HONG KONG — Pyongyang-Beijing ties used to be characterized as being “as close as lips and teeth,” but that phrase no longer applies to the relationship. For no sooner does North Korea arouse deep Japanese public outrage with its prevarication over past abductions than the isolated Stalinist state provokes a deep sense of Chinese official indignation, as it seeks to open up to the outside world without consulting Beijing.

In a bizarre but still unfolding episode, North Korea hired one of China’s wealthiest businessmen — who has a Dutch passport — to run a Hong Kong-like special administrative region (SAR) on its border with China, without telling Beijing what it intended.

China has responded by first detaining the businessman and then placing him under house arrest, as it continues its already 4-month-old investigation of him for suspected tax evasion, illegal property development, corrupt dealings, and probably several other questionable economic activities.

As the almost incredible story unfolded, the North Korean economic “reform” seemed too good to be true — and very probably it was. The businessman, Yang Bin, has been rated as the second wealthiest Chinese, having developed an agribusiness, real estate and orchid-growing business empire.

Yang was born in Nanjing, grew up in China, studied in Holland, claimed political asylum there and acquired a Dutch passport before returning to China a decade ago to faithfully follow former Chinese leader Deng Xiaoping’s injunction that “to get rich is glorious.” Yang also excels at self-promotion, and various tales about his life and intentions have emerged from the numerous press conferences he has given after his name hit the headlines Sept. 24.

On Sept. 20, North Korea suddenly announced that it was setting up a capitalist-style SAR at Sinuiju, a town set in the northwestern corner of North Korea right on the border with China. Three days later Yang was appointed chief executive of the new SAR, as a result of his being a close friend of North Korean leader Kim Jong Il. Yang reportedly denied he had bought his new job, but admitted he had earlier contributed $200 million to North Korea’s coffers.

Subsequently Yang flew a small group of foreign journalists to Pyongyang in his corporate jet to witness the scene as he was formally sworn in by the second ranking North Korean leader, People’s Assembly chairman Kim Yong Nam. A Basic Law was produced, allegedly closely resembling the one that China authorized for Hong Kong.

Yang quickly promised a stream of developments for the Sinuiju SAR, or SSAR. It would have separate laws, judiciary and a legislative council — just like Hong Kong. Sinuiju inhabitants, whom Yang variously numbered at 200,000 and 500,000, would be moved out, while another half a million specially selected skilled workers from all over North Korea would be moved in. All foreign currencies would circulate in the SSAR.

Although he has no bureaucratic experience running a government, Yang said he would hire foreigners to run his administration, and at one stage even hinted that an American might be made the SSAR’s police chief. A wall would be built around the two separate enclaves of the SSAR, to seal the capitalist experiment off from the rest of socialist North Korea.

Yang promised visa-free access, even to journalists. The fact that access to Sinuiju would still require a Chinese or a North Korea visa was glossed over.

When both North Korean and Chinese border officials refused permission for a horde of visaless journalists to enter the SSAR, Yang’s credibility was dented. It was already being battered in the South Korean and Hong Kong presses, as some of his business practices were questioned, and skepticism that he was the man for the job freely aired.

Hong Kong sources indicated that Yang had recently been busy selling the shares of his listed business, Euro-Asia Agricultural (Holdings) Co. Ltd., reducing his holdings from over 70 percent to under 50 percent — even though the shares have lost around 80 percent of their value this year. The sales seemed to indicate Yang’s urgent need for a cash infusion somewhere. Trading in the shares was twice suspended during September while one executive and two directors have suddenly announced their resignations.

As his credibility declined, Yang admitted that he was having some tax trouble with mainland authorities, a fact that had been noted in the People’s Daily way back in July. But on Oct. 3, Yang claimed that a deal had been reached and he would soon be paying $1.2 million in back taxes.

That offer wasn’t soon enough for the Chinese authorities. The Chinese police detained Yang at his Shenyang residence early Oct. 4, before the SSAR chief executive could get in his limousine and cross the border to his refuge in North Korea.

Subsequently South Korean sources indicated that while Yang has been released from detention, he remained incommunicado under house arrest and is likely to stay that way for the time being. North Korea — which had reportedly made Yang a citizen as part of the SSAR deal — protested. China merely sent a middle-ranking envoy to Pyongyang the explain its viewpoint.

Beijing’s message is plain: North Korea had better change the SSAR chief executive. Without doubt, North Korea must have deeply offended China by both announcing the formation of the SSAR and the appointment of a wheeler-dealer like Yang, without first consulting Beijing. A Foreign Ministry spokeswoman briefly welcomed the development when it was first announced, but Beijing officials must have been alarmed at the thought of the directions in which a free-wheeling Yang might have led the new SAR on China’s border. Beijing would undoubtedly have noted that property development, hotel building and casino openings were all part of Yang’s SSAR plans.

China is always highly sensitive to what goes on near its borders. The fascinating aspect of the affair is that old ally North Korea forgot this — and that old ally China forgot about saving Kim Jong Il’s face when they did.

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