The police in northeastern China have announced a criminal investigation into a Chinese conglomerate that does extensive trade with North Korea, which researchers in South Korea and the United States say included materials that can be used in the production of nuclear weapons.
The Public Security Department of Liaoning province said on a government website last week that the Hongxiang conglomerate, based in Dandong, a major trading center with North Korea, was suspected of “serious economic crimes.”
“During their work, the Liaoning public security authorities discovered that for a long time the Dandong Hongxiang Industrial Development Company Ltd. and a relevant responsible individual engaged in suspected grave economic crimes during trading activities,” the department said.
The police did not specify whether the company’s prominent chairwoman, Ma Xiaohong, was under investigation, nor did it say whether the company was the object of scrutiny for its North Korean business, which makes up the bulk of its trade.
The action was compelled by two recent visits to Beijing by officials from the Justice Department to warn the Chinese of the illegal activities of the Dandong company, according to a U.S. law enforcement official who asked not to be identified before a pending announcement of charges against the company by the United States.
The information provided to the Chinese included allegations that the company was helping North Korea’s nuclear weapons program, the official said.
The statement by Liaoning province came just days before a report issued on Tuesday by a South Korean think tank and a Washington research group that singled out the Hongxiang group for dealing in products that can be used to make nuclear weapons. Ma has avidly supported stronger economic ties with North Korea and has called the Hongxiang group a “golden bridge” between China and the North.
One of the targets of the Chinese investigations appears to be aluminum products that Hongxiang is said to have sold to North Korea. A division of the Hongxiang conglomerate dispatched two shipments of aluminum oxide worth $253,219 to North Korea in September 2015, the Asan Institute for Policy Studies in South Korea and the C4ADS research group in Washington said in their report.
According to the U.S. Nuclear Regulatory Commission, aluminum oxide is used to avert corrosion in gas centrifuges during uranium enrichment.
The report listed three other products — aluminum ingots, ammonium paratungstate and tungsten trioxide — that Hongxiang sold to North Korea and that the U.S. Commerce Department considers to have possible civilian and nuclear uses. Aluminum oxide is among a long list of items issued in 2013 by China’s Ministry of Commerce that are banned for sale to North Korea.
The unusual action by China follows congressional legislation passed this year aimed at forcing Beijing to penalize its companies that do business with North Korea. And Ma’s Hongxiang group has been an especially energetic player in such business.
“Be thankful that we were born in this great era and were born in Dandong, this beautiful city on the frontier of China and North Korea,” Ma, 44, wrote in an introduction to herself on the Hongxiang conglomerate’s website. “Be even more thankful that we have chosen this business of doing trade and serving as a shipping agent with North Korea. North Korea’s resumed resurgence and unlimited needs can make all our dreams became possible.”
According to the Hongxiang website, where Ma appears in photographs as a philanthropist with boundless enthusiasm for trade between China and North Korea, the conglomerate’s business interests include chemicals, minerals, metals and coal, the latter one of North Korea’s most valuable exports.
After North Korea held its first nuclear test in 2006, Ma told a Chinese newspaper that she was “not too surprised.” She said, “I think the groundwork has been prepared for a long time.”
The company also owns hotels, travel agencies and a shipping fleet of 10 vessels that link Chinese and North Korean ports and apparently carry coal out of the North, the report said.
Washington and Beijing have had mounting difficulty in agreeing how to deal with North Korea’s expanding nuclear weapons program. The North conducted its fifth underground nuclear test less than two weeks ago, its most powerful so far.
The Chinese government criticized the test but has strongly protested the decision by the Obama administration this summer to deploy an advanced missile defense system in South Korea intended to give the country protection against the North’s weapons.
During a meeting in Hangzhou, China, this month, China’s leader, Xi Jinping, raised the issue of the missile system with President Barack Obama. The two sides failed to resolve the issue, Obama said later.
The investigation by the Chinese authorities was not surprising, said an expert on North Korea, Cheng Xiaohe, an assistant professor of international relations at Renmin University in Beijing. The action did not suggest a sweeping inquiry into Chinese trade with North Korea, he said.
“If the United States makes concrete allegations, China has to oblige,” he said. The Chinese government may use the inquiry to concentrate on one relatively small company while warning bigger entities like banks of the consequences of continuing to do business with the North, he said.
After protracted negotiations with the United States, China agreed this year to tougher U.N. sanctions on the North. But enforcement by the Chinese has been lax, analysts say.
Coal is North Korea’s major export and foreign currency earner, and most of North Korea’s coal is shipped through China.
Recent figures showed that coal sales were down 12 percent since the sanctions were put into effect, a marginal amount, said Stephan Haggard, a Korea specialist at the University of California, San Diego.
Until now, Ma has enjoyed support from the Chinese authorities, especially the Dandong government.
As recently as June, the Ministry of Commerce gave Hongxiang a license to import oil products, something private Chinese businesses can do only with special permission. But a spreading political scandal also implicated Ma and may have been another sign that she has lost her political protection.
Ma was among 452 delegates of the Liaoning province People’s Congress who were stripped of their membership this month after investigators found that they had bribed their way onto the legislature. Membership brings little power, but creates opportunities to mingle and make deals with powerful officials and entrepreneurs.
People who answered telephone calls to Ma’s offices said they could not speak to journalists or did not know where she was. The Liaoning police also declined to comment.
In 2006, Ma told the newspaper Southern Weekly that doing business with North Korea could be perilous. “If the political winds really change, our business will be smashed to smithereens,” she said.