In what may be a major breakthrough in the diplomatic and political stalemate over North Korea if confirmed officially, Japan's Kyodo newspaper reported overnight that Chinese state banks have started suspending transactions through accounts held by North Koreans, making it nearly impossible to do business between the two countries. Furthermore, Kyodo News has confirmed that branch offices of at least three major state banks - the Bank of China, China Construction Bank and Agricultural Bank of China - in the northeastern border city of Yanji have also banned North Koreans from opening accounts.

The Chinese banks have yet to freeze the accounts, meaning that North Koreans can still withdraw money from them - similar to bitcoins held in Chinese exchanges - but they are now prevented from making deposits or remittances, according to the sources quoted by Kyodo.

"This is being influenced by international sanctions against North Korea," an employee of one bank said.

The bank restrictions, which the sources said from April were also starting to be put in force in Liaoning Province - the main region of trade between China and North Korea - suggest that China may have become more serious about curbing its nuclear ambitions, something we hinted at last week in "It Looks Like North Korea Is No Longer Playing To The Chinese Script". The restrictions also appear to be intended to help major Chinese banks avoid being hit by sanctions imposed by the United States and other countries.

In late June, the administration of U.S. President Donald Trump labeled a regional bank based in the northeastern border city of Dandong "a foreign bank of primary money laundering concern," and unilaterally sanctioned another Chinese firm and two Chinese individuals for links to Pyongyang's arms development; China's reaction was understandably angry, which is why it is even more surprising that Beijing has volunteered to proceed with such a unilateral crackdown on its own.

On Monday, the United States will seek to impose the toughest U.N. sanctions possible on North Korea in the wake of its sixth nuclear test a week ago and calling on China to do more to rein in its defiant neighbor, although according to overnight reports by Reuters, the sanction proposed by the US will be watered down to exclude oil trade with China and a freeze of Kim Jong Un's assets (more details here).

China, which accounts for about 90 percent of North Korea's official trade and is its major oil supplier, has long opposed taking excessively strict measures against the country, out of fear of triggering a refugee crisis on the border. China's official data show that its exports to North Korea of petroleum products, including gasoline and light oil but excluding crude oil, fell 75 percent in three months through July from a year earlier to about 19,700 tons.

One source said the main reason for the decline was that North Koreans were having difficulty paying for petroleum product imports because of the banking restrictions. As reported at the time, In North Korea gasoline prices shot up in April and remain high.

North Korean officials told Kyodo News in July that economic activity was not in a state of confusion and prices were not rising continuously. But they said the government had encouraged North Koreans to use public transportation and bicycles to conserve fuel.

If China is now aggressively pushing to cut off North Korea, it will accelerate the denouement: either Kim will crack, and submit to US and Chinese "parental supervision", or having nothing left to lose, he will proceed with more launches and nuclear tests in hopes that the final provocation drags him, and his country down in flames.