To understand China's anger with its long-time ally, North Korea, you need to drive through the Dandong New District, part of a border zone that was supposed to be a showcase for co-operation between the two countries.

As you drive southwest from the main city of Dandong, the multibillion-dollar New District cuts an impressive skyline. A forest of modern apartment blocks rises out of the horizon – wrapped around a giant shopping mall, even bigger government offices, plus a huge Ferris wheel and an international-standard basketball stadium.

But, like so much about relations between China and North Korea, the construction is only impressive from afar. And when you arrive in the New District, you understand why locals call it the "ghost city." Despite efforts by the local government to force bureaucrats to relocate, the 60-plus apartment towers have few residents. You could lie for several minutes in the middle of its 10-lane Main Avenue with little chance of getting hit by a car. The Ferris wheel never spins.

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Many in Dandong blame that failure on North Korea's unfulfilled promises of economic reform. Alongside China's other concerns with the regime of Kim Jong-un – which has rattled East Asia with a nuclear test and repeated threats of war – Pyongyang's failure to co-operate economically has helped create a serious rift between the two long-time allies.

Mao Zedong famously described the relationship between China and North Korea as "closer than lips and teeth." Chinese troops – initially based in Dandong – intervened to rescue the regime of Kim Il-sung, the grandfather of the current leader, Kim Jong-un, during the 1950-53 Korean War. That eventually forced a stalemate with South Korean and United Nations forces that created today's border.

But China has changed dramatically since those days of fraternal socialism. In recent years, Beijing has been trying to encourage its neighbour to adopt reforms similar to those China introduced in the 1980s, hoping that economic opening might create a more rational – and less needy – regime in Pyongyang. But North Korea has stubbornly refused to change course.

The trigger for China's decision to support additional UN sanctions against the Kim regime, and to enforce old ones with more vigour, was the Feb. 12 nuclear test, which Beijing sternly warned Pyongyang against. China has since repeatedly called for calm on the Korean Peninsula, only to see North Korea continue to make belligerent gestures.

On Sunday, South Korea's semi-official Yonhap News Agency, citing unnamed military sources, reported that North Korean had moved two Scud missiles into firing position on the country's east coast. Last month, Pyongyang declared that it was no longer bound by the 1953 armistice that ended the Korean War.

Beijing's frustration has been building for years.

Part of the lure of the Dandong New District was supposed to be its proximity to Sinuiju, the North Korean city on the opposite bank of the narrow Yalu River. Eleven years ago, Sinuiju was declared a "special economic zone" where Pyongyang could experiment with market reforms similar to those China introduced in the 1980s and 1990s.

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Sinuiju was to be the North Korean version of Shenzhen, the southern city, adjacent to Hong Kong, that was the first part of China freed to trade with the outside world. Instead, Sinuiju is a testament to the paranoia that continues to hold back North Korea's leadership and its people.

Wary of the influence China would gain over Sinuiju – and perhaps other parts of the country – the promised reforms were never introduced.

"The North Korean side is just not on the bus of overall economic reforms," said Adam Cathcart, editor of SinoNK.com, a website focusing on relations between China and North Korea. "It's embarrassing to the Chinese government. They keep saying [to Chinese businesses] 'it's time to invest, Kim Jong-un is going to open up.' One of the questions is why are the North Koreans being so rude to the Chinese?"

Sinuiju still looks much the same today as it did years ago: a clutch of unlit, Soviet-style apartment blocks gathered around factories whose smokestacks rarely emit smoke. Construction of a four-lane bridge connecting the New District to Sinuiju, its $300-million cost borne entirely by the Chinese side, appears suspended. Eight giant pillars jut out of the Yalu River, topped by cranes that didn't move at all this week.

At the far end of the New District is Hwanggumpyong Island, 11 square kilometres that are part of North Korea, though during dry season the "island" abuts the Chinese side of the Yalu River. Two years ago, at a ceremony attended by top officials, including Jang Song-taek, the powerful uncle of Kim Jong-un, China was granted a 100-year lease over Hwanggumpyong, where it planned to build an industrial park where Chinese-owned factories could be staffed by cheap North Korean labour.

Again, none of that materialized. Entry to Hwanggumpyong from the Chinese side is today blocked by a military checkpoint and a barbed-wire fence. Visible beyond are two forlorn pillars emblazoned in Korean and Chinese with the message "Welcome to Hwanggumpyong Economic Zone." But the only obvious activity taking place last week was a team of North Korean soldiers gathering scrub by hand near the border.

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The Chinese state media has shown official frustration by hinting that the deal could be called off completely. Supporters of the Dandong New District say their city will only thrive when the North Korean side delivers on its promises.

It's unclear whether Kim Jong-un, who became the country's leader following the death of his father Kim Jong-il in December, 2011, supports the special economic zones near the Chinese border. After coming to power, Mr. Kim initially made a series of statements seen as supportive of economic reform. There was talk last fall that the state-managed agriculture market might even be liberalized to allow farmers to sell some of their own crops.

Then all the reform talk stopped, and the 30-year-old Mr. Kim appeared to shift his efforts to confronting South Korea and the United States. Many believe the young dictator was forced by some internal challenge to back off the proposed economic reforms in order to show his hawkish side instead.

Kim Cheehyung, a North Korea specialist at Duke University, said Mr. Kim's priority now is to "prove domestically to its ruling elites that [he] is in command of the party and the military and is capable to standing up to the superpowers despite his young age."

Meanwhile, Chinese traders who once believed they'd make a fortune off the opening of North Korea say they've been taught by experience to be wary of doing business with their neighbours.

"It's very common for the two sides to co-operate for six or eight years, and then, when it's time to settle the bills, the North Korean side will say, 'Oh, we still owe you $100,000? We won't be paying that,' " said Chen, a 68-year-old Dandong trader who has been doing business in Sinuijus since 1994. "There's no trust."