(This story from August 24, 2012, corrects the description of the source who appears in the first paragraph. An earlier version of this story incorrectly stated that the source previously predicted North Korea's first nuclear test in 2006. The corrected version of the description of the source appears in the 25th paragraph)
By Benjamin Kang Lim
BEIJING (Reuters) - North Korea's young leader wants a state visit to China in the latest move in his push to lift the isolated state out of decades of poverty, but risks further fraying ties with his only powerful ally by sticking to the threat of a new nuclear test.
It is not clear whether China will be prepared to host him, as requested, in September when Beijing will be preoccupied with its own leadership change. The leadership may also have its doubts about the unproven Kim Jong-un, who after only four months in office, defied his giant neighbor by conducting a long-range rocket test.
A source with ties to both Pyongyang and Beijing told Reuters on Friday that Kim's uncle, Jang Song-thaek, effectively the second most powerful figure in Pyongyang, had asked for the visit when he met Chinese leaders on a visit to Beijing last week.
"It will be a state visit. This was one of the most important missions of Jang Song-thaek's visit," the source told Reuters, speaking on condition of anonymity.
China's foreign ministry declined to comment on the proposed visit, which would be Kim's first trip abroad since he took office and became the third of his line to rule North Korea.
Kim, in his late 20s, appears to be trying hard to soften the dour image of his dictator father whom he succeeded in December.
He has appeared waving and smiling at public events, even attending a pop concert that included Disney characters, and at times - just as unusually for a North Korean leader - accompanied by his wife.
But for most of North Korea's 22 million people, who are among the Asia's poorest, little has changed.
Some analysts see Jang as the driving force behind the North's promise of economic reform. Kim's uncle made his trip to China to press its leaders to provide greater backing for an economy brought to its knees by decades of mismanagement and international sanctions over missile and nuclear tests.
MAY BE LOATH TO HOST KIM
Beijing may be loath to host Kim in September at a time when China is preparing its own leadership change and because of the April rocket test, analysts said.
"North Korea has been nice to China only in the past one and half months," said Shi Yinhong, a professor of international relations at Renmin University in Beijing.
"Heaven knows whether North Korea will change again in a few months."
The proposed visit also comes when there are doubts over how willing Chinese companies are to put money in their neighbor, with its complex and contradictory investment laws.
One Chinese mining company this month took the rare step of turning to the Internet to air grievances over what it saw as the North's unfair business practices.
Observers said new special enterprise zones in North Korea, aimed at building up business with China, have met with little or limited success.
United Nations estimates show that a third of North Korea's population is malnourished and it says the economy still has to regain output levels seen in the 1990s, when a devastating famine and the withdrawal of Soviet aid hit the country hard.
Chinese investment is the only viable large-scale option for the North.
"Jang Song-thaek went to China and discussed economic issues but the visit did not turn out to have the major impact that was expected. So Kim Jong-un will go to ask for the economic aid and long-term cooperation that they need," said Yoo Ho-yeol, professor of North Korean studies at Korea University in Seoul.
China will expect to extract a price from Kim and will want the North to commit to return to talks with regional powers, so-called Six Party talks, aimed at defusing the nuclear threat on the Korean peninsula, Yoo said.
For the reclusive North, that nuclear threat has long been its only real diplomatic leverage with the outside world, especially the United States.
Kim's father oversaw two nuclear tests and his long range missile tests were seen by the United States as attempts to develop a ballistic missile capable of reaching the U.S. mainland.
While the most recent missile test in April went spectacularly wrong, and saw sanctions even further tightened, the North is believed to be pushing ahead with plans to conduct a third nuclear test.
The source who disclosed Kim's request for a visit said that the North retained the capacity to carry out another test.
"There is no doubt North Korea has the capability, but China is strongly opposed to it," the source said.
It was impossible to verify the plan independently in North Korea, one of the world's most closed states, although the source has proved reliable in the past, predicting the ascent of Kim's uncle, Jang Song-thaek. Also, after North Korea announced its first nuclear test in 2006, the source gave Reuters exclusive details of the preparations for that test before it was conducted.
"North Korea wants a permanent peace treaty to replace the armistice in exchange for dropping plans for a third nuclear test. It's been 60 years and time to (formally) end the war with a peace treaty," the source added.
A formal peace treaty to end the 1950-53 Korean War, rather than the armistice in place, has been a longstanding demand from Pyongyang, which wants diplomatic recognition from the United States.
Washington and its ally South Korea, which is host to some 28,000 troops, insist the North give up its nuclear ambitions before any peace treaty and large scale economic aid.
With the U.S. presidential election and Chinese leadership change this year, Pyongyang has little leverage beyond its nuclear threat, analysts say.
But they add that Beijing cannot give up on Pyongang, which acts as a buffer to U.S. ally South Korea, and knowing that the North's collapse could send columns of refugees fleeing across its border.
Recent satellite images have shown North Korea making progress in tunneling associated with a nuclear test, although it has been impossible to independently verify the images.
Siegfried Hecker, a U.S. nuclear expert who has visited the North's main Yongbyon nuclear facility four times since 2004 and was the last foreign expert to visit the site in late 2010, wrote in a report published on August 6 that the North could be technically ready for a test within two weeks.
Hecker and co-author Frank Pabian wrote that North Korea might conduct a simultaneous test using plutonium and highly enriched uranium.
The North's previous tests have used plutonium and the use of highly enriched uranium would give Pyongyang a second route to a nuclear weapon.
"Whether and when North Korea conducts another nuclear test will depend on how high a political cost Pyongyang is willing to bear," Hecker and Pabian wrote.
"Beijing has continued to expand aid and trade with North Korea, but has also applied significant diplomatic pressure on Pyongyang not to test."
(Additional reporting by Jack Kim and Ju-min Park in Seoul and Chris Buckley in Beijing, Editing by David Chance and Jonathan Thatcher)