Cash for Influence

China stands to gain clout with a bigger financial foothold in North Korea.

China-NK-305.jpg Wang Jiarui (L), head of the International Liaison Department of Chinese Communist Party, walks with Kim Jong-Il (C) in Pyongyang, Feb. 8, 2010.

SEOUL—China's reported plans to invest billions of dollars in North Korea reflect Beijing's bid to prop up the regime and keep a dominant role in the region rather than to lure Pyongyang back to multilateral talks, analysts say.

A number of state-owned Chinese banks and other companies are close to a deal to invest nearly U.S. $10 billion in North Korean infrastructure, after talks with the official Pyongyang-based Taepung International Investment Group, Seoul’s Yonhap news agency has reported.

The report couldn't be immediately confirmed.

The investment earmarks funds to build railroads, harbors, and homes in North Korea, the report said, adding that more than 60 percent of the investment would be put up by Chinese banks.

The deal, with North Korea’s State Development Bank, is expected to be signed next month, Yonhap said.

Winston Yang, a China analyst and professor emeritus from Seton Hall University, gave three reasons for the injection of Chinese funds into North Korea.

"The first is that it will increase [Beijing's] control over North Korea and its influence there. The second is that Beijing fears that Kim Jong Il will fall from power,” Yang said, adding that North Korea’s current economic woes have left millions hungry.

“The third reason is, I believe, that there is a sense in which it goes against the wishes of the United States,” he said.

Yang cited strains in U.S.-China ties stemming from U.S. arms sales to Beijing's arch-rival Taiwan, a threat from Google to withdraw from China, and a meeting between U.S. President Barack Obama and Tibet's exiled leader, the Dalai Lama.

“Of course the U.S. wants to push for a positive outcome to the six-party talks,” he said, referring to internationally brokered talks to denuclearize the Korean peninsula.

“China isn't so keen, but it doesn't want to make a clean break, so it's dragging its feet on the North Korean and the Iranian nuclear talks. It hasn't really done much to help the U.S., because it thinks that the U.S. hasn't done much to safeguard China's core interests,” he said.

Preventing a collapse

June Dreyer, a political scientist at the University of Miami, said the investment aims to boost Chinese influence in North Korea while also preventing Kim Jong Il’s regime from collapsing.

“If the North Korean government were to fall, then South Korea would probably seek to take back the North, and a much stronger Korea would pose a much bigger challenge for China,” Dreyer said.

“Beijing has always felt that a unified Korea would be like a dagger pointing straight at China's heart.”

John Park, senior researcher at the Washington-based United States Institute of Peace, called the proposed investment a violation of U.N. sanctions imposed following several North Korean missile launches and a nuclear test it held last year.

“The fact that this is being framed as Chinese investment in North Korean transportation infrastructure and housing—that is a very focused approach to make sure it doesn’t look like they are violating sanctions,” Park said.

Park said Beijing is in a period of “rebuilding the Chinese Communist Party to Worker’s Party of Korea relationship,” and called Chinese Premier Wen Jiabao’s visit to Pyongyang last year a “high point” in bilateral ties.

But he said now is the time for “implementation,” adding that more deals are likely to be signed over the next two years, taking precedence over larger regional goals.

“If you look at the priorities for the Chinese, it is very important to continue with denuclearization and the six-party talks, but having a stable bilateral relationship with North Korea is more important,” Park said.

“If you look at China as trying to increase stability in the region, and specifically with North Korea, it’s very prudent for the Communist Party of China to do what amounts to a bailout...The idea is that it will increase the stability of the Worker’s Party of Korea,” Park said.

“This is the broader Chinese thinking—if China can help with these types of investments and economic development, then North Korea will feel less of a need for a nuclear arsenal.”

Six-party talks

News of the deal came one week after North Korean leader Kim Jong Il told high-level officials from Beijing in Pyongyang that he is committed to a denuclearized Korean peninsula.

Afterwards, Kim sent his top nuclear negotiator to Beijing to discuss a resumption of six-party talks on shutting down North Korea's nuclear program in return for aid.

China is North Korea's key ally and biggest aid provider, and negotiations with Beijing are most likely to bring the reclusive regime back to six-party talks involving the two Koreas, the United States, China, Russia, and Japan.

After North Korea quit the talks and conducted a second nuclear test last year, the United Nations levied tough sanctions against Pyongyang.

The North Korean regime has called for a removal of the sanctions and peace talks to officially end the 1950-53 Korean War before it will return to talks on denuclearization.

But the United States, South Korea, and Japan demand that North Korea first return to negotiations and offer measurable progress in shutting down its nuclear capabilities.

Seoul’s central bank estimated North Korea’s gross domestic product for 2008 at U.S. $24.7 billion.

Original reporting by Jung Min Noh for RFA’s Korean service and Xi Wang for RFA’s Mandarin service. Korean service director: Bong Park. Mandarin service director: Jennifer Chou. Translated by Luisetta Mudie. Written for the Web in English by Joshua Lipes. Edited by Sarah Jackson-Han.

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