China's policy toward the Korean peninsula has shifted from a one-Korea policy to a de facto two-Korea policy. Beijing's constant policy is recognition of Pyongyang as the sole legitimate regime on the peninsula. What Beijing has changed is to acknowledge the existence of the Seoul regime and to inaugurate Sino-South Korean unofficial ties. The main thrust of this research is to examine China's relations with South Korea and North Korea during the period between 1984 and 1989 and to identify the national interests which made Beijing leaders shift their Korea policy. The hypothesis of this study is: China's economic priority is the determining factor and changes in the international environment in East Asia are a contributing factor which made China incrementally shift policy toward the Korean peninsula.The decision to adopt the policy of "revitalizing the economy internally and implementing the open door policy externally" in the Third Plenum of the Eleventh Chinese Communist Party Central Committee in 1978 resulted in revolutionary changes in Chinese foreign policy. These changes resulted from new foreign policy orientations, namely, pragmatism, the growing magnitude of economic elements, open door policy, and entente diplomacy. These new orientations were able to be applied to the Korean case when changes in the Northeast Asian international milieu provided chances in the early 1980s. These changes were the growing positive Sino-Soviet relations, the emergence of South Korea as an economic power, the improvement of Soviet-North Korean relations, and the failure of North Korean diplomacy.Through empirical studies of Chinese foreign behavior and official media, the hypothesis is proven valid. In the early 1980s, China evidently changed its Korean policy priority from strategic interests to political interests with a desire for a peaceful international environment. The growing unofficial Beijing-Seoul contacts show that China desires to pursue its economic interests in South Korea but under the premise of not jeopardizing its relations with North Korea. This line will not change until North Korea is willing to accept cross-recognition.