US, China to step up cooperation on North Korea

[NEW YORK] US President Barack Obama and Chinese Premier Li Keqiang agreed on Monday to step up cooperation in the United Nations Security Council and in law-enforcement channels after North Korea's fifth nuclear test, the White House said.

China and the United States are also targeting the finances of Liaoning Hongxiang Industrial, a Chinese conglomerate headed by a Communist Party cadre, that the Obama administration thinks has a role in assisting North Korea's nuclear programme, the Wall Street Journal reported on Monday.

UN diplomats say the two countries have started discussions on a possible UN sanctions resolution in response to the nuclear test earlier this month, but Beijing has not said directly whether it will support tougher steps against North Korea.

Mr Obama met Mr Li on the sidelines of the annual United Nations General Assembly session in New York.

"Both leaders condemned North Korea's September 9 nuclear test and resolved to strengthen coordination in achieving the denuclearisation of the Korean Peninsula, including by invigorating cooperation in the United Nations Security Council and in law enforcement channels on North Korea," a White House statement said.

China is isolated North Korea's most important diplomatic backer and its biggest trading partner.

It has been angered by Pyongyang's repeated nuclear and missile tests and signed on to increasingly tough UN sanctions, but it has said it believes such steps are not the ultimate answer and called for a return to talks with North Korea.

Chinese Foreign Minister Wang Yi told his Japanese counterpart last week China opposes "unhelpful" unilateral sanctions on North Korea but will work within the United Nations to formulate a response.

Washington has pressed Beijing to do more to rein in North Korea. The United States has said it is willing to negotiate with the North if the country commits to get rid of its nuclear weapons, which Pyongyang has refused to do.

HONGXIANG PROBE

The US Department of Justice (DoJ) is preparing as early as this week to announce legal action against Chinese firms suspected of providing financial assistance to Pyongyang, the Journal reported, citing officials familiar with the matter.

It said DoJ prosecutors visited Beijing twice last month to make their Chinese counterparts aware of alleged criminal activities being committed by Liaoning Hongxiang Industrial.

A social media post last week for the police in Liaoning, the northeastern border province of China, said they were investigating the firm's alleged long-term involvement in "serious economic crimes" and that relevant suspects were cooperating.

A report by Asan Institute for Policy Studies in Seoul and C4ADS in Washington says it identified more than US$500 million in trade from January 2011 to September 2015 between the North and the Liaoning Hongxiang Group, which states on its website that it trades heavily with the North.

The figure includes more than US$360 million in imports from North Korea by one group company, Dandong Hongxiang Industrial Development, an industrial machinery and equipment wholesaler.

"While no judgement is being made on the final use of these funds, trade at this volume is of particular note. By one estimate, this amount would have been almost enough to both fund North Korea's uranium enrichment facilities, and to design, make and test its nuclear weapons," the report said.

Certain assets related to the company, its founder and top executive Ma Xiaohong, and some of her relatives and associates, have been frozen by Chinese authorities in recent weeks, according to government and corporate filings cited by the Journal.

The Asan report said its trading of goods that could qualify as potential military and nuclear dual-use products under US export restrictions were of particular concern. The products have possible use in a nuclear programme, particularly the uranium enrichment programme.

The companies identified have had deals with sanctioned North Korean entities, the report said.

Representatives of the US Department of Justice, Chinese Government and Hongxiang Industrial were unavailable for comment.

The Liaoning Hongxiang Group is also heavily involved in North Korea-related shipping, with Ma and other people associated with the group owning and operating a combined fleet of 10 ships that regularly sail between the North and China.

REUTERS