China's Premier Wen Jiabao attends a meeting with Uruguayan Vice-President and President of the Congress Danilo Astori, during a visit to the Congress building in Montevideo, June 23, 2012. Wen is in Uruguay for an official visit. 
 
 SHANGHAI (Reuters) - Premier Wen Jiabao encouraged North Korea to allow "market mechanisms" help revamp its economy, state media said on Saturday, and laid down other pre-conditions as China tries to wean its impoverished ally off its dependence on Chinese aid. 
 
 Wen's comments followed his meeting with Jang Song-thaek, the powerful uncle of North Korean leader Kim Jong-un, in Beijing on Friday. Jang is the highest-profile North Korean official to visit China since Kim power in December 2011. 
 
 As well as allowing freer rein to market forces, the Chinese premier also recommended Pyongyang encourage economic growth by improving laws and regulations, encouraging business investment and reforming its customs services. 
 
 China's President Hu Jintao also met Jang in a clear show of support for the North and its new leadership. Jang is seen as the driving force behind reforms that the isolated and destitute North is believed to be trying and for which it desperately needs Chinese backing. 
 
 Beijing has had difficulty managing the relationship with North Korea, which it views as a strategically critical buffer between itself and U.S. military forces in South Korea. 
 
 But North Korea is often more cantankerous than China would like, in particular towards South Korea, even though the economic relationship between China and South Korea is far more important. Bilateral ties are also not always smooth. 
 
 In May, North Korea seized a number of Chinese fishermen and boats in the Yellow Sea and demanded 1.2 million yuan for their release. 
 
 China has expressed unhappiness with North Korea's nuclear weapons program, particularly with nuclear tests that have been conducted near the Chinese border, and is quietly lobbying against future tests. 
 
 Beijing has supported international sanctions against the North in the past, and has also occasionally cut off economic aid, including critical oil shipments, but the desperate state of the North's economy has limited its leverage in Pyongyang. 
 
 Experts and government sources who spoke to Reuters say China cannot go too far with such sanctions for fear of destabilizing the regime entirely, prompting a flow of refugees across the border into China. 
 
 China and North Korea have moved to intensify economic cooperation through development zones in Rason on the North's east coast, and in the border area of Hwanggumphyong. 
 
 So far North Korea has received around $300 million in non-financial direct investment from about 100 Chinese companies, mainly in the food, medicine, electronics, mining, light industry, chemicals and textile sectors. 
 
 China's exports to North Korea rose 20.6 percent last year to $2.28 billion from 2010, while imports plunged 81.4 percent to $147.4 million, according to Chinese customs figures. 
 
 Those numbers are dwarfed by trade with South Korea, China's third-largest trading partner. 
 
 (Reporting by Pete Sweeney; Editing by Paul Tait) ||||| The powerful uncle of North Korean leader Kim Jong Un met both China's president and premier on Friday in a sign that relations between the two countries are back on track after Kim irked Beijing with a rocket launch soon after taking power. 
 
 State media have said the six-day visit to China by Jang Song Thaek, the chief of the central administrative department of the Workers' Party of Korea, is a possible prelude to a visit by Kim himself. China remains North Korea's most important ally. 
 
 The top-level meetings came after Beijing earlier this week agreed to help Pyongyang revamp two trade zones near the Chinese border. 
 
 Since he became North Korea's top leader following his father's death in December, Kim has promoted younger economists to key party positions to help revive his country's economy. North Korea has lagged economically far behind the rest of Northeast Asia, and much of the nation is impoverished outside the capital, Pyongyang. 
 
 Beijing also wants to see bolder economic reforms under the young Kim to lessen North Korea's reliance on hand-outs. 
 
 A few months ago, relations between the two allies were strained. North Korea drew strenuous objections from China, the United States, Japan and others by testing a rocket in April because they feared it would add to tensions on the Korean Peninsula between the North and the South. Analysts said North Korea did not give Beijing advance notice of the launch, which particularly irked them. 
 
 Jang is a vice chairman of the powerful National Defense Commission. He also is seen as a leading economic policy official. 
 
 His meetings with President Hu Jintao and Premier Wen Jiabao in Beijing came toward the end of his visit. Hu praised Jang for his "huge amount of work for the friendly relations between China and North Korea as two neighboring countries," the official China News Service reported. 
 
 Wen told Jang that the China-North Korea friendship has endured historical tests and is a shared treasure to be "doubly cherished." He said Jang's visit will deepen the relations between the two ruling parties and the two nations, according to CNS. 
 
 Jang met Chinese commerce ministry officials earlier this week to discuss the development of two special economic zones in North Korea. 
 
 The ministry said the two sides signed a number of cooperation agreements to further develop the zones _ Rason on the Korean Peninsula's northern tip, and Hwanggumphyong, an island in the Yalu River that marks their border to the southwest. 
 
 Rason would be developed into a manufacturing base, logistics center and tourism hub, and the Hwanggumphyong zone would focus on information technology, tourism, agriculture and garment manufacturing, it said. 
 
 Rason has recently begun to develop thanks to Chinese infrastructure projects, but Hwanggumphyong has languished since ground was broken last year. 
 
 On Thursday, Jang met with Wang Jiarui, the head of the international department of the Communist Party of China Central Committee. Wang said China is committed to strengthening and developing the friendly and cooperative relations between the countries, and Jang said Pyongyang wants to see the friendship strengthen, the official Xinhua News Agency said. ||||| 1 of 2. North Korean soldiers parade in front a portrait of former North Korean President Kim Il-sung during a military parade in Pyongyang's central square in this photo taken by Kyodo on September 9, 2011 marking the 63rd anniversary of the state's founding. North Korean leader Kim Jong-il flanked by his son reviewed a military parade of goose-stepping North Korean soldiers in Pyongyang's central square on Friday, underlining a planned third generation of dynastic rule is on track. Mandatory Credit 
 
 BEIJING | 
 
 BEIJING (Reuters) - North Korea will shift to collective rule from a strongman dictatorship after last week's death of Kim Jong-il, although his untested young son will be at the head of the ruling coterie, a source with close ties to Pyongyang and Beijing said. 
 
 The source added that the military, which is trying to develop a nuclear arsenal, has pledged allegiance to the untested Kim Jong-un, who takes over the family dynasty that has ruled North Korea since it was founded after World War Two. 
 
 The source declined to be identified but has correctly predicted events in the past, telling Reuters about the North's first nuclear test in 2006 before it took place. 
 
 The comments are the first signal that North Korea is following a course that many analysts have anticipated -- it will be governed by a group of people for the first time since it was founded in 1948. 
 
 Both Kim Jong-il and his father Kim Il-sung were all-powerful, authoritarian rulers of the isolated state. 
 
 The situation in North Korea appeared stable after the military gave its backing to Kim Jong-un, the source said. 
 
 "It's very unlikely," the source said when asked about the possibility of a military coup. "The military has pledged allegiance to Kim Jong-un." 
 
 North Korea's collective leadership will include Kim Jong-un, his uncle and the military, the source said. 
 
 Jang Song-thaek, 65, brother-in-law of Kim Jong-il and the younger Kim's uncle, is seen as the power behind the throne along with his wife Kim Kyong-hui, Kim Jong-il's sister. So too is Ri Yong-ho, the rising star of the North's military and currently its most senior general. 
 
 The younger Kim, who is in his late 20s, has his own supporters but is not strong enough to consolidate power, analysts said. 
 
 "I know that he's been able to build a group of supporters around himself who are of his generation," said Koh Yu-hwan, president of the Korean Association of North Korean Studies in Seoul. 
 
 "So it is not entirely elders in their 70s, plus some like Jang in their 60s, who are backing him. These young backers will be emerging fairly soon." 
 
 Koh said the coterie was put in place by Kim Jong-il before he died. "The relative calm seen these few days shows it's been effective. If things were not running smoothly, then we'd have seen a longer period of 'rule by mummy', with Kim Jong-il being faked as still being alive." 
 
 He said the younger Kim would accept the set-up, for now. "Considering the tradition of strongarm rule by his father and grandfather, things can't be easy for him," he said. 
 
 "REGIME SURVIVAL" 
 
 Ralph Cossa, an authority on North Korea and president of the U.S. think tank Pacific Forum CSIS, said it made sense that the ruling group would stick together. 
 
 "All have a vested interest in regime survival," he said. "Their own personal safety and survival is inextricably tied to regime survival and Kim Jong-un is the manifestation of this. I think the regime will remain stable, at least in the near-term." 
 
 He added in a commentary that the new group may be inclined to reform, but stressed this was far from confirmed. 
 
 "Over the long term, there appears to be some hope, primarily emanating from Beijing, that Kim Jong-un will take North Korea down the path of Chinese-style reform, apparently based on the belief that Jang is or will be a 'reformer'." 
 
 "Who knows, this may be true. While this could relieve the suffering of the North Korean people over time, it will do little to promote the cause of denuclearization, however." 
 
 The high-level source also said North Korea test-fired a missile on Monday to warn the United States not to make any moves against it. Pyongyang however had no immediate plans for further tests, barring an escalation of tensions. 
 
 "With the missile test, (North) Korea wanted to deliver the message that they have the ability to protect themselves," the source said. 
 
 "But (North) Korea is unlikely to conduct a nuclear test in the near future unless provoked" by the United States and South Korea, the source said. 
 
 The unpredictable North's nuclear program has been a nagging source of tension for the international community. 
 
 Pyongyang carried out nuclear tests in 2006 and 2009, and has quit six-party talks with South Korea, the United States, China, Japan and Russia on abandoning its nuclear program and returning to the Non-Proliferation Treaty. 
 
 The high-level source also said Beijing was only notified of Kim's death earlier on Monday, the same day North Korean state television broadcast the news. Kim died on Saturday. 
 
 A leading South Korean newspaper reported on Wednesday China learned of Kim's death soon after it occurred. 
 
 China has given no official comment or even hints suggesting it was told of Kim's death before the public announcement. 
 
 Beijing, the North's closest ally and biggest provider of aid, has pulled out the stops to support the younger Kim. 
 
 The government has invited him to visit and, in an unusual gesture, President Hu Jintao and Vice-President Xi Jinping also visited the hermit state's embassy in Beijing to express their condolences. Roads leading to the embassy were blocked. 
 
 Mainly, the prospect of instability on its northeastern border worries China and it sees the younger Kim and his coterie as the best prospect for keeping North Korea on an even keel. 
 
 North Korea has been pressed by China to denuclearize and is willing to do so on condition that North and South Korea, the United States and China sign an armistice replacing a 1953 ceasefire agreement, the source said. 
 
 The two Koreas have been divided for decades and remain technically at war since their 1950-53 conflict ended with an armistice but no peace agreement. The United States backed the South, while China supported the North in that conflict. 
 
 Pyongyang is also convinced there are U.S. nuclear weapons in South Korea and demands Washington pull them out, the source said. 
 
 (Additional reporting by Jack Kim in Seoul; Editing by Raju Gopalakrishnan and Jonathan Thatcher)
– It's time for authoritarian North Korea to let in some free markets, urged Chinese Premier Wen Jiabao today, following a rare meeting with a high-ranking North Korean official, reports Reuters. Wen and President Hu Jintao met yesterday with Jang Song Thaek, the powerful uncle of North Korea's young leader Kim Jong Un, encouraging North Korea to improve its laws, reform customs services, and encourage business investment. The two countries announced the creation of two special economic zones near the China-North Korea border earlier in the week. Jang is widely considered one of the top forces for reform in the North, so getting strong support from China is vital for the new regime, notes the AP. China may consider North Korea a vital buffer between it and South Korea, Japan, and the United States, but Pyongyang has often been a difficult ally, with its bellicose rhetoric, missile and nuclear weapons programs, and ravaged economy. China's exports to North Korea totalled just $2.28 billion in 2010, while South Korea is China's third-largest trading partner. China's GDP reached $7.3 trillion in 2011, South Korea's $1.1 trillion, and North Korea's an estimated $40 billion.