By Chris Buckley and Ju-min Park
BEIJING/SEOUL (Reuters) - Kim Jong-un, the third in a dynasty that has ruled North Korea since its foundation in 1948, paid homage to his dead father Tuesday as the isolated country appeared to cut itself off even more from the outside world.
While U.S. Secretary of State Hillary Clinton urged North Korea to follow a "path of peace," diplomats and commentators were struggling to understand what would happen as it transitions from the 17-year iron rule of Kim Jong-il, 69 years old when he died Saturday, to that of his untested son, in his late 20s.
Dressed in black, Jong-un, along with top army and government officials, paid respects to his father who lay in state in the capital Pyongyang in a glass topped bier surrounded by the red "Kimjongilia" flowers named after him.
Emphasising the ruling family's lineage, Kim Jong-il's bier was placed in the mausoleum where the embalmed body of founding father Kim Il-sung is displayed in a glass sarcophagus.
State news agency KCNA said the visitors were "wailing over the sudden and grievous death of Kim Jong-il." South Korean workers returning from an industrial park in the North said the atmosphere there was "normal but solemn."
North Korea has said it does not want foreign dignitaries to attend the Dec 28 funeral and China said it had noted that, although it later said that the country's leadership was welcome to visit China "at a convenient time."
North Korean media lauded Kim Jong-il as the "Great Father of the People" and reported that he had made several public appearances in the past week.
Jong-un, the youngest son and successor to the ruling dynasty started by his grandfather, was described as the "eternally immovable mental mainstay of the Korean people" by KCNA.
In a sign the hermit state was sealing itself off from the outside world even more after the "Dear Leader's" death, few people crossed the Dandong border with China. China is one of the few states with which it actively trades.
"We can't go in now, because of the death of Kim Jong-il," Yu Lu, a Chinese trader in Dandong who does business with the North, told Reuters. "It's all closed off, and basically all the North Koreans are heading back. It's very tightly closed today."
However, it was not clear if the border was officially closed.
Chinese business people in Dandong said that while it was still possible to travel across Tuesday, many were cancelling trips, fearing the border could be closed.
"We're worried that it could be shut down at any time, because of the mourning activities, and nobody wants to be stuck in North Korea with the border closed," said Yu Lu.
North Korea made the announcement of the elder Kim's death of a heart attack Monday, prompting South Korea - with whom the North remains technically at war after a 1953 armistice ended a conflict - to put its forces on full alert.
Officials said neither the United States nor South Korea appeared to be aware of his death until the announcement.
South Korean media reported that the North test-fired at least one short-range missile Monday, sparking a fresh round of tension, although government officials in Seoul said they did not necessarily believe the launches were linked to Kim's death.
Seoul was calm Tuesday, a sunny winter day, and there appeared to be no sense of crisis, although the country's military called off plans to light Christmas trees on the border, a move that Pyongyang warned could lead to conflict.
U.S. HOPING FOR PEACE
North Korea, with one of the largest armies in the world and the ambition to join the nuclear club, has been recently trying to re-engage the United States in a bid to win food aid. But there has been little progress.
The United States, a close ally of South Korea, wants North Korea first to abandon its attempts to become a nuclear weapons power.
"It is our hope that the new leadership of (North Korea) will choose to guide their nation onto the path of peace by honouring North Korea's commitments, improving relations with its neighbours, and respecting the rights of its people," Clinton said in a statement.
"The United States stands ready to help the North Korean people and urges the new leadership to work with the international community to usher in a new era of peace, prosperity and lasting security on the Korean Peninsula."
The question remains, however, as to who is actually running the North. While Kim Jong-un may be the anointed heir, there are other powerful players who may be forming a coterie around him.
Jong-un has had only since 2009 to prepare for leadership, whereas his father had more than a decade under the tutelage of his father and founder of North Korea, Kim Il-sung.
Key stakeholders around Jong-un are Jang Song-thaek, the husband of Kim Jong-il's sister Kim Kyong-hui, herself a powerful player at the court in Pyongyang.
China will also play a key role and Beijing extended the hand of friendship to the new leader, who has not made any official visit to China that has been recorded publicly.
"I want to add that China and North Korea have always kept up high-level visits, and we welcome the North Korean leader to visit at a convenient time to both sides," Chinese Foreign Ministry spokesman Liu Weimin said.
President Hu Jintao visited the hermit state's embassy in Beijing to express his condolences. The gesture -- unusual for China's highest ranked leader -- also highlighted Beijing's effort to shore up support for Pyongyang under the younger Kim.
South Korean financial markets, which initially plunged on the news of Kim's death, recovered their poise Tuesday, posting small gains. Other Asian markets were also calm.
South Korean workers from the Kaesong industrial complex in the North, where South Korean businesses have factories, started to come home and said it was business as usual.
"Kaesong is normal but solemn. Our factory called it a day 30 minutes earlier than usual," said Ok Sung-seok, head of apparel maker Nine Mode that has 250 North Korean workers in the industrial park.
"We have a manual to abide by. Don't talk politics and focus on work," was the rule, he said as he re-entered South Korea.
Close to the border, life in the vibrant and prosperous South, the world's 13th largest economy, appeared to be going on as normal. Few saw Kim's death as particularly worrying.
"I don't think any crisis will happen because veteran soldiers are advising the young Kim. Even if he wants to provoke, they will persuade Kim not to do," said Oh Seok-hyun, a 84-year old retired soldier who fought in the Korean war.
"We are, I think, still safe because we have the Eighth United States Army," said Oh, a tourist at the "unification observatory" in the South Korean city of Paju, 3 km (2 miles) from the fortified border.
(Additional reporting by Andrew Quinn in WASHINGTON, Christine Kim in SEOUL, Reuters Television in DANDONG, CHINA; Writing by David Chance; Editing by Raju Gopalakrishnan and Jonathan Thatcher)
