What should China be doing to defuse tensions between North Korea and the U.S.?

China is not going to 'defuse' tensions between NK and US. It may tell NK that it is upholding its commitment to the UN sanctions recently announced, and stick to that commitment, but that is all. It will let NK implode, in time, regardless of the threat or risk of having hordes of North Koreans try to cross its border as refugees. China can contain that scenario, and once any NK dictator is gone, it can begin to feed the people of that country and win them over. But that's only my opinion.

China is capable of shutting North Korea's missile/nuclear program. They just don't want to. China accounts for 90% of North Korea's trade and supplies 90% of it's energy needs.

https://www.nytimes.com/2017/04/13/world/asia/china-north-korea-trade-coal-nuclear.html

Placing sanction and after sanction on North Korea which China will violate is pointless. The US should bring China/US Trade to a screeching halt.

Get one of their sleeper agents/hackers to shut down Trump's twitter access. That would be a start.