Washington is scrambling to develop a new strategy to counter North Korea's aggressive nuclear weapon and missile programs, but tougher sanctions could provoke a diplomatic clash with China.

Secretary of State Rex Tillerson will visit the United States' frontline allies South Korea and Japan next week before heading on to great power rival China to discuss the mounting crisis.

Kim Jong-Un's regime is testing a new ballistic missile that could threaten US bases and cities in the Pacific rim, and rocket salvo tactics that could overwhelm missile defense systems.

Most observers see China as the only power with the leverage to get its isolated neighbor to stand down, and existing United Nations-backed sanctions have had little effect so far.

The crisis is the first major security challenge of Donald Trump's presidency, and the Pentagon has already provoked China's ire by deploying an advanced anti-missile system to South Korea.

Now, other options are being considered, and the hawkish wing of the Washington foreign policy community is pushing for measures that would hurt Chinese banks that work with Pyongyang.

State Department spokesman Mark Toner would not be drawn on the details of any plan Tillerson might take to Asia, but officials confirmed that an urgent policy review is underway.

Toner said the North Korean threat would be "front and center" in the planned talks next week between Tillerson and his Chinese, South Korean and Japanese counterparts.

The senior diplomats would, he said, "talk through what our options are and new ways to look at resolving the situation."

But the signals coming out of China are not encouraging for those in Washington who cling to the hope that Beijing may be ready to rein in its small but belligerent neighbor.

On Wednesday, Foreign Minister Wang Yi implied that the United States and North Korea were equally at fault for provoking the latest crisis and headed towards a "head-on collision."

Wang urged the US military to halt planned exercises with South Korea, in exchange for Pyongyang halting its nuclear and missile programs -- an idea Washington promptly dismissed.

"The onus is on North Korea to take meaningful actions toward denuclearization and refrain from provocations," Toner said.

China has in the past supported measures against North Korea's nuclear program, but six sets of UN sanctions since Pyongyang's first test in 2006 have failed to slow it.

- Nuclear strike -

North Korea is now building and testing an intercontinental ballistic missile (ICBM) with a solid fuel motor that could be carried by a small, easily-hidden road convoy.

This would be harder for existing US and South Korean forces to detect and counter, and could put American mainland cities as well as US bases in Japan in range of a nuclear strike.

But, North Korea watchers in Washington argue, this is not such a worry to China, which opposed the North Korean nuclear program itself but does not see the new missile as such an issue.

"The Chinese are not serious about this threat," said former US official Anthony Ruggiero, a veteran of the State Department and US Treasury's sanctions and counter-proliferation teams.

For Ruggiero, a fellow of the hawkish Foundation for Defense of Democracies, the key to getting China to take notice is to fine the banks that give North Korea access to international finance.

According to a recent report by a panel of UN experts, Pyongyang has become increasingly sophisticated at dodging sanctions via a web of front companies with accounts in Chinese banks.

These banks have US offices and do business with US banks, allowing North Korean-controlled firms in secretive jurisdictions such as Hong Kong or the British Virgin Islands to move funds.

"They're doing business in Chinese currency, in euros and US dollars," he said.

North Korea's money is hard to track but, Ruggiero argues, the Chinese banks could be targeted by US prosecutors and fined, just as were European banks under the former Iran sanctions regime.

"You go after one Chinese bank and that will trickle down. The Chinese government may not be ready to help us, but the Chinese banks might unilaterally," he told reporters.

- Aggressive move -

He cited the example of ZTE, a Chinese telecom giant that on Tuesday agreed to pay a $1.2 billion fine to settle a US charge that it traded illegally with Iran and North Korea.

Tillerson, he said, should go to Beijing next week and say: "Did you see the ZTE fine? That's coming for your banks."

This would be an aggressive move and other experts recommend proceeding cautiously for fear that China will become even more stubborn, but America and its allies do need new options.

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Chinese protest against South Korea's Lotte
Beijing (AFP) March 5, 2017
Dozens of people holding Chairman Mao posters protested in China's Jilin province on Sunday, calling for a boycott of South Korean goods as part of a backlash against the country's Lotte Group. The retail giant has faced growing opposition in China since signing a deal to provide land for a US missile-defence system Tuesday. The plan to install the Terminal High-Altitude Area Defense (TH ... read more

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