SEOUL (Reuters) - North Korea’s ailing leader Kim Jong-il has named his youngest son as a military general, state media said early on Tuesday, marking the first stage of a dynastic succession.

A man walks past a sign in Pyongyang September 26, 2010. REUTERS/Kyodo

It was the first time the 20-something Kim Jong-un had been mentioned by name in the North’s media, and his appointment came just hours before the start of a rare ruling party meeting to elect its supreme leadership.

Kim Jong-il, 68, is believed to have suffered a stroke in 2008, but despite his declining health is not expected to go into retirement just yet, experts say. They say his son is too young and inexperienced to fully take the reins.

State news agency KCNA said Kim had issued a directive bestowing military rank on six people including Jong-un, the leader’s sister Kyong-hui and Choe Ryong-hae, who is considered a loyal aide of Kim and his family.

Kim Jong-il “indicated in the directive that he ... confers the military titles to members of the Korean People’s Army with the firm belief they will complete their honorable mission and duty on the occasion of the 65th anniversary of the Workers’ Party of Korea,” the report said.

Intelligence officials say the youngest son of the “Dear Leader” was identified last year as next in line to take power in a country which for years has been punished by international sanctions for trying to develop nuclear weapons.

The son is believed to have been born in 1983 or 1984 but little is known about him, even by intensely secretive North Korean standards, beyond the sketchy information that he went to school in Switzerland and has been his father’s favorite.

Regional powers will be keeping close tabs on the Workers’ Party conference, the biggest meeting of its kind for 30 years, for any signs of change which could have an impact on the destitute state’s economic and foreign policies.

Washington said it was too early to tell how the country’s leadership may be evolving or how other nations should respond.

“The United States is watching developments in North Korea carefully and we will be engaged with all of our partners in the Asia-Pacific region as we try to assess the meaning of what’s transpiring there,” Kurt Campbell, the top U.S. diplomat for the Asia-Pacific region, told reporters.

Financial markets see the preferred outcome of the meeting as an approximate continuation of the current system. The biggest concern is any sign of collapse that could result in internal unrest, massive refugee flows and military exchanges.

China and Japan are the world’s number two and three economies and, with South Korea, account for close to 20 percent of global economic output. Instability on the Korean peninsula could have grave implications for the global economy.

“Should the conference itself open the door for an orderly leadership change and in one way or another economic reform, we see a great deal of underlying, long-term economic benefit for a united Korean economy,” said Goohoon Kwon, Korea economist and co-head of research at Goldman Sachs in Seoul.

FAMILY AFFAIR

At the last such party meeting three decades ago, Kim, then aged 38, embarked on the path to succeed his father Kim Il-sung, the state founder, by taking on a Workers’ Party title.

“It’s striking that the big announcement coming out of a party conference is not a party position but a military position,” said Marcus Noland, a North Korea expert at the Peterson Institute for International Economics in Washington.

“This attests to the centrality of the military in governing North Korea today,” he said, adding this followed the pattern of his father’s succession.

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By signaling the young Kim’s rise, experts say North Korea is readying for a collective father-and-son leadership, which will cement the family’s grip on power.

In the event Kim Jong-il died suddenly, his son, by then identified as figurehead leader, would be surrounded by close family confidants who have been appointed to senior positions in the Workers’ Party and military in recent months.

Kim’s appointment of his sister to a military role underlined his resolve to ensure a smooth transition, Noland said. “This is belt and suspenders, keeping it in the family to create another general in the family at the older generation to play some kind of regent role,” he said.

His uncle, Jang Song-Thaek, was also promoted to a powerful military post earlier this year, and analysts say he is most likely to act as his principal regent until the young Kim can build his own power base.

The party meeting takes place at a time of great hardship for the impoverished North as it tries to work around U.N. sanctions -- adopted in 2006 and 2009 in response to Pyongyang’s two nuclear tests -- and justify its pledge to become a “powerful and prosperous” nation by 2012.

The North is hopelessly low in cash, and Kim’s two visits to China this year were in part seen as bids for economic support. Exacerbating its problems, a botched currency reform last year triggered inflation and wiped out ordinary citizens’ savings.

The meeting comes amid a flurry of diplomatic activity in the region after Pyongyang expressed readiness to return to nuclear disarmament talks, which have been in limbo since 2008 when the mercurial North walked out and said they were finished. China has hosted the on-again-off-again talks since they began in 2003.