|

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:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD clings to small gains near 1.1750

Following a short-lasting correction in the early European session, EUR/USD regains its traction and clings to moderate gains at around 1.1750 on Monday. Nevertheless, the pair's volatility remains low, with investors awaiting this weeks key data releases from the US and the ECB policy announcements.

GBP/USD edges higher toward 1.3400 ahead of US data and BoE

GBP/USD reverses its direction and advances toward 1.3400 following a drop to the 1.3350 area earlier in the day. The US Dollar struggles to gather recovery momentum as markets await Tuesday's Nonfarm Payrolls data, while the Pound Sterling holds steady ahead of the BoE policy announcements later in the week.

Gold stuck around $4,300 as markets turn cautious

Gold loses its bullish momentum and retreats below $4,350 after testing this level earlier on Monday. XAU/USD, however, stays in positive territory as the US Dollar remains on the back foot on growing expectations for a dovish Fed policy outlook next year.

Solana consolidates as spot ETF inflows near $1 billion signal institutional dip-buying

Solana price hovers above $131 at the time of writing on Monday, nearing the upper boundary of a falling wedge pattern, awaiting a decisive breakout. On the institutional side, demand for spot Solana Exchange-Traded Funds remained firm, pushing total assets under management to nearly $1 billion since launch. 

Big week ends with big doubts

The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.

Solana Price Forecast: SOL consolidates as spot ETF inflows near $1 billion signal institutional dip-buying

Solana (SOL) price hovers above $131 at the time of writing on Monday, nearing the upper boundary of a falling wedge pattern, awaiting a decisive breakout.