Seoul: North Korea said on Monday it was withdrawing all workers and suspending operations at its joint industrial zone with South Korea -- the only surviving symbol of inter-Korean cooperation.
The announcement came amid reports of heightened activity at the North`s nuclear test site, although the South Korean Defence Ministry denied suggestions that a fourth nuclear test was imminent.
North Korea "will withdraw all its employees from the zone", Kim Yang-Gon, a senior ruling party official, said in a statement carried by the official Korean Central News Agency.
At the same time, Pyongyang "will temporarily suspend the operations in the zone and examine the issue of whether it will allow its existence or close it", Kim added.
Kaesong was built in 2004 as a rare symbol of cross-border economic cooperation.
Neither side has allowed previous crises to significantly affect the complex, a crucial hard currency source for the impoverished North and seen as a bellwether for stability on the Korean peninsula.
But Pyongyang has blocked South Korean access to Kaesong since last Wednesday, forcing 13 of the 123 South Korean firms operating to halt production.
Monday`s announcement came just hours after South Korean Finance Minister Hyun Oh-Seok denounced the access ban as "ridiculous".
Pyongyang had threatened to withdraw its 53,000 workers last week after the South`s defence minister said there was a "military" contingency plan in place to ensure the safety of South Koreans in the complex.
"How the situation will develop in the days ahead will entirely depend on the attitude of the South Korean authorities," said Kim, who blamed the pull-out on "military warmongers" who had affronted the North`s "dignity."
The Korean peninsula has been locked in a cycle of escalating military tensions since the North`s third nuclear test in February which drew toughened UN sanctions.
The South`s Defence Ministry said on Monday that activity detected at the North`s Punggye-ri atomic test site was "routine" and should not be interpreted as final preparation for another detonation.
"There is no indication that a nuclear test is imminent," ministry spokesman Kim Min-Seok said, while adding that the North consistently maintained Punggye-ri at a state of test-readiness.
The daily JoongAng Ilbo had reported on Monday intelligence reports of stepped-up activity at the site that might point to an upcoming test.
The South`s Unification Minister had appeared to confirm the report, but then insisted his remarks had been misinterpreted.
North Korea`s bellicose rhetoric has reached fever pitch in recent weeks, with near-daily threats of attacks on US military bases and South Korea in response to ongoing South Korea-US military exercises.
Intelligence reports suggest Pyongyang has readied two mid-range missiles on mobile launchers on its east coast, and is aiming at a test-firing before the April 15 birthday of late founding leader Kim Il-Sung.
Japan has ordered its armed forces to shoot down any North Korean missile headed towards its territory.
A missile launch would be highly provocative, especially given a strong rebuke the North`s sole ally China handed it at the weekend and a US concession to delay its own planned missile test.
"No one should be allowed to throw a region, even the whole world, into chaos for selfish gains," Chinese President Xi Jinping told an international forum in southern China on Sunday.
Although he did not mention North Korea by name, Xi`s remarks were taken as a clear warning to the regime in Pyongyang, which is hugely dependent on China`s economic and diplomatic support.
On Saturday, Chinese Foreign Minister Wang Yi had told UN chief Ban Ki-moon that Beijing would "not allow troublemaking on China`s doorstep".
The United States, which has met the North`s threats with some military muscle-flexing of its own, offered a calibrated concession Saturday by delaying a planned inter-continental ballistic missile test.
Russian President Vladimir Putin on Monday welcomed the decision to postpone the Minuteman 3 test, which the US had said it feared could be misconstrued as an attempt to exacerbate the crisis on the Korean peninsula.
The mid-range missiles mobilised by the North are reported to be untested Musudan models with an estimated range of around 1,860 miles (3,000km) that could theoretically be pushed to 2,485 miles with a light payload.
That would cover any target in South Korea and Japan, and possibly even US military bases on the Pacific island of Guam.
The North has no proven inter-continental ballistic missile capability that would enable it to strike more distant US targets, and many experts say it is unlikely it can even mount a nuclear warhead on a mid-range missile.