.N. Security Council. Coal exports to China are a major part of the North Korean economy and North Korea is China's fourth-biggest supplier of coal.

That announcement had seemed like a turning point for the international community, which had long hoped China would use its considerable economic clout to put pressure on North Korea to drop its weapons programs. But reports that Chinese trade with North Korea is  growing hint at the complexities of China's economic ties to North Korea — and just how difficult disentangling those ties might be.

Even measuring the North Korea-China economic relationship can prove difficult. Benjamin Katzeff Silberstein, an associate scholar at the Foreign Policy Research Institute and co-editor of North Korean Economy Watch, said in a phone call that while the Chinese customs data apparently cited by  Trump were  probably the most accurate data we have, they are still imperfect.

As concern about North Korea deepens, the U.S. and China are at odds

“China’s customs data should be viewed judiciously as we can never be too sure that politics is removed from its customs reporting,” Kent Boydston of the Peterson Institute for International Economics wrote in an email. “It’s worth noting that China has not reported crude oil exports to North Korea since early 2014, but it is quite clear that North Korea is still importing Chinese crude oil.”

Boydston also noted that numbers available at a data portal for Chinese custom data were far lower than those cited by Trump — as low as a 1 percent increase year to year. The reason for this disparity was unclear, as was whether either number was accurate.

If anything, Silberstein said, any official Chinese number was probably too low. “We should see it as a minimum benchmark,” Katzeff Silberstein said.

Claims that North Korean coal imports have been reduced to zero have struck some analysts as ridiculous — especially given a number of witness accounts of coal trucks and trains crossing into China — though there are signs that North Korea's coal-producing northern regions are taking an economic hit. Another key North Korean resource, iron ore, is now being imported to China at a dramatic rate (according to Chinese custom data, an equal amount of iron ore was imported in the first five months of 2017 than in the entire of 2016).

China says it hasn’t imported any coal from North Korea for two months

There's no firm evidence that iron ore was being imported to take the place of coal, but it is one possibility. “If we assume that China wants to somehow make sure that North Korea has an export income at a reasonable level, I think that shifting imports to another good that North Korea has large quantities of makes a lot of sense,” Katzeff Silberstein said.

Katzeff Silberstein cautioned against reading too much into China's custom data, however, noting that they are  influenced by a wide variety of factors including relatively mundane things like commodity prices. The data would also struggle to factor in the illegal or semi-legal cross-border trade that is largely outside the control of the Chinese state.

The degree to which Chinese companies could be compelled to end their economic activity with North Korea is a subject of debate. Last month, a Washington-based research group named C4ADS released a report that suggested that China could target just a few crucial companies and disrupt a larger network. “By being centralized, limited and ultimately vulnerable North Korean overseas networks are, by their nature, ripe for disruption,” the researchers wrote in the report, titled “Risky Business.”

But North Korea has been under sanctions since 2006 and the country has proven itself adaptable, and any further sanctions would have to be well designed. “It's ingrained within the North Korean government mind-set to do things outside of common legal frameworks,” Katzeff Silberstein said.

China does still have considerable economic power — as evidenced recently during a dispute with South Korea over the deployment of a U.S.-led missile defense system in the country. However, North Korea may be a harder sell: China shares a long border with the Hermit Kingdom and is believed to be fearful that its neighbor could potentially collapse, leaving open the possibility of war on its doorstep and huge numbers of refugees entering China.

“Policymakers in the U.S. and elsewhere should be very skeptical that China will ever clamp down on North Korea to the point where it really makes the Kim regime rethink its behavior,” Boydston said. “Beijing is cautious and fears a destabilized regime more than an aggressive, nuclear Pyongyang,” Boydston said.

Whether Trump can persuade Xi Jinping and other Chinese leaders to levy more economic sanctions remains to be seen, but China may already be following a different path. By coincidence, the July 4 missile launch occurred during Xi's trip to Moscow, and Russia and China released an unusual joint statement condemning the launch in the aftermath. Notably, both countries share a border with North Korea — and have sought economic cooperation with it in recent years.

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