Beijing hopes to work with Pyongyang to resolve any problems arising from economic cooperation, Foreign Ministry spokesman Hong Lei said in response to the Democratic People's Republic of Korea's negative comments about a Chinese company.

Speaking at a regular news briefing, Hong said China encourages enterprises to make contributions toward trade and economic cooperation with the DPRK.

"The Chinese government continues to support Chinese enterprises to invest in the DPRK and contribute to economic and trade cooperation between the two nations," Hong said.

DPRK's state-owned Korean Central News Agency on Wednesday published an article accusing Xiyang Group, a Chinese company producing fertilizer and minerals, of breaching a contract.

"It (Xiyang) has carried out only 50 percent of its investment obligations despite almost four years having passed since the contract took effect," KCNA quoted a spokesman for DPRK's Commission for Joint Venture and Investment as saying.

Xiyang Group's investment in an iron ore powder venture was the largest Chinese investment in the DPRK. But the group has now said the deal turned into "a nightmare" and claimed the DPRK has violated its own investment laws.

A Xiyang official told Reuters that it signed up for a 75 percent stake valued at $45 million in a 10 million ton a year iron ore processing plant. The official said it started producing in April 2011 and stopped two months later after the DPRK prohibited it from selling 30,000 tons of ore and arbitrarily raised land, power, water and labor costs.

The KCNA article said that Xiyang Group's comments have been used by "hostile forces" in an orchestrated media campaign to blacken Pyongyang and undermine its friendship with China.

Chinese investment in DPRK's non-financial sector increased to $300 million by the end of 2011, according to the Ministry of Commerce.

According to the General Administration of Customs, both the trade volume between China and the DPRK and the year-on-year growth rate reached a record high, of $5.67 billion dollars.

With the increasingly close connection between China and the DPRK, observers have called for calm when issues arise, as economic frictions could become common.

"The DPRK failed to follow the international practice to deal with Chinese investors," said Huang Youfu, an expert in Korean Studies at Minzu University of China in Beijing. Huang said he was not surprised by what Xiyang Group experienced in the country.

Huang called for more efforts to build up a sound investment environment by signing intergovernmental deals.

"The accusatory statement is not helpful to handle the friction through a low-key approach, because Pyongyang is now tackling its own economic problems," Huang said, adding that it was "unwise" for KCNA to publish the article.

A Chinese expert who has recently returned from the DPRK, and wished to remain anonymous, said the media should act rationally to help settle the case.

"Loopholes existed from the beginning when they signed the contract. And both sides are still negotiating on how to work their way out," he said, emphasizing that media, especially domestic media, should not take one side against the other without further investigation.

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