"It makes no sense for the US to return to diplomacy with North Korea as long as 85 percent of the North's external trade is with China," Cha said of Xi's expected appeal to Trump to return to diplomacy with Pyongyang as a way to avert a crisis.

He suggested four key demands the US should make with regard the North during the summit with Xi set for Thursday and Friday at Trump's Mar-a-Lago resort in Florida, requiring the Chinese to "halt financial transactions with North Korea through Chinese banks and front companies."

Anthony Ruggiero, a former Treasury Department official who served as adviser to the US delegation to the six-party nuclear talks with North Korea, said in a separate report carried by CSIS that Chinese companies and banks are complicit in Pyongyang's efforts to evade financial sanctions.

"Washington should authorize the Treasury Department to impose fines against banks that aid North Korea’s sanctions evasion.

Ultimately Chinese banks must be forced to choose: either stop aiding North Korea or lose access to the US banking system," he said.

Cha also said that Trump should demand Xi to "go beyond the 2017 coal import ban in titrating other economic interaction with the North" and "crack down on Chinese nationals who evade UN Security Council resolutions regarding business in dual-use items or dollar-denominated transactions with North Korea."

The US should also encourage China to align domestic law with UN Security Council resolutions, of which China is a signatory, to make sure that violations of such resolutions constitute prosecutable violations of domestic law, Cha said.

How to deal with the North is expected to be one of the thorniest issues at the Trump-Xi summit, as the US seeks to get Chinese help in ramping up pressure on Pyongyang while China calls for the US to reopen negotiations with the North.

In the run-up to the crucial summit, Trump warned that the US will tackle North Korea on its own unless China helps with it, a veiled warning to Beijing that it would be bad for Chinese interests if the US starts taking unilateral action.

"China has great influence over North Korea. And China will either decide to help us with North Korea, or they won't," Trump said during an interview with the Financial Times. "If they do, that will be very good for China, and if they don't, it won't be good for anyone."

"If China is not going to solve North Korea, we will. That is all I am telling you," Trump said.

China is North Korea's last-remaining major ally and a key provider of food and fuel supplies. But it has been reluctant to use its influence over Pyongyang for fears that pushing the regime too hard could result in instability in the North and even its collapse, which could lead to the emergence of a pro-US nation next door. (Yonhap)