What To Know as China’s Xi Jinping Heads to North Korea

As Xi Jinping visits Pyongyang, he faces an emboldened North Korean dictator, whose alliance with Russia has reduced his dependence on China.

Xi Jinping's visit to North Korea comes nearly seven years after his last trip, when Kim Jong-un was struggling with sanctions and failed nuclear talks with the United States. Since then, North Korea has developed closer ties with Russia, reducing its dependence on China. In 2022, trade between North Korea and Russia increased by 20%, with Russia providing significant economic and military aid. China's exports to North Korea, meanwhile, have declined by 15% over the same period.

The shifting alliance between North Korea, China, and Russia could disrupt global trade, particularly in the shipping industry, where companies like Maersk and COSCO rely on stable relations between these nations. A potential conflict or increased tensions in the region could lead to higher shipping costs, affecting the price of goods imported from Asia. For instance, a 10% increase in shipping costs could result in a $100 increase in the cost of a container shipped from Shanghai to Los Angeles. This, in turn, could impact businesses that rely on international trade.

Historically, China has been North Korea's primary ally and economic supporter, providing significant aid and investment. However, Russia's increasing involvement in the region has altered the dynamics of this relationship. Insiders know that Kim Jong-un's regime has been seeking to diversify its economic partnerships, reducing its reliance on China. This shift is part of a broader pattern of North Korea's efforts to assert its independence and negotiate better deals with its allies.

In the coming weeks, Xi Jinping is expected to announce new economic cooperation agreements with North Korea, potentially including investments in the country's mining and manufacturing sectors. A key date to watch is June 15, when the two nations are scheduled to hold a joint economic forum in Pyongyang. Surprisingly, despite the tensions between the United States and North Korea, the latter has been quietly increasing its exports of rare earth minerals to China, with exports valued at $100 million in 2022, a significant increase from previous years.