Fire and Kimche

Fire and Kimche

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It's all about North Korea this week, boys and girls, and the key development is that now it is not just one crazy leader shouting about fire and fury, but two. The official party cartoons-in-textual form publication, Global Times, was used as the conduit for getting the key message out, and it was as expected. If North Korea attacks the US first, as Kim has threatened, then China will not intervene. But if the US attacks North Korea first, as Trump seems to suggest is a possibility, then China will stand with North Korea. 

North Korea's current nuclear warhead capabilities and the intercontinental missiles it has developed are extensions of a process of developing nuclear attack capability that the Kims have pursued for decades. But the bottom line, we believe, is that as long as North Korea simply engages in rhetoric, missile tests and military parades there is no reason to react in any substantial way. They are extreme, they are operating well beyond the norms of the international community, but they are not suicidal. Mr Kim surely recognizes that if he does anything which can be characterized as an attack on any US assets or territory, or in fact does anything militarily that goes beyond posturing, he is finished. And as China now states clearly, they will not protect him. 

The problem for Beijing for more than 30 years, since it emerged from the Maoist madness that North Korea still suffers from in a variant form, has been what to do about Pyongyang.  The North Korean regime relies heavily on China, which accounts for more than 90% of its total trade volume. The only substantial international banks and trading companies that will deal with Pyongyang are Chinese. In terms of food supplies and energy supplies, China has its fingers around North Korea's neck. But Kim has made it blindingly clear that he will not accept orders from Beijing. The execution of his uncle in 2013 and the assassination of his half-brother last year, both of them aligned with Beijing, made that point in an unmistakable way. So China is faced with a dilemma. It has the power to only bring North Korea's economy to its knees, with little or no negotiating room beyond. To do that would create an unacceptable choice for the Chinese. If North Korea collapses, the only alternatives would appear to re-unification with South Korea, or a Chinese military occupation and the installation of an alternative regime that was Beijing-friendly. 

Re-unification of North and South Korea sounds like a good idea in theory, but it would create an entity that China does not wish to exist—a strong, independent-minded nation right next door. But the alternative of a Chinese occupation and a regime change operation is even more fraught with uncertainties. 

What is the right way to deal with all this? Trump put huge pressure on the Chinese, and nothing happened because the Chinese do not have the power to rein in Kim, only to squash him. Sanctions against North Korea are going to be ramped up, and Chinese state firms dealing with Pyongyang are going to find it increasingly difficult to avoid consequences. 

Our view, on balance, is that pressing on with sanctions, forcing them to accept a new approach is really the only option available to the world, including China. 

This is a game that is getting increasingly worrying for China because of the implications for itself. China's strategy throughout has been to maintain North Korea as a buffer state, neither successful nor collapsed, stable in its instability. But instability is inherently unpredictable. And Those in Command hate unpredictability. It's a thorny one, and the timing is all off, too, given that the 19th Party Congress is bearing down on us.

Not much to chuckle about there, for which our apologies. it's not often we face the prospect of all-out war. Here's hoping for a peaceful weekend.