|

US could struggle to re-isolate North Korea as Kim turns to China for help with economic transformation

As reported by Reuters, US President Donald Trump could find difficulties re-isolating North Korea if the upcoming Trump-Kim summit takes a turn, as North Korea's leader has been seen making economic planning pals with China's Xi Jinping.

Key quotes

"U.S. President Donald Trump may have promised that North Korea will become “very rich” on the back of American investment if Pyongyang ditches nuclear weapons but economists and academics who have studied the isolated country say it is China not the U.S. that will be the engine of any transformation.

The nearest template would not be based on American-style capitalism, but China’s state-controlled market economy first championed by Deng Xiaoping, who became China’s leader in 1978, these experts said. And in the run up to the unprecedented summit between Trump and North Korean leader Kim Jong Un on Tuesday in Singapore, it has been China that Pyongyang has been increasingly turning to. Kim has made two visits to meet Xi since March, while a high-level delegation from his ruling Workers’ Party toured China’s industrial hubs in an 11-day visit in May that focused on China’s high-tech urban transport and latest scientific breakthroughs.

That delegation went to China only weeks after Kim declared an end to nuclear and missile tests and vowed an all-out effort toward “socialist economic construction.” Chinese media labeled Kim’s announcement North Korea’s “opening and reform”, shorthand for Deng’s policies, sparking a flurry of investment in housing in Dandong, the Chinese border town.

“Kim is talking to Trump because he needs to get the United States to back off sanctions. After that, headlines will be all about Kim and Xi Jinping,” said Jeon Kyong-man, an economist at the Institute for Korean Integration of Society, with reference to the Chinese president.

Across the region, there are signs that U.S. President Donald Trump’s campaign of “maximum pressure” on Pyongyang to give up its nuclear weapons is weakening ahead of his summit with North Korean leader Kim Jong Un in Singapore on Tuesday.

Trump, along with leaders like South Korea’s President Moon Jae-in, have credited the pressure campaign with bringing Kim to the negotiating table through a combination of international sanctions, political isolation, and threats of military action. However, unless there is a major provocation or resumption of nuclear testing or missile launches by North Korea, strategists and academics say it is unlikely that maximum pressure will ever fully return. “Trump’s campaign is over,” said Kim Hyun-wook, a professor at the Korea National Diplomatic Academy. “The diplomatic openings with North Korea have already been taking a toll on the maximum pressure campaign.”

Preparations are already underway in China, South Korea and Russia, which share land borders with North Korea, for better ties with the isolated nation.

Diplomats say all the major players, including Russia, China, and South Korea, are expected to continue to enforce the letter of any United Nations sanctions. Beyond sanctions, U.S. officials say they successfully persuaded more than 20 countries to downgrade or end diplomatic ties with North Korea. Some of that political isolation has been reduced, however, by Kim Jong Un’s meetings with leaders of China and South Korea, and this week’s summit with Trump."

Author

Joshua Gibson

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

More from Joshua Gibson
Share:

Editor's Picks

GBP/USD revisits 1.3530; Dollar pushes harder

GBP/USD adds to the weekly correction and recedes toward the 1.3530 zone on Friday. Indeed, Cable faces increasing selling pressure on the back of extra gains in the Greenback, particularly fuelled by Chair Warsh’s speech at the Jackson Hole Symposium and the US NFP Annual Revision (-79K).

EUR/USD breaches below 1.1600, multi-day lows

EUR/USD now accelerates its decline and retreats to seven-day troughs in the sub-1.1600 region at the end of the week. The pair’s pullback comes on the back of the strong rebound in the US Dollar after Chair Warsh delivered a hawkish message in Jackson Hole, while the US NFP Annual Revision came in at -79K.

Gold challenges its 200-day SMA near $4,530

Gold’s decline gathers fresh steam, hitting weekly lows while disputing its critical 200-day SMA near $4,530 per troy ounce. The yellow metal’s increasing weakness comes in response to the generalised upbeat tone in the US Dollar and the widespread rebound in US Treasury yields, as investors continue to reprice a Fed rate hike in September.

Crypto Today: Bitcoin, Ethereum, XRP rally loses steam despite steady ETF inflows

Bitcoin is back below $80,000 at the time of writing on Friday, after a second attempt at breaking resistance between $81,000 and $82,000. Meanwhile, Ethereum and Ripple mirror Bitcoin’s cooling trend, with ETH sliding to $2,500 and XRP falling toward $1.40 support.

Week ahead – RBNZ and BoC decide on rates ahead of all-important US NFP

Dollar rebounds ahead of ISM PMI and NFP data. RBNZ is expected to raise rates; focus to fall on forward guidance. BoC is set to remain on hold; will it raise rates in 2027?

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.