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China investigating North Korean bank, report says

Associated Press Associated Press 26/09/2016

BEIJING — Chinese authorities are investigating a North Korean bank suspected of financing its government's imports of goods that might be used by the North's nuclear weapons program, a South Korean newspaper reported Monday.

Kwangson Banking Corp. was ordered closed under U.N. sanctions imposed in March in response to the North's nuclear tests but kept operating in secret in the border city of Dandong, Joongang Daily reported, citing unidentified sources.

China's Foreign Ministry and its bank regulator did not respond to requests for comment.

Beijing has long been North Korea's main source of aid and diplomatic support but is showing growing frustration with Pyongyang's pursuit of nuclear weapons in defiance of foreign pressure.

China signed on in March to the U.N. trade sanctions and has tightened controls on cross-border flows of goods. Security Council resolutions prohibit nuclear weapons development by the North and all ballistic missile activity.

This month, Chinese authorities disclosed they were investigating the Hongxiang Group in Dandong, which U.S. and South Korean researchers said sold the North materials with possible military uses.

The government of North Korean leader Kim Jong Un conducted its fifth nuclear test on Sept. 9. That raised concern abroad that it was moving closer to its goal of a nuclear-armed missile that could one day strike the U.S. mainland.

Kwangson Bank is an affiliate of North Korea's state-run Foreign Trade Bank, which was cited by the U.S. Treasury in 2009 for financing entities supplying equipment with possible military uses to Pyongyang, according to Joongang Daily.

The newspaper said Kwangson's Dandong branch operated on the 13th floor of a building occupied by Hongxiang Group.

Hongxiang is suspected of unspecified "serious economic crimes," according to earlier announcements by police in Liaoning and China's Foreign Ministry.

The Center for Advanced Defense Studies in Washington and the Asan Institute for Policy Studies in Seoul said in a report in August that the company supplied aluminum oxide and other materials used in processing nuclear bomb fuel.

The researchers said Hongxiang supplied the North with possible "dual use" products, including pure aluminum ingots, aluminum oxide, ammonium paratungstate and tungsten trioxide.

Tungsten trioxide can be used in making more aerodynamically stable missiles, while aluminum oxide is used to resist corrosion in gas centrifuges during uranium enrichment, according to Asan. It said those could qualify as "potential military and nuclear dual use products" under U.S. Department of Commerce restrictions.

The chairwoman of Hongxiang, Ma Xiaohong, was detained last month and three of her siblings are being investigated, Joongang Daily said.

Washington wants Beijing to lean harder on Pyongyang. Chinese leaders have resisted for fear of destabilizing Kim's government and setting off a flood of refugees or a political collapse that might lead to U.S. and South Korean troops being stationed in the North near China's border.

In April, China banned imports of North Korean coal and iron ore, an important revenue source for the impoverished country.

That was followed in June by a ban on exports to the North of "dual use" items, including metal alloys, cutting and laser-welding equipment, and materials that could be used in production of chemical weapons.

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