China is apparently preparing to increase economic and diplomatic pressure on North Korea. This is in response to recent North Korean missile and nuclear tests and North Korea ignoring Chinese criticism and advice. China is apparently now cracking down on North Korean use of Chinese banks. China has long tolerated North Korea using Chinese banks to avoid a growing list of international sanctions. In northeast China, where a lot of this illegal banking takes place, North Korean bank accounts are being emptied. Some of the cash is being switched to accounts owned by locals who have no obvious connection to North Korea. But a lot of the cash is staying cash and despite the risk of theft or getting caught by the Chinese police, North Korea is preparing to use cash transactions despite China now enforcing banking sanctions.
China and Russia both agree that North Korea having nukes is a bad thing but China is more concerned about this than Russia or anyone else. China long refused to back the strict UN sanctions on North Korea believing it could persuade North Korea to behave and fix its economy. The United States has been increasingly public in its criticism of the Chinese approach. Since 2015 China has, with little fanfare, been acting on the American requests. This included more public criticism, via state controlled media, of the North Korean leadership. China quietly cracked down on some of the illegal trade with North Korea resulting in overall trade declining 15 percent in 2015. That did not seem to have any impact. Then in late 2015 China announced that if North Korea continued work on its nuclear and ballistic weapons programs North Korea could no longer depend on support from China if North Korea got involved in a war. To emphasize that point China quietly increased cargo checks and border security on the North Korean border with an emphasis on stopping the North Korean smuggling of weapons and technology that is normally tolerated. North Korea may be able to ignore Chinese criticism but they cannot ignore the special kinds of economic pain China can inflict. So far this year North Korea has responded with another nuclear test and another long range ballistic missile test.
There are limits to what can be done. China could cut off all trade, which would cause a major economic crisis in North Korea and China would have to clean up the mess if there were a political collapse in North Korea. Chinese trade is essential for North Korea. While that trade only amounts to about five billion dollars a year, it is over 70 percent of North Korean foreign trade. An even bigger problem is that China has not shipped any petroleum products to North Korea for two years. There has been some smuggling, but China since has been the major source of oil for North Korea since the 1990s. This fuel embargo created major problems for the economy and the military. Officially the North Koreans have not backed off because of these Chinese moves. Unofficially there have been a lot of secret negotiations going on between North Korea and China. Both countries know that they need each other and want to reach some sort of deal but so far the North Koreas see nukes and ballistic missiles as essential for the survival of the ruling Kim dynasty.
As a side effect of the North Korean mess China is becoming more hostile to South Korea over missiles defense. Because of the latest North Korean nuclear and ballistic missile tests South Korea has sped up its efforts to obtain and put into service the American THAAD anti-missile system. China and Russia joined North Korea in opposing THAAD. South Korea wants THAAD for protection from North Korean missile attack and has openly rejected Chinese objections, even though China has hinted that failure to drop THAAD might result in less trade with China. That was a signal to South Korean voters to carefully consider the cost of defying China. The Chinese will not come right out and say it but they object mainly because THAAD would also make South Korea less vulnerable to intimidation by Chinese ballistic missiles. South Korean voters understand that so the economic threats are having less impact that China expected. South Korean public opinion polls show voters are even more enthusiastic about the high tech and very expensive (over $100 million per launcher and associated equipment) THAAD system now that North Korea has launched another ballistic missile.
South China Sea Arms Race
China quietly installed a battery of HQ-9 long range antiaircraft missiles on Woody Island in the South China Sea. The HQ-9 is roughly equivalent to the U.S. Patriot. This is a Chinese designed and manufactured system what was introduced in 2001. While never used in combat it has been noted that HQ-9 appears to have benefitted from data stolen from similar American and Russian systems. The radar apparently derived much technology from that used in the Russian S-300 system. The HQ-9 missile has a max range of about 100 kilometers, weighs 1.3 tons and has a passive (no broadcasting) seeker in the missile. This deployment is apparently an answer to increasing American flights through international air space in the South China Sea that China now claims as Chinese territory. While the presence of the HQ-9 will probably not stop American military flights, commercial aircraft will probably comply with Chinese demands that they ask for permission before flying through the South China Sea. To emphasize that point China also began operating navy warplanes (J-11s and JH-7s) from the air strip on Woody Island. Throughout 2015 the airstrip and facilities on Woody Island were upgraded to handle warplanes.
China has also been training its marines to operate in the South China Sea. Chinese marines are not stationed where they could be used for an invasion of Taiwan but in the south, where they can grab disputed islands in the South China Sea. China has also amassed a large fleet of navy and coast guard ships and aircraft in the area.
A more public reaction to refusal of foreigners to acknowledge Chinese claims on the South China Sea was seen on February 7th when the Chinese military was ordered to a higher alert level. This is rarely done, especially during the Spring Festival (“Chinese New Year” in the West). Inside China this higher alert level during the biggest national holiday was seen more as a warning to the military to cooperate with the anti-corruption effort the government has imposed on the military. Corruption and slowed economic growth are the biggest threat for most Chinese and the government is trying to fix both problems without letting it become too obvious that government mismanagement is the main cause of all these problems.
Despite all this American military commanders in the Pacific have gone on record that the United States considers North Korea, not China, the biggest military threat in the region. China considers the United States a more immediate threat than North Korea which, no matter what it does, is still a miniscule military threat to China. Other nations bordering the South China Sea are more concerned about the Chinese threat and look to the United States for help.
Despite the priority attached to the North Korean threat American military leaders point out that the biggest problem with China is not the growing quantity of Chinese ships and warplanes but the increasing quality of those systems. This is being used to pressure the American government to get into an arms race with China to maintain or improve the American (and Western) military tech advantage.
An example of this is the fact that China is developing two stealth warplanes. The 25 ton J-31 first flew in 2012 and the 32 ton J-20 in 2011. There are eight prototypes of the J-20 and apparently at least one pre-production model. Both the J-31 and J-20 are expected to enter service by the end of the decade. Japan is also developing a stealth fighter which, if it is completed, won’t enter service until the late 2020s. Russia is developing one as well and hopes to have it in service by the end of the decade. Meanwhile the United States has had stealth warplanes since the 1980s and is the only nation with operational stealth aircraft as well as combat experience with this tech.
In southwest Pakistan (near the Iran border) several hundred additional police and soldiers have recently arrived to provide more security for the growing Chinese workforce in Gwadar, a city of 100,000 and site of one of the biggest construction projects in the country. Pakistan has assured China that there would be no terrorist violence against Chinese working on upgrading the port of Gwadar. This is a key part of the $46 billion China-Pakistan Economic Corridor (CPEC). This project began in 2013 when China agreed to spend $18 billion to build a road from Gwadar into northwest China. This will require drilling long tunnels through the Himalayan Mountains on the border (in Pakistani controlled Kashmir.) The road and a natural gas pipeline are part of the larger CPEC project. This will make it much easier and cheaper to move people, data (via fiber optic cables) and goods between China and Pakistan. China also gets a 40 year lease on much of the port facilities at Gwadar, which India fears will serve as a base for Chinese warships. The thousands of Chinese coming into Pakistan for this project will be prime targets for Islamic terrorists and tribal separatists in Baluchistan (southwest Pakistan). The people in Gwadar will benefit greatly from the construction and the expanded port. Because of that Pakistan is recruiting another 700 local policemen, whose intimate knowledge of the area will be key in keeping the peace. These new police will serve in a unit dedicated to keep the foreign (mainly Chinese) workforce safe.
February 24, 2016: China and the United States agreed on new sanctions against North Korea. This agreement was the result of meetings and negotiations that began shortly after the January 6th North Korean nuclear test. In the past China has made a show of reluctantly going along with more sanctions on North Korea but this time China is making it clear that it is behind the latest round of sanctions and responsible for suggesting some of them. The message to North Korea is that China will not look the other way on any of these new sanctions, or most of the existing ones either.
February 8, 2016: In northwest India the first joint military exercise between Chinese and Indian troops took place. Thirty troops from each country spent the day doing joint disaster relief chores. The object of the drill (aside from the diplomatic benefits) was for both sides to discover and eliminate any differences in procedures that would disrupt future joint operations along the border area. Earthquakes are frequent in the area as are avalanches.
February 2, 2016: Two Chinese warplanes entered South Korean air space near Suyan Rock (also called Ieo Island or Ieodo). The Chinese pilots apparently soon noted their error and left before South Korean jets could arrive to challenge them. China later denied that the incident even happened and none of their aircraft violated anyone’s air space. Ieodo is actually a submerged (nearly five meters under water) rock in the East China Sea that is 150 kilometers from South Korea and 245 kilometers from China. In 1987, South Korea built a warning beacon on the rock, which is a navigation hazard to large ships. South Korea officially claimed Ieodo in 1951 and China officially challenged that claim in 1962. In 2006 the Chinese agreed not to challenge South Korean claims to Ieodo, which are supported by the international community. But in 2008 China renewed its challenge apparently as part of a more general campaign that included claims to all of the South China Sea and large chunks of India.