China bets Donald Trump won't resort to strike against North Korea

Trucks are seen crossing the Friendship Bridge from the Chinese border city of Dandong to North Korea's Sinuiju, on July 5, 2017.
Trucks are seen crossing the Friendship Bridge from the Chinese border city of Dandong to North Korea's Sinuiju, on July 5, 2017.PHOTO: AFP

BEIJING (BLOOMBERG) - China is betting that US President Donald Trump would not make good on his threats of a military strike against North Korea, with Beijing continuing to provide a lifeline to Kim Jong Un's regime.

Secretary of State Rex Tillerson singled out China and Russia as "economic enablers" of North Korea after Mr Kim on Friday (July 28) test-fired an intercontinental ballistic missile (ICBM) for the second time in a matter of weeks.

While Mr Tillerson said the United States wants a peaceful resolution to the tensions, the top American general called his South Korean counterpart after the launch to discuss a potential military response.

China on Saturday condemned the latest test while calling for restraint from all parties, a muted reaction to Pyongyang's progress on an ICBM capable of hitting the US mainland.

Despite Mr Kim's provocations, analysts said Beijing still sees the collapse of his regime as a more immediate strategic threat, and doubts Mr Trump would pull the trigger given the risk of a war with North Korea that could kill millions.

"The military option the Americans are threatening won't likely happen because the stakes will be too high," said Mr Liu Ming, director of the Korean Peninsula Research Centre at the Shanghai Academy of Social Sciences.

"It's a pretext and an excuse to pile up pressure on China. It's more like blackmail than a realistic option," he said.

Relations between the world's biggest economies have soured after an initial honeymoon between Mr Trump and President Xi Jinping.

The US last month (June) sanctioned a regional Chinese bank, a shipping company and two Chinese citizens over dealings with North Korea, which could be a precursor to greater economic and financial pressure on Beijing to rein in its errant neighbour.

Mr Trump has expressed periodic public frustration with Beijing over the pace of its efforts to curtail Mr Kim. On Saturday, he again linked China's actions to the broader US-China trade relationship.

"I am very disappointed in China," he said in a series of Twitter posts. "Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade, yet they do NOTHING for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem!"

Hours later, Mr Xi called on China to speed up its military modernisation, telling troops at an army parade that "the world isn't safe at this moment".

"A strong army is needed now more than ever," he said, without specifically addressing North Korea or Mr Trump's comments.

Ms Nikki Haley, the US ambassador to the United Nations, weighed in with a Twitter posting on Sunday about being "done talking about" North Korea and that "China is aware they must act" with increased pressure from Japan and South Korea as part of an international solution.

Ms Dianne Feinstein of California, the top Democrat on the Senate Judiciary Committee, said she was "very disappointed in China's response" and that it wasn't firmer or more helpful.

"I think the only solution is a diplomatic one," Ms Feinstein said on CBS's "Face the Nation" on Sunday. She called North Korea's threat "a clear and present danger" to the US and said she hoped new White House Chief of Staff John Kelly, a retired Marine Corps general, will be able to help negotiate to stop the nuclear programme.

China's biggest fears related to North Korea remain a collapse of Mr Kim's regime that sparks a protracted refugee crisis, and a beefed-up US military presence on its border.

It has repeatedly called for both sides to step back, proposing the US halt military drills in the region and North Korea freeze weapons tests.

The US has dismissed that proposal, saying North Korea must first be willing to discuss rolling back its nuclear programme.

On Saturday, the US announced that two Air Force B-1B bombers conducted bilateral exercises with South Korean and Japanese fighter jets in response to the ICBM test.

North Korea is "probably correct" in its view that it can survive sanctions long enough to build its arsenal to the point where the world has to accept it as a nuclear state, according to Mr Andrew Gilholm, director of North Asia analysis at Control Risks Group. The US is likely to make a "dramatic move" this year against China in a bid to stop that from happening, he said.

"If the US really loses patience and moves against major Chinese banks or firms it will certainly impact North Korea's financing, but I don't see Beijing making a radical policy change under that kind of pressure," Mr Gilholm said from Seoul. "It'll likely harden China's insistence that Washington has to deal with Pyongyang, not coerce China into strangling it."

China's relations with its neighbour and ally have become more fraught, though China still accounts for about 90 per cent of North Korea's trade. North Korea warned China of "grave consequences" earlier this year after it banned coal imports, while Beijing's Communist Party media stepped up criticism of Mr Kim's regime.

The latest ICBM test also risks boosting tensions between China and South Korea over a missile shield.  Seoul has partially installed the US' Terminal High Altitude Area Defence (Thaad) missile shield despite Chinese protests.

It had halted that roll out under the new administration of President Moon Jae In, but after the ICBM test, Mr Moon called for talks with the US on temporarily deploying more launchers.

China warned on Saturday that Thaad would disrupt the region's strategic balance.

The US carried out a test of Thaad on Sunday, the Pentagon said in a statement. A medium-range target ballistic missile was launched from a plane over the Pacific Ocean, then tracked and intercepted by a system located in Alaska.

Despite the disagreement over Thaad, on the whole, China probably prefers Mr Moon to the conservative government he replaced in May. Since taking office, Mr Moon has sought to engage North Korea, calling for peace talks and saying he would meet Mr Kim under the right conditions.

Mr Moon's dovish views on North Korea make it likely he will oppose a US missile strike on North Korea. US Marine General Joseph Dunford, chairman of the Joint Chiefs of Staff, also warned in June that an armed conflict with North Korea would leave Seoul facing casualties "unlike anything we've seen in 60 or 70 years".

As relations with the US cool, China has boosted ties with Russia. The countries blocked US-led efforts to expand penalties against North Korea in a draft UN Security Council resolution condemning its first ICBM test on July 4. Those ties are likely to strengthen after Mr Trump said he would tighten sanctions on Russia for meddling in the US election and aggression in Ukraine.

To placate Mr Trump, China will likely take some moderate measures against North Korea without doing anything that could collapse the regime, said Mr Gilholm from Control Risks.

"China has a lot of room to step up pressure on Pyongyang while staying well short of a really destabilising 'cut-off'," he said. "Personally I don't think North Korea is going to roll over and give up its nuclear survival card even under a life-threatening level of economic pressure."