June 1 (Bloomberg) -- China suspended government exchanges with North Korea after Kim Jong-Il’s regime last week tested a nuclear device and fired short-range missiles, Yonhap News said.

China has halted plans to send officials to North Korea and won’t accept visits from there either, Yonhap said today, citing unidentified diplomatic sources in Beijing. China’s foreign ministry didn’t respond to a faxed request for comment. South Korean government spokesman Lim Jung Taek said he couldn’t confirm or deny the report.

The move, if confirmed, would be the strongest reaction yet to North Korea’s actions by its biggest ally and trading partner. China accounts for almost three-fourths of North Korea’s foreign trade, and can cut off shipments to the impoverished country of food, fuel and luxury goods.

China has said it “resolutely opposes” North Korea’s nuclear test, and agreed last week with the U.S., Japan and Russia to work toward a United Nations Security Council resolution censuring the regime. U.S. Defense Secretary Robert Gates, who is in Asia for a week-long tour, said on May 29 that “based on what the Chinese government has said publicly, they’re clearly pretty unhappy.”

Dependence on China

China accounted for 73 percent of North Korea’s global trade last year, up from less than a third in 2003, according to the Seoul-based Korea Trade & Investment Promotion Agency. It supplies 90 percent of North Korea’s oil, 80 percent of consumer goods and 45 percent of its food, according to Dong Yong Seung, a researcher on North Korean issues at the Samsung Economic Research Institute in Seoul.

North Korea’s economic output was about $26 billion in 2007, according to the World Bank, less than 3 percent of South Korea’s $970 billion economy.

South Korea responded to the atomic explosion by joining a U.S.-led initiative to halt shipments of weapons of mass destruction. The North then warned that any move to seize its ships would be met with military retaliation, and also fired six short-range missiles in a show of defiance.

Gates said May 30 that the communist regime would be held “fully accountable” for the consequences of transferring nuclear weapons or material to “states or non-state entities.”

‘Never Tolerate’

“The Republic of Korea will never tolerate North Korea undertaking military threats and provocation and ignoring the way to peace and dialogue,” South Korean President Lee Myung Bak said in a bi-weekly radio speech today.

North Korea’s military ordered ships in the Yellow Sea and units guarding the country’s coast to double their ammunition stockpiles, Yonhap News reported today, citing a South Korean government official it didn’t identify. The North is also planning to launch a long-distance ballistic missile as early as this month, Yonhap said over the weekend.

The U.S. and Japan are seeking a UN Security Council resolution that cuts North Korea’s international financial ties as well as China’s help in persuading it to abandon its nuclear ambitions.

To contact the reporters on this story: Heejin Koo in Seoul at hjkoo@bloomberg.net; Kyung Bok Cho in Seoul at kcho7@bloomberg.net

Last Updated: June 1, 2009 01:09 EDT