SEOUL—China’s economic slowdown and a plunge in coal prices are depriving North Korea of critical foreign currency, threatening to stir discontent among the small, elite class that the nation’s mercurial dictator relies on for support.

The drain on income comes as North Korea continues to plow its limited resources into its armed forces. On Saturday, the isolated state is set to hold a military parade to mark the 70th anniversary of the founding of its ruling party. It has also declared plans to launch satellites, seen by the U.S. and others as a way to test ballistic missile technology.

The value of North Korean exports to China, by far Pyongyang’s biggest trade partner, fell 9.8% through August from the year-earlier period, Chinese data show, accelerating from a 2.4% decline last year.

Adding to the pressure on Pyongyang is China’s attempt to scale back its bloated steel industry, the main customer for North Korea’s biggest export product, coal.

The scenario leaves North Korea’s young leader, Kim Jong Un, vulnerable. North Korea depends on China to buy most of its exports, but ties between the longtime allies have become strained over North Korea’s nuclear brinkmanship. To boost exports, Pyongyang has little option but to turn to its only other significant trade partner, South Korea.