DANDONG, China--The Chinese government has ordered a major Chinese bank to freeze some remittances to North Korea from Dandong, a cross-border trading city.
According to financial sources, Beijing imposed a freeze on certain transactions by the Dandong branch of the China Construction Bank earlier this month after the U.N. Security Council responded to a third nuclear test by North Korea in February with new financial sanctions.
Beijing is believed to have taken the step after assessing Pyongyang's apparent determination to continue nuclear-weapons development and after evaluating the general drift of international opinion.
However, loopholes appear to exist and some insiders believe the ban may have a limited impact.
China Construction Bank has had strong business ties with Korea Kwangson Banking Corp. (KKBC) since December 2008 and played a leading role in handling financial transactions between the two countries.
The sources said China Construction Bank's Dandong branch began suspending cash remittances from bank accounts held by North Koreans on or around March 16, roughly 10 days after the U.N. Security Council adopted a resolution obliging member nations to impose financial sanctions on Pyongyang.
A source at KKBC confirmed the freeze.
"The China Construction Bank stopped financial transactions with bank accounts held by North Koreans in the middle of this month," the source said.
Dandong is a major cross-border trading zone. Seventy percent of China's shipments to and from North Korea pass customs there. The Dandong branch of China Construction Bank serves both Liaoning province, where Dandong is located, and neighboring Jilin province, which shares the border.
In its first year of cooperation with KKBC, China Construction Bank's transactions with North Korea reached 220 million yuan (3.3 billion yen, or $35 million).
The sources explained that foreign banks with branches in China must first send cash to a Chinese bank before they can remit it to their home countries.
But the source at KKBC pointed out a loophole that allows transactions to continue.
"If the account is one held in the name of a Chinese national we can conduct trade as before," the source said. "It will not affect our operations in practice."
One Chinese merchant apparently confirmed this, saying he had already received an amount of money from North Korea since the trade restraint was applied.
"Following the freeze, a North Korean merchant asked to use my name for the transaction, and I received about one hundred thousand yuan from North Korea," he said.
The KKBC office is located in a multitenanted building in Dandong. One customer seen emerging from it told The Asahi Shimbun in Chinese that he had just sent some money to North Korea.
At the entrance was a notice saying the branch would shut temporarily between March 21 and March 25. It was unclear whether there was any connection between this and the government's actions.
Meanwhile, speaking at a news conference in Beijing on March 19, Foreign Ministry spokesman Hong Lei said he could not comment on how financial sanctions were being applied because he himself was not up to speed on the matter. But he said China would be meeting its obligations.
"China is a responsible nation," he said. "We are dealing with issues based on domestic laws and on U.N. Security Council resolutions."
The Chinese government is believed to have warned Pyongyang of the impending freeze before it took place, in order to minimize the impact on cross-border trade.
- « Prev
- Next »