Chinese regulators appear to have issued a warning to North Korean banks, cautioning them to operate within their legal boundaries or risk harsh penalties from Beijing.
According to a report by Yonhap, a South Korean news agency, Tanchon Commercial Bank, Korea Kwangson Banking Corp, Korea Daesong Bank and Golden Triangle Bank have received notices from the China Banking Regulatory Commission ordering them to conduct business according to their permits.
Citing an unnamed Beijing-based source, Yonhap said the banks had been named in United Nations and U.S. sanctions for aiding Pyongyang in its nuclear and missile programmes.
Chinese authorities have so far turned a blind eye to the short-term lending and remittance operations by the banks, said the report, which may have allowed the North to save on fees and have access to preferred exchange rates. Such activities are, however, illegal because the banks are not licensed.
"These Chinese measures that ban illegal operations by North Korean banks in China came about as part of implementing UN Security Council resolutions, so it would be difficult to see them as bilateral sanctions imposed by China," said the North Korean source in Beijing. "China is in effect putting pressure on North Korea by saying they'll do things according to the law."
Chinese officials, including the CBRC, did not confirm the Yonhap report. "But I want to stress that China is a responsible country and has consistently, in accordance with domestic law and including the UN Security Council resolutions and its international obligations, handled the relevant problem," Chinese Foreign Ministry spokesman Hong Lei told reporters in Beijing.
On Tuesday evening, South Korea’s foreign minister Yun Byung-se, had a 40-minute phone conversation with his new Chinese counterpart, Wang Yi, calling for Beijing to stringently enforce the UN sanctions on Pyongyang. Both diplomats agreed to cooperate to peacefully resolve tensions, officials said.
Since the North's first nuclear test in 2006, Pyongyang has been hit by heavy UN sanctions, but it was believed that the isolated regime bypassed the sanctions through trade with China, its last-remaining major ally and benefactor.
In the past, China was accused by critics of blunting international sanctions by providing aid to its impoverished neighbour.
Bilateral trade between China and the North stands at almost $6 billion a year, accounting for 70 percent of Pyongyang’s total trade.