China has been nudging North Korea to shelve plans for a third nuclear test, though it remains unclear how North may react to the pressure, sources aware of the secretive discussions between the two nations have said.

If Pyongyang continues with the proposed test, Beijing is expected to take retaliatory steps, though they would hardly be substantive, a source with ties to Pyongyang and Beijing told Reuters.

North Korea, reportedly, is nearing completion of preparations to test a nuclear device for the third time after two attempts in 2006 and 2009, with observers saying that the reclusive Asian nation may have developed the capabilities to test a nuclear weapon using highly enriched uranium, raising concerns in Washington, Seoul and Tokyo.

It remains to be seen whether uranium or a limited supply of plutonium would be used in the test.

China is unhappy... and urged North Korea not to conduct nuclear test near Changbai Mountain, the source, who wished to remain anonymous, said. China also complained about the environmental damage to the area after the first two tests.

North's two previous nuclear tests had caused environmental damage to the mountainous terrain bordering China. Beijing fears further degradation if North decides to go ahead with testing.

China, however, is likely to refrain from drastic measures against Pyongyang due to fears of instability in its north-east region.

China can't stop food aid. If that stops, it would endanger the (North Korean) regime, a Western diplomat, who was also not named, told Reuters.

Pyongyang drew heavy international criticism when it decided to test a long-range missile on April 13, purportedly aimed at boosting its defense to develop an intercontinental ballistic missile capable of striking the US. North's ambitious attempt to launch the Unha-3 rocket failed when it broke apart shortly after takeoff.

China had condemned the rocket launch along with other world powers in a United Nations Security Council (UNSC) statement but ignored calls for harsher sanctions on the North Korean regime.

Beijing, however, shifted its stance later regarding Pyongyang's widely panned rocket launch. China's senior-most diplomat  Dai Bingguo showered praise on North's leader Kim Jong-Un and promised to strengthen bilateral ties in a meeting with Kim Yong-il, the Korean Workers' Party director of international affairs in April.

The latest analysis of the satellite imagery of North's nuclear test site, obtained by a US-based institute, appeared to show that the construction of a nuclear reactor that can be used to expand the country's nuclear weapons program has been resumed.

South Korean intelligence, in a report early April, said that the North was digging a new tunnel at the Punggye-ri nuclear site which was interpreted as a sign of a covert nuclear weapons program.

The analysis of the satellite imagery captured on April 30, shows that Pyongyang has resumed building work in Yongbyon after months of inactivity and is close to completing the reactor containment building, a post published Thursday on the website of US-Korea Institute at Johns Hopkins University said.

Over all, it may take another one to two years before the new facility becomes operational, the organization said in a statement as reported by the New York Times.

Japanese Prime Minister Yoshihiko Noda and South Korean President Lee Myung-bak who were in Beijing recently for a trilateral summit made no reference to Pyongyang's nuclear ambitions, in a joint declaration issued Sunday, but said that the three nations reached an agreement on avoiding escalation of nuclear provocation.

Of course there was agreement on issues such as avoiding escalation and further North Korean provocation, said the official, who was accompanying Noda and refused to be named.

But on the exact phrasing of the paragraph and how it should be included in the declaration, there was no agreement.

The disagreement over the phrasing was largely attributed to China's reluctance in pressurizing Pyongyang against nuclear testing through stricter sanctions and policy measures.