• Reuters, Kyodo

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The United States is investigating a number of Chinese companies for suspected breaches of sanctions on North Korea, and Chinese banks and firms should understand that dealing with North Korea is “risky,” a senior U.S. official said on Wednesday.

China said it opposed any country using its own laws for “long-arm jurisdiction,” after the United States on Monday sanctioned China’s Dandong Hongxiang Industrial Development Co. for using front companies to evade sanctions on North Korea’s nuclear weapons and ballistic missile programs.

It was the first time the United States has taken such a step against a Chinese firm, and Daniel Fried, sanctions policy coordinator at the U.S. State Department, told a U.S. Senate hearing the action should serve as a warning. He said it would be better if China took such actions itself.

Fried declined to name other Chinese firms under investigation, or firms elsewhere in the world, but added: “We are actively looking at a number of targets. … Clearly our actions on Monday indicate that we are willing to sanction Chinese companies who are evading U.S. and U.N. sanctions.

“Of course, the preferred option is for China to do more,” Fried said.

“It would also be useful if Chinese banks and companies understood that increasingly, dealing with North Korean companies, especially those that are sanctioned, is going to be risky; frankly not worth it.”

The United States acted against the Chinese firm after North Korea conducted its fifth and largest nuclear test on Sept. 9.

Discussions are also underway on a possible new U.N. sanctions resolution on North Korea.

Daniel Russel, the senior U.S. diplomat for East Asia, told the same hearing that although China had agreed to a tough round of U.N. sanctions on North Korea in March, there was much more it could be doing to ensure proper implementation of existing sanctions and by agreeing new steps.

“We recognize that changing Chinese behavior is a prerequisite for changing North Korea’s behavior,” Russel said.

The U.S. officials said North Korea coal exports were a focus of current sanctions discussions with China in the U.N., Security Council, as was Pyongyang’s income from labor exports to countries including China and Russia.

Fried said coal exports to China, which bring North Korea around $1 billion annually, were the largest single generator of foreign currency for the isolated country, accounting for about a third of its export earnings.

“Treasury and State are investigating a number of companies around the world,” said Fried, coordinator for sanctions policy at the State Department, two days after the Treasury Department blacklisted a Chinese trading company for its involvement in North Korea’s proliferation of weapons of mass destruction.

“There are no limits and there is no administration red line of exempt countries or companies,” Fried told a hearing at a subcommittee of the Senate Committee on Foreign Relations.

Asked if the U.S. government has probed into more Chinese companies for suspected breaches of U.S. and U.N. sanctions, he declined comment, only saying, “I wouldn’t argue with you.”

On Monday, the United States sanctioned Dandong Hongxiang Industrial Development Co. and four of its executives for acting on behalf of Korea Kwangson Banking Corporation, a North Korean entity that has been under U.S. and U.N. sanctions for assisting proliferation of weapons of mass destruction.

The move marked Washington’s first punitive action against Pyongyang over its fifth and largest nuclear test on Sept. 9.

It also came at a time when the United States, Japan and South Korea are leading efforts to adopt a strong U.N. Security Council sanctions resolution on the North.

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