North Korea has warned of retaliation after the US scrapped food aid over its rocket launch, raising fears of a new nuclear test, as China reportedly suspended a refugee deal with its wayward ally.

In a defiant statement late Tuesday, the nuclear-armed North said it was no longer bound by a bilateral agreement to halt testing of nuclear weapons and long-range missiles after Washington suspended much-needed food aid.

"We have thus become able to take necessary retaliatory measures, free from the agreement," its foreign ministry said, accusing Washington of hostile acts.

South Korean analysts said they expect the North to follow up by staging a third nuclear weapons test, or launching another long-range missile.

The North also rejected condemnation by the United Nations Security Council, including its ally China, of the failed launch on Friday last week.

Japan's Yomiuri Shimbun newspaper said Wednesday that China has suspended the refugee repatriation deal because it was not consulted about the launch, seen by the US and its allies as a covert test of ballistic missile technology.

The paper quoted two Chinese officials as saying the longstanding policy of swiftly returning North Koreans as economic migrants -- despite the punishment they face back home -- had been put on hold.

"North Korea failed to disclose specific plans of the missile launch to the Chinese side," the paper quoted one unidentified official as saying.

The suspension reflects Beijing's displeasure with its neighbour which "did not show the necessary attention to its friend China", the official said.

Pyongyang insists its botched satellite launch was not a missile test and did not breach the February deal with Washington, under which it vowed to suspend uranium enrichment and nuclear and missile tests in return for food aid.

But the US called off plans to start shipping 240,000 tonnes of food, saying the North could no longer be trusted.

On Monday a Security Council presidential statement "strongly condemned" the launch. It ordered a tightening of existing sanctions and warned of new action if the isolated state stages another nuclear or long-range missile test.

South Korean President Lee Myung-Bak Wednesday praised China's response to the launch, including its backing for the UN statement.

"I believe we can trust China... we should continue to manage relations with it," he was quoted by Yonhap news agency as saying.

But Pyongyang said Washington had imposed a "brigandish demand" on other Security Council members. "Nothing can stand in the way of (North Korea's) space development for peaceful purposes," it vowed.

The launch was to have been the centrepiece of mass celebrations marking the centenary of the birth of founding president Kim Il-Sung, grandfather of current leader Kim Jong-Un.

Shrugging off the failure, the North wheeled out an apparently new long-range missile at a major military parade Sunday.

The North staged atomic weapons tests months after its long-range rocket launches in 2006 and 2009.

"With the February agreement broken down in practice, the North will likely take many of the steps the US and South Korea have long feared, including another nuclear test and a long-range missile test," said Paik Hak-Soon of the South's Sejong Institute think-tank.

When the United States and the Security Council start taking punitive actions, "Pyongyang will certainly respond with actions as well", said Yang Moo-Jin of Seoul's University of North Korean Studies.

"These would include a third nuclear test, or test-launching of an inter-continental ballistic missile or stepping up activities involving weapons-grade uranium," Yang said.

The South's Unification Minister Yu Woo-Ik said a third nuclear test could not be ruled out but the North's statement did not specify one.

Yu said Seoul would continue aid for the North's vulnerable people through international organisations, and allow private groups to send assistance.