CHINA'S SHOT ACROSS THE BOW: CHINA ORDERS NORTH KOREA BANK TO

Chinese authorities have issued a warning to North Korean banks that they must stay within the parameters of operations with China or risk new penalties after new U.N. sanctions were levied against North Korea.

This in effect, is the fist time that China has sided against North Korea, and in issuing the warning it has communicated to Pyongyang that it intends to support the UN sanctions.  

Such a decision from China, could curtail the advantage afforded to N. Korea by interaction between N. Korean banks and China, which resulted in less fees and preferred exchange rates.  

Although this measure is by no means drastic, it does send a signal to N. Korea that it will not be allowed to behave in complete disregard of sanctions as it did in the past.  China is hard pressed to control its neighbor, given the instability that the N. Korean dictator has exhibited so far. 

Source: Bloomberg 3.20.13