The exchange of artillery fire between North Korea (DPRK) and South Korea (ROK) in waters off the west coast of the Korean peninsula, and subsequent joint military drills by the U.S. and South Korea in the Yellow Sea, have raised regional tensions and posed serious challenges to China's strategic interests.

First, the escalation of tension on the Korean peninsula is completely against China's vital national interests. To achieve economic prosperity and social development, China made maintaining a stable and peaceful regional environment its foreign policy priority from the outset of the reform and opening up policy. The military confrontations between the two Koreas and the reaction of the U.S.-ROK security alliance will damage the geopolitical and economic environment on which the achievement of China's primary national goals depends.

Second, the situation on the peninsula challenges China's ability to shape the regional environment in ways that enhance its reputation on the global stage. Since the beginning of the second nuclear crisis in 2002, the Chinese government has worked tirelessly to convene, mediate and promote multilateral negotiations, and to demonstrate that it is a constructive, responsible and indispensable actor in Northeast Asia. But the deterioration of the regional security situation, and fading prospects that the six-party talks will achieve their planned goal of denuclearizing North Korea, have revealed the limits of China's leverage when it comes to mitigating hostilities among North Korea, South Korea and the U.S.

Third, it undermines China's unremitting efforts to develop and maintain good relationships with the two Koreas in order to influence the future of the peninsula in ways favorable to Chinese interests. Given China's strategic cooperative partnership with South Korea and traditional friendship with North Korea, it is the only great power that has sound relationships and effective communication channels with both Koreas at the highest levels. In order to promote peace on the peninsula, China has devoted itself to facilitating cooperation and engagement between North and South. But the current animosity, high-profile warnings of retaliation and negative atmosphere between the Koreas, mean China faces a dilemma: keeping good relationships with one side may undermine its relationship with the other.

Fourth, the enhancement of US-led security alliances is a serious setback to China's attempts to use multilateral diplomatic approaches to address regional security issues. Using the excuse of the threat posed by North Korea's reckless actions, US security alliances with South Korea, Japan, and even Australia have been strengthened by frequent and regular military exercises. But the so-called "minilateral" security arrangements not only reinforce US ability to coerce North Korea, but also put geo-strategic pressure on China because they involve displays of military force near the Chinese coast.