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I frankly do not understand what is going on here.

I accept the idea that North Korea exists at the suffrage of China and ultimately must do China's bidding. The fact that North Korea has nuclear weapons and the fact that Korea has a potential population bomb that it might inflict on China if Korea implodes, does not alter the essential balance of power between the two nations. Why then would the Korean regime risk rupturing relations with a neighbor to whom it is so desperately dependent?

I am aware that North Korea has been even more bellicose than usual with South Korea and it makes it even more puzzling why North Korea would choose to send a diplomatic rebuff to China on the eve of potential hostilities, no matter how limited when the potential for escalation is so real.

We have approximately 28,000 American troops in a very vulnerable position along the DMZ and after about sixty-two years one would think that the South Koreans, one of the world's leading economies and one of the world's technological enterprises, could defend themselves. People like Donald Trump are now asking why are we paying for the defense of a country which is taking our money by selling is televisions?

To make matters even more complicated, China is increasingly bellicose raising the issue of the defense of the region against China similar to the questions concerning our exposure in cost in defending Korea: when will the Philippines, Japan, Taiwan, even Vietnam step up?

It is worth noting that this parade scheduled in China is a slap in the face of Japan and a lie historically. The Chinese Communists contributed relatively little to the defeat of Japan in China which should go to the Kuomintang yet they are crediting themselves by this parade. Nothing seems to fit together in the region, yet it has the look of a potential stack of dominoes.

One might ask the same questions in your concerning our NATO partners.

N. Korea is a hereditary totalitarian dictatorship based on the extreme cult of personality. To maintain such a system, the country has to be closed and hostile to the outside world in order to keep its populace brainwashed and free of contamination. Everything has to be dictated by the state, even providing food. Periodic military confrontation with enemies (S. Korea and U.S.) is also a necessary component. It rallies people around the regime and reaffirm the grip on its people.

Such a system cannot be productive in the long term, and their economy started to crumble. It would make the regime unstable. It has to find a way to survive. Unlike other communist countries, which embraced political and economic reform, N. Korea did the exact opposite. It saw how things could go horribly wrong if they take the road of reform. Especially it was deeply traumatized by what happened to Ceausescu regime in Romania, a close approximation of N. Korean regime. So N. Korean regime further tightened its grip, and looked for the ultimate insurance against regime change: nuclear weapons. So they poured much of their economic resources to developing nukes and missiles, their delivery system. They believe this is the only way to perpetuate the rule by hereditary cult of personality.

So N. Korean regime created two sources of instability: 1) crumbling economy 2) nuclear threat. It tried to use the latter to offset the former. With nuclear blackmail, it receives generous economic aids, and keeps the economy from free fall. This is predicated on the aid providers’ hope that N. Korea would eventually give up its nuclear programs. However, N. Korea has no intention of doing it. It believes the nuke is the only guarantee against its downfall. It does not want to be Ghaddafi’s Libya or Saddam's Iraq. When and if the regime is threatened by uprising or coups, it should have a means to thoroughly check external influence. Beside, its state ideology Juche dictates that the regime should be seen as standing up to mighty powers. Actually, what it wants most is the regime guarantee by U.S., a peace pact which recognizes its legitimacy over entire Korean Peninsula.

China values N. Korea as useful buffer against pro-West S. Korea and U.S. It wants N. Korea to be a friendly ‘stable’ communist country. China wants N. Korea to be economically productive and stable, and refrain from periodic military adventures, which could invite the attention of its adversaries such as U.S.

Until recently, China put up with N. Korea. It kept N. Korea alive by providing steady stream of economic aids. However, the level of military destabilization is getting worse not better. It conducted nuclear tests, and claim that it possessed nuclear weapons. They are working on ICBM, too. It is constantly providing reasons for large U.S. military presence in its neighborhood.
China tries to talk them out of it, but N. Korea is not interested. N. Korean regime does not want to be transformed into another ‘China’ ruled by a collective leadership where people no longer worship a god-like ruler from a sacred family. Economic reform means the end of dynasty. They believe that following China's advice will lead to their demise.

They are intent on completing their quest for nuclear arsenal. No amount of food or money can make them stop. China had enough of this. However, they are not about to take drastic action such as complete embargo or military invasion. Such actions entail great risk, and it is far from certain that things will turn out the way they envisioned. So instead they tried to nurture pro-China faction in N. Korea. It seemed to be going well, until Kim Jong-un executed its leader, his uncle Jang Sung-taek, and unleashed the purge of entire faction. Now there is no ally of China inside N. Korea. Kim Jong-un knows that, if he goes to China, he will be under great pressure from Chinese leadership to change his way. Kim figures that there is no friendly audience in Beijing. Besides, there is a security concern. Something can happen during his trip. Attempts at his life or a coup back home while he is away, even if such a possibility is low.

Under the current situation, Kim is backed into a corner. China in effect drew a line. No more nuke and belligerence. S. Korea is not pliable as it used to, either. Gone are the days of “Sunshine Policy.” Once, such a policy enjoyed a popular support. Not anymore. In S. Korea, these days, it takes some courage to openly advocate appeasement policy in public. They get roundly booed.
So Kim Jong-un has little maneuvering room. He sent out feelers to Russia, but was met with skepticism. Every country around N. Korea is souring on him and now trying to find some common ground against N. Korea. Kim Jong-un is a product of cult of personality in a sealed totalitarian country, even though the seal is starting to break down. He cannot be Deng Xiao-ping. He is more like third generation Mao Zedong. That is why he is compelled to resist China's way.

PS: You are right that Chinese communists did little to nothing in fighting Japanese. Nationalists did all the work.

I frankly do not understand what is going on here.

I'll take a stab at it. North Korea resents the idea of being essentially a Chinese protectorate. The notion of communist brotherhood has been replaced by Juche which was Kim il Sung's bastardized ideal of socialism mixed with Korean independence. There's probably some Korean ethnocentrism thrown into the mix as well.

Which is why North Korea has always acted like a lady-in-waiting courting China and Russia throughout the decades and playing one off against the other. Furthermore, North Korea sees the 'economic inter-dependence' of China, South Korea and the United States as a betrayal. I'd describe it as akin to our disgust with the GOPe. We're told by the GOP that they'll address our issues meanwhile they're playing a different game.

North Korea, however, is banking on the idea that from China's perspective they are the best game in town. If the regime in Pyongyang were to collapse or were overrun by US/ROK forces that China would not allow Korean re-unification under a western-allied government on its border. In their mind they are sitting in the catbird seat and can afford to offend their benefactor to service their ideology which keeps the Kim dynasty in power.

As for China itself we've all heard the myth about this being the Chinese century. China wishes to establish itself as a regional hegemon in Asia. Their territorial ambitions regarding Taiwan, the South China Sea, the Spratly's etc., is well known. Hence Obama's "pivot" to Asia. Whatever we think of him or how he's going about doing it is the correct geopolitical move to make so China does not rise up and achieve parity with the United States. Bilateral relations with the nations you mentioned will ensure Chinese containment.