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The Korean Peninsula, where Canadian troops fought some six decades ago, is once again the setting for tensions over bellicose statements from Pyongyang. We have been along this path many times since the 1953 Korean War armistice, and each time the tensions have dissipated. But the latest round of threats from North Korea is distinct from earlier security challenges on the peninsula, and it poses unpalatable choices for China.

Here is what has changed. First, there has been a gradual but significant qualitative increase in the capacity of the North Korean military's ability to project force at a distance. With three nuclear-weapon tests, North Korea has laid the foundation for a nuclear capacity, even though questions remain regarding the ability of their delivery systems to work – especially outside northeast Asia. While the North Korean missile program has made uneven progress, with many failures, time and practice are allowing a gradual increase in capacity.

North Korea almost certainly lacks the capacity to deliver a nuclear weapon onto a distant target, such as continental North America. However, when dealing with an opponent that exudes hostility sixty years after the last large-scale combat, one cannot fault either the South Korean or U.S. governments for taking military precautions. While the rising tensions do not mean that war is imminent, or even likely, the risks of a miscalculation by Pyongyang that might lead to retaliation by Seoul are probably higher than in the past.

All of this is bad news for Beijing. While China almost certainly prefers a state on its northeastern border that does not contain either U.S. forces or have a military alliance with Washington, Chinese strategic planners cannot be pleased that their small North Korean neighbour is adding stress to the vital northeast Asian region, where rival maritime claims have already caused strains between Beijing and Tokyo.

To China's ruling Communist Party and government, sustained economic development is seen as vital to domestic security. Any significant military action, which would almost certainly be focused on the Korean peninsula itself, would be disastrous for the South Korean economy, but would also sap confidence from the economies of both China and Japan, with immediate knock-on effects on global confidence.

China's decision in March to support the latest round of sanctions against North Korea will no doubt have strained Beijing's difficult relationship with Pyongyang, even if the sanctions proposals were softened at Beijing's request. China has influence in North Korea that is unmatched by any other state, but that does make the prickly regime of Kim Jong-un a client state of China.

When I visited Pyongyang as a Canadian diplomat I usually called on the Chinese Embassy, as that mission had access superior to that of any other. But even with China's access, and party links between the Chinese Communist Party and the Korean Workers' Party, I never had the sense that the decision-making process in Pyongyang was clearly understood by the Chinese.

Since the 1990s, China has made periodic attempts to nudge North Korea towards the sort of broad economic reform measures that have generated rapid growth in China itself. For a range of reasons, similar policies have been given very limited application in North Korea, and with correspondingly poor results.

For at least two decades, many in the West have thought that the example of rising economies in Asia, and the worldwide unravelling of Soviet-style command economies, might generate change in North Korea, either through Chinese-style economic reforms or as a result of regime collapse. While China would certainly favour the former outcome, the Chinese, on balance, appear to fear the latter, often citing the risks of waves of North Korean refugees entering China.

While China has the capacity to turn the screws on Pyongyang, by cutting off certain key industrial inputs such as petroleum, or closing transportation links across the Chinese-North Korean border, the result of such actions cannot be known in advance. While such pressure might force concessions from North Korea regarding its weapons programs, such direct measures could also precipitate yet more extreme measures on the part of Pyongyang.

None of the players in North East Asia, including North Korea – whose leaders wish to live long lives – wishes for war. For that reason, the most probable outcome of the current crisis is a gradual reduction in war rhetoric from Pyongyang, and a subsequent lowering of tension in regional capitals. But with gradually growing North Korean military capacity, at least with regard to nuclear weapons development and ballistic missile technology, the risks of war cannot be entirely dismissed.

For China the greatest downside of perpetual tension on the peninsula could be the risk of enhanced military capacity in the region by Japan and the United States.

Gordon Houlden, the highest-ranking Ottawa-based Canadian diplomat to have entered North Korea, is director of the University of Alberta's China Institute