AP reports that the Foreign Trade Bank is accused of funding N. Korea's nuclear weapons programs.
Analysts see the move as an indication of China's mounting frustration with North Korea's young leader Kim Jong Un.
The move, announced on Tuesday by a spokesman of the Bank of China in a brief statement, is in line with US-led sanctions to starve Pyongyang's nuclear program of funding. According to the
CNN, the statement said: "Bank of China has sent North Korea's Foreign Trade Bank a notice that it has closed its account and has also halted all fund transfers related to this account."
However, the statement did not indicate how much money was in the accounts of the North Korean bank when the move was made.
According to
The Wall Street Journal (WSJ), the Bank of China is one of Beijing's largest state-owned banks with significant operations in the United States.
Reuters reports that a spokesman of another of China's largest banks, China Construction Bank, said the bank has no business links with the Foreign Trade Bank.
Analysts see the move, which comes after the installment of a new Chinese leadership last year, as decision-making originating from the highest levels of China's political hierarchy and may have been driven mainly by concerns that the bank's sizable US operations could be threatened by continued links with the Korean bank.
The decision comes after the US Treasury imposed sanctions on the the Foreign Trade Bank in March, describing it as "a key financial node" in North Korea's nuclear and missile program and accusing it of facilitating millions of dollars of transactions on behalf of companies involved in North Korea's nuclear and missile program.
It also comes at a time of increasing tensions on the Korean Peninsula and growing alarm in China about the potential threat of North Korea's nuclear weapons program to regional security.
The move is part of recent actions signaling that China, North Korea's major ally and biggest trading partner, which supplies nearly all of North Korea's fuel, is willing to co-operate within limits with Washington's efforts to put pressure on Pyongyang which has resisted Beijing's attempts to push it along a path of economic reform.
CNN reports that early in the year, China endorsed new UN Security Council Sanctions against Pyongyang after its long-range rocket and nuclear bomb test. China's President Xi Jinping sent a significant warning to the North Korean leadership, saying that "no country should be allowed to throw a region and even the whole world into chaos for selfish gains."
A senior official of the Obama administration reacting to the news, said: "We welcome reports that banks throughout the world, including Bank of China, have announced that they have closed the accounts of North Korea's Foreign Trade Bank. We will continue to work with China and our other international partners to encourage global compliance."
However, the US government said it remains to be seen just how far China was willing to go in co-operating wit the international community's efforts to place pressure on Pyongyang to abandon its nuclear and missile program.
North Korea does most of its banking through China. The Bank of China is the country's biggest bank for foreign exchange transactions, thus the decision to close the accounts of the Foreign Trade Bank could have significant impact on North Korea. However, experts say the impact may be reduced by failure of other Chinese banks, especially smaller regional banks capable of handling foreign exchange deals, to follow the Bank of China's move.
Analysts say that the move by the Bank of China may reflect risk management strategy and rather than political considerations.
LA Times notes that an expert in Chinese-North Korean relations at Havard University's Belfer Center, John Park, said: "Bank of China, of all the Chinese banks, has to adhere to international sanctions because they have a reputation to uphold." He noted that the closure may have no significant impact because the Bank of China had in the years been reducing its financial dealings with North Korea. He said: "What would be more substantive is if China revokes the work authorization documents for the North Korea state trading companies in China."
CNN reports that Stephanie Kleine-Ahlbrandt, northeast Asia director at the International Crisis Group, said: "This is part of a ratcheting up of pressure but with very clear limits. This is part of making North Korea feel some limited pain in an attempt to get them back to talks."
Cai Jian, professor and deputy director of the Center for Korean Studies at Fudan University in Shanghai, told the
The New York Times: "I personally don’t believe that this would have been a business decision by the bank alone, and it’s probably a signal from the government to reflect its views on North Korea. This appears to be a step by the government to show that it’s willing to cooperate with the international community in strengthening sanctions or perhaps taking steps against illicit North Korean financial transactions."
According to
Reuters, Zhang Liangui, a North Korea expert at China's Central Party School, said: "I think it is indeed a very noteworthy action which reflects the Bank of China's concern about its reputation. He added: "In taking this action I think there are political considerations as well as considerations about its own interests."
North Korea under the leadership of its new and youthful leader Kim Jong Un, has caused some tension and anxiety in the region with wild threats of nuclear action against the US and its South Korean ally. The country conducted its third nuclear test in February in defiance of the international community and there are fears it may conduct a fourth test.
