By Sue-Lin Wong

DANDONG, China (Reuters) - A labor agent sat in his bus on a recent frigid morning, waiting to cross the "Friendship Bridge" at China's main border post with North Korea. He had come to pick up migrant workers and take them to jobs in factories and restaurants in China. 

The single-lane bridge in the border city of Dandong is the main gateway for international trade into isolated and heavily sanctioned North Korea and it has grown unusually quiet of late, traders and businessmen in the city of 2.5 million people say.

"I used to bring at least 40-50 North Korean factory workers and waiters across at least once a month but it's less frequent now," said Liu, the labor agent, who did not want to give his full name. "I don't think China wants them to come and work here anymore."

Their numbers have, indeed, been dropping of late, said Lu Chao, Director of the Border Study Institute at the Liaoning Academy of Social Sciences, a Chinese government think-tank.

"China has been cutting back the number of workers from North Korea it allows in by tightening checks on potential visiting workers and making the paperwork more difficult," Lu said.

"There’s still a flow of workers coming into China. But if there’s a new round of tougher sanctions, no doubt we’ll see a further drop in the number of workers coming from North Korea to China,” Lu said.

Estimates of North Korea's overseas workers vary greatly but a study by South Korea's state-run Korea Institute for National Unification put the number as high as 150,000, primarily in China and Russia. They send back most of their wages - as much as $900 million annually - through official North Korean channels.

Asked about the flow of North Korean workers into China, foreign ministry spokesman Geng Shuang said on Monday: “I am unaware of the situation you mention."

It's not just the flow of workers that is drying up. Interviews with Chinese traders and business owners in Dandong reveal commerce with North Korea has become squeezed to an unprecedented degree as Beijing tries to thwart Pyongyang's accelerating nuclear and missile programs.

China's position, Geng said last week, is that U.N. sanctions "should not have a negative impact upon the livelihoods in North Korea or humanitarian needs.”

KEEP FROM COLLAPSING

China has long been North Korea's lifeline. Beijing's primary calculus about its nearly friendless neighbor has been to keep it from collapsing, and thus removing a buffer between China and South Korea, home to 28,500 U.S. troops.

China sends a vast range of products into North Korea from Dandong, the main international gateway to the isolated state, including oil from a pipeline that passes under the Yalu River. The North mainly exports coal through Dandong and other Chinese ports for badly needed foreign exchange. China is the only buyer of its coal, according to U.S. officials.   

But Beijing signed onto tough international sanctions imposed in March after North Korea conducted its fourth nuclear test, including cutting off much of the coal exports.

Beijing is now close to approving new sanctions with the four other veto powers of the U.N. Security Council to further cut North Korea's coal exports, diplomats said on Friday.

The resolution, which comes to a vote before the Security Council on Wednesday, also calls upon member states to "exercise vigilance" over North Koreans sent to work abroad, who may be earning hard currency for the regime's nuclear and ballistic missile programs.

North Korea's repeated nuclear and missile tests have raised the stakes considerably in North Asia, stoking talk of U.S. allies Japan and South Korea acquiring their own nuclear arsenals.

Beijing could come under more pressure from President-elect Donald Trump and his more hawkish national security team to pile more pressure on North Korea because no country has the leverage China has.

When it comes to squeezing North Korea, the Friendship Bridge is where the rubber hits the road. Around 80 percent of trade between China and North Korea flows across it.

 

EARNING HARD CURRENCY    

Dandong's main truckyard was almost empty at mid-morning last Wednesday, a far cry from just a few months ago when trucks queued for hours to cross the bridge.

"It's never been this tense," said Wang who sells tractors and trucks to North Korean businesses. Like others interviewed in Dandong, he asked only to be identified by his last name.

While U.N sanctions aim to starve North Korea of hard currency for its nuclear weapons program, they have had a chilling effect overall on trade.

"We're not exporting banned goods, but the sanctions have hit our North Korean business partners so they aren't spending the way they used to," Wang said. "It feels like I'm the one being punished."

Trade all along the China-North Korea border has slowed in recent months, said Li Zhonglin, director of the College of Economics and Management at Yanbian University.

"Even above-ground, legal trade has been hit - that's unavoidable," he said, because businesses were being cautious in the current climate, holding out for when tensions ease.

Around seven years ago, Dandong was home to more than one thousand coal trading companies, a coal trader in northern Shandong province told Reuters, but that number has now dropped to only two dozen.

Traders say they also got spooked after the U.S. Justice Department in September slapped sanctions on the Dandong Hongxiang Industrial Development company and its chief executive, Ma Xiaohong, a prominent businesswoman and government official. The DOJ accused her company of channeling U.S. dollars to North Korea for its nuclear weapons program.

"She was dubbed the richest woman in Dandong, a government official. If they can get her, none of us are safe," said one Korean-Chinese trader.   

    

RETAIL CONSUMER   

One thing that hasn't suffered much is North Korea's appetite for retail consumer products. 

Every morning, North Korean traders gather at Huamei, Dandong's wholesale electronics market, buying everything from second-hand desktop computers to the latest fitness tracking watches. They will bring their stash back across the Friendship Bridge to resell in the ever-growing "black markets" that have emerged across North Korea, as the Communist state's grip on the economy becomes looser. 

"They come and buy everything," said a vendor who was selling earphones and selfie-sticks on a counter that displayed both a Chinese and a North Korean flag. "Anything you can get in China you can get in North Korea if you pay the right price."

 

(Additional reporting by Meng Meng and the Beijing newsroom; Editing by Tony Munroe and Bill Tarrant.)