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CHINA has secretly harboured the eldest son of North Korean dictator Kim Jong-il in Macau for three years, despite the US-led crackdown on North Korea's finances in the former Portuguese colony, local reports say. Kim Jong-nam, the North Korean leader's eldest son and former heir apparent, has been living with his family in Macau, dividing his time between five-star hotels and a family villa, the South China Morning Post reported yesterday citing a six-week investigation. The newspaper said the younger Kim had made Macau his home, and was not just a frequent visitor as previously thought. In contrast to the deprived conditions, and in some cases starvation, suffered by most North Korean citizens, Mr Kim spends much of his time wining, dining and gambling in Macau's growing number of casinos and slot machine parlours, and travels frequently to the mainland and abroad using passports from the Dominican Republic and Portugal, the paper said. The rotund younger Kim hit the headlines in 2001 when he was deported from Japan after trying to enter with his wife and then four-year-old son on a fake passport, apparently to visit Tokyo Disneyland. The humiliation led his father Kim Jong-il to cancel a planned visit to China. Macau, like neighbouring Hong Kong, is a special administrative region of China and as such enjoys limited autonomy. But there is little doubt that Beijing would be aware of Mr Kim's presence in Macau as North Korea is such a touchy issue. "He's been on the move for much of the decade but Macau is the place he calls home now," a source familiar with Mr Kim's movements told the South China Morning Post. "He's been free to stay as long as he lives quietly. He believes he is among friends and he appears to be happy." Macau has been a key conduit for North Korean financial dealings for more than 40 years, but in November 2005 the Macau Government froze $US24 billion ($A31.7 billion) in North Korean-linked accounts at the request of the US Treasury, which said they were used for money laundering. The financial bans strangled Kim Jong-il's cash flow and North Korea angrily blamed them for the breakdown of talks. If confirmed, the news that China has been harbouring Kim Jong-il's son is likely to embarrass Beijing, which has been under intense international pressure to use its much vaunted influence to pull North Korea back into line after it tested its first nuclear device last October. China voted in favour of unprecedented Security Council sanctions against North Korea after the October 9 nuclear test and North Korea eventually agreed to return to six-party talks in December. These are due to resume in Beijing next Wednesday.

Under the deal brokered by China last year to resume the stalled talks, the US agreed to hold separate meetings with North Korea on the Macau bank accounts.

The latest talks on this issue ended in Beijing on Wednesday but afterwards a source told Reuters that the North Koreans might threaten to conduct a second nuclear test at the resumption of six-party talks next week if the US did not lift the Macau financial bans.