By David Brunnstrom
WASHINGTON (Reuters) - The United States is investigating a number of Chinese companies for suspected breaches of sanctions on North Korea, and Chinese banks and firms should understand that dealing with North Korea is "risky," a senior U.S. official said on Wednesday.
China said it opposed any country using its own laws for "long-arm jurisdiction," after the United States on Monday sanctioned China's Dandong Hongxiang Industrial Development Co for using front companies to evade sanctions on North Korea's nuclear weapons and ballistic missile programs.
It was the first time the United States has taken such a step against a Chinese firm, and Daniel Fried, sanctions policy coordinator at the U.S. State Department, told a U.S. Senate hearing the action should serve as a warning. He said it would be better if China took such actions itself.
Fried declined to name other Chinese firms under investigation, or firms elsewhere in the world, but added: "We are actively looking at a number of targets ... Clearly our actions on Monday indicate that we are willing to sanction Chinese companies who are evading U.S. and U.N. sanctions."
"Of course, the preferred option is for China to do more," Fried said.
"It would also be useful if Chinese banks and companies understood that increasingly, dealing with North Korean companies, especially those that are sanctioned, is going to be risky; frankly not worth it."
The United States acted against the Chinese firm after North Korea conducted its fifth and largest nuclear test on Sept. 9. Discussions are also under way on a possible new U.N. sanctions resolution on North Korea.
Daniel Russel, the senior U.S. diplomat for East Asia, told the same hearing that although China had agreed to a tough round of U.N. sanctions on North Korea in March, there was much more it could be doing to ensure proper implementation of existing sanctions and by agreeing new steps.
"We recognize that changing Chinese behavior is a prerequisite for changing North Korea’s behavior," Russel said.
Chinese Foreign Ministry spokesman Geng Shuang reiterated at a regular briefing on Thursday that China was willing to cooperate, but it opposed any country extending the jurisdiction of its domestic laws internationally.
"We will severely punish according to law any company or individual if there is verified evidence of violations," Geng said.
The U.S. officials said North Korea coal exports were a focus of current sanctions discussions with China in the U.N., Security Council, as was Pyongyang's income from labor exports to countries including China and Russia.
Fried said coal exports to China, which bring North Korea around $1 billion annually, were the largest single generator of foreign currency for the isolated country, accounting for about a third of its export earnings.
(Reporting by David Brunnstrom; Additional reporting by Michael Martina in Beijing; editing by Andrea Ricci and Diane Craft)