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China’s Liaoning Hongxiang Group

A Chinese company exported to North Korea a substantial amount of dual-use materials that could be used to produce weapons, according to a new report by an American think tank.

The claim appears in a report titled “Risky Business: A System-Level Analysis of the North Korean Proliferation Financing System,” which was released on June 12 by the Center for Advanced Defense Studies, an American security research institute. After comparing a list of dual-use equipment with items exported to North Korea, analysts from the center found that Chinese company Dandong Dongyuan Industrial had exported US$790,000 worth of radio navigational aid apparatus to North Korea in June 2016.

Radio navigational aid apparatuses are reportedly capable of being used in the guidance system of ballistic missiles. Records indicate that Dandong Dongyuan Industrial exports automobiles, machinery and natural resources to North Korea, the Republic of the Congo and the US, the center said.

The center is a non-profit research institute in the US that only collects and analyzes publicly released information related to security. In Sep. 2016, it released its first report claiming that China‘s Liaoning Hongxiang Group had assisted financial transactions and provided materials connected with North Korea’s nuclear weapons development program. This prompted American and Chinese legal authorities to work together on placing sanctions on the Liaoning Hongxiang Group. Considering these factors, it is quite likely that the US government will use this report as grounds for asking China to investigate and prosecute Dandong Dongyuan Industrial.

The report argues that Dandong Dongyuan Industrial is also linked to Dandong Zhicheng Metallic Material, the largest importer of North Korean coal over the past three years. Furthermore, a Chinese national named Sun Sidong controls 97% of stock in Dandong Dongyuan Industrial. Between Apr. 2012 and Aug. 2014, Sun was the sole owner of the Jie Shun, a ship carrying 30,000 RPG-7 anti-tank projectiles underneath a load of iron ore that was seized in the Suez Canal in Aug. 2016. This implies that Sun is closely involved in business with North Korea. Sun is also registered as the president of a company based in the US, the report said.

While Chinese companies accounted for 85% of trade with North Korea as of 2016, the report said there is a limited number of such companies. A survey of Chinese companies trading with North Korea between 2013 and 2016 only turned up 5,233 such companies. This is less than 10% of the 67,163 Chinese companies doing business with South Korea, the report said. Furthermore, trade between North Korea and China consists of an oligopoly in which the ten Chinese companies with the highest trading volume handle 30% of imports of North Korean goods, and these companies have maintained their position in the market for several years, the report explained.

“We’ve briefed the South Korean and US governments on the report in question. We’re also planning to hold a large event in Congress that will be hosted by House Foreign Affairs Committee Chairman Ed Royce,” said a center source.

By Yi Yong-in, Washington correspondent

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