China is North Korea’s biggest trading partner by far, giving the former a great deal of leverage over the behavior of its neighbor.
North Korea got the world’s attention – and President Donald Trump’s – when it said on July 4 that it had successfully launched an intercontinental ballistic missile for the first time. The weapon, potentially equipped with a nuclear warhead, could reach Alaska.
President Trump’s initial reaction included blaming China for letting things get this far. He tweeted that Chinese trade with North Korea “ rose 40% in the first quarter, ” implying that China is reluctant to punish North Korea for continuing to pursue nuclear weapons.
Is he right to call out China’s trade relationship with North Korea, which formally goes by the Democratic People’s Republic of Korea?
While the poor quality of the data on trade between these countries should lead one to be skeptical of any sweeping claims, Trump’s overall sentiment is probably correct. China has increased its trade with North Korea in recent decades and has likely done very little on that front to try to forestall this trading partner’s nuclear ambitions.
Yet a quick look at the data, however murky, shows just how much leverage China has, if it wishes to use it.
In general, exports from one country to another can be mostly explained by the distance between them and the sizes of their markets, a pattern that holds for China and North Korea.
Geographically, they share a large border, which makes China a natural partner for trade. North Korea also abuts South Korea, which doesn’ t trade with its rival, and shares a tiny border crossing with Russia, with whom it trades a little (more on that later) .
China’s large market, proximity and willingness to trade with North Korea has led to a situation in which the latter has become highly dependent on trade with its primary patron. About half of North Korean exports and imports go directly to and from China and much of the rest of its trade is handled indirectly by Chinese middlemen.
North Korea’s dependence on its northern neighbor has grown hand-in-hand with the nascent superpower’s increasing economic dominance of East Asia, which began 15 years ago when China joined the World Trade Organization.
