South Korea's Lee talks security risks with Chinese leader

China's President Hu Jintao (2nd R) and his wife Liu Yongqing (R) shake hands with South Korean President Lee Myung-bak and his wife Kim Yoon-ok during a welcome ceremony ahead of the opening of the Shanghai World Expo in Shanghai, April 30, 2010.

SHANGHAI (Reuters) - South Korean President Lee Myung-bak held talks with his Chinese counterpart Hu Jintao in Shanghai on Friday that touched on security risks caused by the North's suspected attack on a warship from the South.

China, the reclusive and impoverished North's biggest benefactor with the most influence in Pyongyang, wants to prevent further tensions that increase the chances of war but is not about to punish its neighbor, analysts said.

"The bottom line is that Pyongyang knows that Beijing will not forsake them even if they behave in this provocative manner," said Peter Beck, a specialist in Korean affairs at Stanford University.

Lee, who met Hu on the sidelines of the World Expo in Shanghai, has signaled Seoul will not retaliate with force, calming investor concerns in Asia's fourth largest economy.

"I want to address the tragic loss of your country's warship," Hu told Lee. "To those who died and to their families, please let them know we grieve with them."

South Korea lost 46 sailors when their ship was struck last month by what is believed to be a North Korean torpedo. If confirmed, it would be one of the deadliest strikes by Pyongyang since the end of the 1950-53 Korean War.

South Korea's defense minister told parliament that investigators have found a piece of aluminum that appears to be not part of the sunken corvette. Military experts say aluminum debris is consistent with a torpedo attack.

Lee has been looking for regional support in the wake of the crisis, which experts say could result in economic and political moves to punish Pyongyang if Seoul formally names it as the culprit.

Lee may also have his first face-to-face meeting with a top member of the North's ruling class in Shanghai. The North's nominal number 2 leader Kim Yong-nam, who serves as the face of the government, is also attending the Expo.

GOOD NEIGHBOURLY RELATIONS

Both Lee and Kim attended the same welcome dinner hosted by Hu in Shanghai, but were seated far apart and did not appear to speak to each other.

China's official Xinhua news agency quoted Hu as telling Kim earlier in the day that China was willing "to promote good neighborly relations to new heights."

Neither Xinhua, nor a similar report by North Korea's KCNA news agency, made mention of the South Korean ship sinking.

Analysts say Lee's government, which has cut off once lucrative aid to the North and has few economic means left to hurt Pyongyang, risks pushing the North even closer to China if it decides to act tough.

"If the drive to cooperate with China starts producing results, North Korea's policy of ignoring the South will become more blatant, as will its hardline position against the South," said Cho Myung-chul of the Korea Institute for International Economic Policy, who was formerly an academic in the North.

North Korea may also try to raise tensions by resorting to saber rattling, experts have said.

Japan's Asahi newspaper quoted unnamed military sources as saying the North could test fire its mid-range Rodong ballistic missile from its east coast toward Japan some time next month.

The Rodong, with an estimated range of up to 1,400 km (870 miles), can hit all of South Korea and most of Japan. The North is barred from test-firing its missiles by U.N. resolutions.

(Additional reporting by Jack Kim and Jon Herskovitz in Seoul; Editing by Jeremy Laurence)