Recently, our attention was drawn to a very interesting report written for the US Senate. Titled, "China's Impact on Korean Peninsula Unification and Questions for the Senate",the main thesis of the report is that in any unification scenario, "China could attempt to manage, and conceivably block the unification process." China has overweening influence and currently sees the status quo as favorable. The division of Korea, in its current form, does have advantages for China. The greatest of these is that it has become a stable system of division. While not without its problems, it is currently a "manageable low-burn crisis".
Strategically, the division allows China to counterbalance the US influence on the Taiwan issue and provides China an ally in Northeast Asian affairs. It also gives China monopsony power over several key industries in the DPRK, such as mining, while not interfering with economic relations with major trading partner in the South.
If a unifcation process began to foment, China would want to protect its commercial assets and keep the north of the peninsula in its sphere of influence, the report concludes. It would also want to try to mitigate any increased influence of the US over a united Korea as well as ensure no ethnic unrest develops among Korean-Chinese along the border. These are no small tasks and the desired outcomes by no means certain. The changes could erase some of China's advantages on the peninsula.
We concur that China's current economic advantage in the DPRK is expressed (perhaps ironically) through the market. Even though the DPRK is a source of "unique anxiety", China's recent increase towards marketized support rather than direct subsidy "reflects an incremental economic integration with the North and is reminiscent of similar situations involving other sovereign states bordering China including Cambodia and Laos."
China's meta-concept for regional relations is to “be harmonious, pacify and enrich thy neighbors” (mu lin, an lin, fu lin), promoting Beijing's twin pillars of economic growth and social stability. In this sense, North Korea is not viewed differently from other surrounding countries, as the report points out. Beijing gives little special support to Chinese companies doing business in the DPRK, but recognizes that it does not have to, because of the North's relative isolation from other regional sources of investment. It's reticence to truly back large Chinese enterprises is perhaps due to an awareness that flooding the country with transformative FDI could also be a source of risk, in that it could contribute to dramatic social change.
The study quotes an unnamed US official as saying:
‘‘The day China decides to break with the DPRK and the moment the PRC decides that a reunified Korean Peninsula (under Seoul’s aegis) is more in its interest than a divided peninsula, that is when the process of Korea’s national unification will begin in earnest, and there will be little the DPRK can do to sustain itself as an independent entity. It is for that reason that the North has been extremely cautious in its ties with Beijing. . . . China is the DPRK’s lifeline and insurance policy, which for a nationalistic North Korea is something that necessarily sticks in the craw, but it is a fact of life.’’
If China holds all the cards on Pyongyang's regime stability, Pyongyang also knows it holds the cards on regional stability, giving it some room to maneuver. Thus the two allies can warily look across the Yellow Sea at each other and say, "let's not change things too much".
The report, well worth reading, is here in full.