Chinese Banks Stop Transfers to N. Korea

BEIJING (AP) -- Chinese banks have stopped financial transfers to North Korea under government orders as part of sanctions imposed for Pyongyang's nuclear test, bank employees said Friday, in a possibly serious blow to the country's frail economy.

China is North Korea's main trading partner and aid donor, and the disruption of financial transfers is a forceful expression of Beijing's anger at the Oct. 9 nuclear test by its isolated ally. It is a break with China's earlier reluctance to use economic pressure against the North for fear its ally's government might collapse.

All four major Chinese state-owned banks and British-owned HSBC Corp. have stopped financial transfers to the North, according to bank employees in Beijing and the northeastern Chinese city of Shenyang.

"We received a circular recently that banned services from China to North Korea because of the sanctions imposed as a result of the nuclear test," said an employee of the international business department of the Agricultural Bank of China Ltd., in Shenyang. She would give only her surname, Song.

Employees of the Bank of China Ltd., the Industrial & Commercial Bank of China Ltd., China Construction Bank Ltd. and HSBC said they received similar orders and stopped transfers.

"The ban started this week," said a Bank of China employee in Dandong, a Chinese city on the North Korean border. She would give only her surname, Zhang. "We have to wait for notice from higher levels about when to resume these operations."

The bank employees said the orders didn't say how long the suspension would remain in effect.

Spokespeople for the banks' headquarters in Beijing and for China's central bank said they couldn't confirm such an order was issued and had no information on the scale of Chinese transfers to the North.

China also has stepped up inspections of cargo being trucked across the border into North Korea since the U.N. Security Council approved sanctions on the country last Saturday.

China is believed to be North Korea's main link to the world financial system. China's importance increased after Washington imposed sanctions on a Macau bank that served North Korean companies, making other financial institutions uneasy about dealing with Pyongyang.

Washington has long pressured Beijing to use its leverage as the North's main economic partner to compel Pyongyang to return to six-nation talks aimed at ending its nuclear ambitions.

But Beijing has been reluctant to use economic pressure for fear the regime of North Korean leader Kim Jong Il might collapse, setting off a flood of refugees into China's northeast and upsetting Northeast Asia's complex military balance.

But China's anger has grown as Kim's government defied appeals not to conduct its nuclear test and an earlier plea in July not to test-fire ballistic missiles.

Reference : AP(Associated Press)