HOW LONG WILL CHINA SUPPORT NORTH KOREA? / GEOPOLITICAL FUTURES

How Long Will China Support North Korea?

It isn’t always easy for Beijing to back such an unpredictable regime.

By: Victoria Herczegh

On Sept. 3, North Korean leader Kim Jong Un appeared side by side with Chinese President Xi Jinping at a military parade in Beijing. 

Also present was Kim’s daughter, Kim Ju Ae, who had never before been introduced to the public. 

The appearance followed several days’ worth of meetings, mutual praise between the two leaders and several months' worth of increased bilateral trade, culminating in a nearly 30 percent year-over-year increase ($228.9 million) in June.

Reports published in August suggest the North Korean economy – no stranger to calamity – is nevertheless strained. 

It’s experiencing a long bout of severe inflation amid the strengthening of the dollar, and major military and construction projects are sucking up valuable resources. 

To be sure, data on North Korea’s economy is notoriously scarce. 

Pyongyang tightly controls information and blocks independent reporting, and it is more isolationist than most authoritarian regimes. 

What the rest of the world knows of North Korea, especially its economy, is generally stitched together by satellite imagery, defector testimony and limited reporting. 

It isn’t a pretty picture, and North Korea’s frequent economic crises only add to the regime’s unpredictability.

Its only allies of note are Russia and China. 

With Russia preoccupied in Ukraine, China is the only country with the means and resources to support Pyongyang through trade and investment. 

Chinese support isn’t merely charitable; North Korea has long been a crucial buffer against U.S. forces stationed in Japan and South Korea, essentially preventing encirclement by U.S. allies and protecting the Chinese sphere of influence. 

It’s also a convenient destination for Chinese largesse meant to show the world Beijing is rich and successful enough to support weak and even unpredictable countries.

But it seems as though Chinese investment in the North has slowed, highlighting both the limits of China as an economic powerhouse and the challenges of Pyongyang’s economic model. 

Put simply, the North Korean economy is a highly centralized, state-controlled system dominated by heavy industry, military production and limited agriculture, with minimal integration into the global economy due to decades of self-imposed isolation and extensive international sanctions. 

Rooted in a near-fanatical sense of self-reliance, the state practically owns all means of production. 

This approach is born of its adherence to an ideology known as Juche, which was developed by the nation’s founding father, Kim Il Sung, and states that the Korean people are the masters of the revolution and construction, and they must act independently, without relying on outside forces. 

Its core tenets are political independence, economic self-sufficiency and military self-defense. 

Juche was meant to provide a unifying narrative for resisting foreign domination, but it has also made North Korea deeply isolated and economically inefficient. 

By design, the country has never really had access to critical technologies – replacement parts for machinery, modern equipment, etc. – needed to fully modernize its economy. 

More, the Kim dynasty has prioritized heavy industry and military industry over consumer goods and architecture, so key sectors like coal mining, metallurgy, textiles and agriculture have long suffered from chronic underinvestment, poor infrastructure and outdated technology. 

Coupled with limited arable land, collective farming inefficiencies and a vulnerability to natural disasters, famine and near-famine conditions are a constant feature of the North Korea economy.

It’s little surprise, then, that in the early years of Kim Jong Un’s tenure in the 2010s, North Korea wanted to draw Chinese investment into its struggling economy. 

Kim was under pressure to deliver economic improvements to consolidate his legitimacy, especially as the country’s economy was still reeling from a famine in the 1990s. 

Kim’s efforts were part of a broader attempt to modernize the economy and reduce dependence on aid by encouraging limited foreign capital. 

Special economic zones based loosely on China’s early reform-era zones were created, offering tax incentives, infrastructure development and, in theory, fewer business regulations. 

The North also granted Chinese companies port access at Rajin, allowing Beijing to ship coal and goods through the Sea of Japan. 

Attempts were also made to improve cross-border infrastructure, including at the New Yalu River Bridge, and investment seminars and trade fairs were also held, attracting delegations from the Chinese provinces of Liaoning and Jilin. 

Pilot programs of Chinese-style agricultural reforms were introduced, and the leadership also encouraged semi-private markets, which were tolerated and even regulated more clearly.

Initially, China welcomed these initiatives enthusiastically. 

Its economy was growing rapidly, and it was eager to spread its influence as a global investor. 

But investment never really took off. 

North Korea’s business environment was still too unpredictable, international sanctions were still too strict, and Pyongyang itself was still too distrustful of foreign influence. 

The special economic zone along the Hwanggumpyong and Wihwa islands, for example, stalled almost immediately because North Korea was unwilling to grant sufficient economic autonomy or the necessary legal means for dispute settlement to Chinese companies. 

Similarly, the Sinuiju special economic zone collapsed after North Korea revoked permissions and cracked down on foreign involvement. 

The bottom line is that Chinese firms have had to take extraordinary risks to do business in North Korea: unexpected cancellations of agreements and joint ventures, asset seizure, poor contract enforcement, bad infrastructure, and potentially running afoul of U.N. sanctions. 

Investor sentiment fell even lower in 2013, when Kim executed his uncle, Jang Song Thaek, a staunch advocate of deeper Chinese-Korean ties.

Even now, despite its heavy reliance on China’s economic support, the North eschews any sort of liberalization and refuses to grant China more influence. 

When Pyongyang does accept Chinese support on some project, it often changes its mind later, wrecking the deal and leaving its Chinese partner with substantial financial losses. 

Take mining, for example. 

Even before the North’s controlled opening-up in the 2010s, capital- and technology-starved Pyongyang granted long-term extraction rights and favorable joint venture terms to Chinese firms willing to help develop the North’s reserves of iron, molybdenum, gold, copper and coal. 

(China’s growing appetite for resources meant plenty of companies were eager to dive in.) 

In 2007, North Korea awarded a consortium that included China’s Tonghua Iron and Steel Group the rights to explore the Musan iron mine for 50 years. 

The more than $900 million deal involved major investments in infrastructure, including railways to transport iron ore to China. 

But just two years later, Pyongyang terminated the agreement without explanation (though the global decline in iron ore prices was likely a significant factor). 

Although the mine continued to export iron ore to China, Beijing suffered significant revenue loss from the termination of the agreement and further losses from the infrastructure investment that went idle.

After the Musan mine incident, Chinese firms started demanding safer guarantees or running their investments in North Korea through intermediaries to reduce their exposure. 

Still, investments often didn’t pan out. 

China’s Xiyang Group struck a deal on an iron mining and processing venture, only for North Korea to block Xiyang’s access to the mine after a processing plant had been built. 

Xiyang eventually was forced out of the project without compensation. 

Another project, the New Yalu River Bridge, linking Dandong and Sinuiju, has been awaiting completion on the North Korean side since 2020. 

With bilateral trade rebounding, the North resumed building roads and customs facilities in February 2025, but the bridge remains unfinished – apparently a bargaining chip for Pyongyang in its diplomatic relations with Beijing.

Despite these betrayals, China needs North Korea. 

It needs stability on the Korean Peninsula, it needs the North to act as a buffer against U.S. forces in the South, and it hopes that its influence over Pyongyang can serve as leverage in its dealings with Washington. 

Having some business deals fall apart because of North Korean duplicity is a small price to pay for security and power. 

It certainly has not deterred many Chinese operations. 

Chinese investors looking to export heavy construction equipment or tap North Korea’s mineral resources have poured into the country since the start of the year, and recently, a company based in Jilin province sent Pyongyang a proposal for a joint stone processing venture.

Of course, China is careful to avoid truly large-scale ventures in North Korea due to the threat of U.S. and U.N. sanctions, but the main constraint on Chinese investment in the North is Pyongyang’s own leadership. 

In addition to his concerns about dependence, Kim believes that if he relaxes his control on the economy in any meaningful way, more pro-market political factions could emerge. 

His fears are especially relevant now, amid signs that a rival faction already exists. 

Likely in response to this threat, the Kim regime has just tightened its grip on trade once again, probing major trading companies in North Pyongan province in charge of trade with China. 

Senior officials on both sides are already lamenting the risk of lasting damage to their trade ties.

North Korea is weak, but it has always bounced back from its worst economic episodes with just enough trade and other assistance from China. 

However, this is hardly an ideal position for Beijing. 

Self-designated as the nation always ready to aid smaller states in need, China must tolerate unusually high risk when it comes to these strategic investments. 

So far, this arrangement has worked for both sides: Beijing retains influence, and Pyongyang gets enough aid to survive without needing to liberalize. 

But North Korea’s unpredictable nature could come back to bite China, giving it ample reason to keep a close eye on its neighbor.