Why North Korea's economy can't live without China

NEW YORK (CNNMoney)

Not only is North Korea an isolated country, but the key factor complicating a response is its deep economic and diplomatic ties with China, the world's second-largest economy.

In fact, North Korea's economy is almost completely dependent on China.

The two Asian nations have been allies since the Korean War in the 1950s. And as North Korea has become increasingly cut off from the rest of the world, China has become its biggest trading partner.

Food and energy: China provides North Korea with most of its food and energy supplies, and accounts for 60% of the reclusive nation's total trade.

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Air and land routes: Considered a rogue state by the West, North Korea is able to use air and land routes through China with minimal interference or inspection.

Cheap labor: For its part, China seems to be interested in its neighbor's natural resources and cheap labor.

Mining and commodities companies: There are about 200 Chinese companies in operation in North Korea, most of which are involved in mining and the production of commodities.

Because North Korea cannot finance its trade through borrowing, it has a $1.25 billion deficit with China, according to the Council of Foreign Relations. Beijing is also the largest foreign direct investor, according to the Korea Economic Institute of America.

Some experts see signs that China might be losing patience with North Korea. For example, China has criticized North Korea's nuclear weapons tests.

But the Chinese government has also offered its reclusive neighbor a measure of support. In February, Beijing criticized a UN report that accused North Korea of human rights violations, and this month tried unsuccessfully -- together with Russia -- to prevent the UN Security Council discussing the issue.

-- CNN's Jethro Mullen contributed to this report.

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First Published: December 23, 2014: 4:42 AM ET

Source: http://money.cnn.com/2014/12/23/news/economy/north-korea-china-economic-ties/