North Korean Economy Watch

According to the AFP (h/t NKnews.org):

North Korea will receive emergency aid from China amid reports that the impoverished country’s food crisis would worsen this year.

China has decided to provide an unspecified amount of “emergency relief materials” to North Korea, its official Korean Central News Agency (KCNA) said late today.

“This measure will encourage the Korean people in their efforts to recover from the flood damage as early as possible and more energetically step up the building of a thriving nation,” it said.

The report followed a message of sympathy from China’s president Hu Jintao to North Korean leader Kim Jong-Il.

In the message, quoted by KCNA, Hu expressed deep sympathy and consolation over “the sad news that some parts of your country were hit by severe flood recently, causing causalities and property losses”.

The North has reported widespread flooding this summer which washed away homes, roads, railways and farmland, causing an unspecified number of deaths.

Heavy downpours last week swelled the Yalu river, which forms part of the border between China and North Korea, sending water spilling over its banks on both sides and inundating homes, roads and farmland.

After decades of deforestation, the North is particularly vulnerable to flooding. In 2007, it reported at least 600 people dead or missing from devastating floods.

Aid groups warned that this year’s flooding would aggravate the North’s chronic food shortages.

The North suffered a famine in the mid-1990s which killed hundreds of thousands. The UN children’s fund estimates one third of children are stunted by malnutrition.

A bungled currency revaluation last November, designed to flush out entrepreneurs’ savings, backfired disastrously, fuelling food shortages and sparking rare outbreaks of unrest.

In 2008 South Korea suspended an annual rice shipment to its impoverished neighbour as relations soured.

For its part, South Korea has also offered to send assistance.  According to Yonhap:

South Korea’s Red Cross on Thursday proposed providing aid to North Korea to help the communist neighbor recover from recent flood damages, an official said.

The proposal was made in a message delivered to a inter-Korean office in the North Korean border town of Kaesong, a Unification Ministry official in Seoul said, declining to be identified.

The ministry said earlier in the day that it was considering allowing emergency relief assistance to North Korea, but did not elaborate. The North, which remains technically at war with the South, had to evacuate a large number of people when heavy rains raised the level of rivers on its border with China and flooded its towns earlier this month.

“It’s not just the people in the Sinuiju border area that we’re considering providing aid to,” a Red Cross official said by phone, declining to be named. “We will follow the examples of 2006 and 2007 when we provided help, but the scale of aid this year will be determined upon exact assessments.”

“The emergency aid will mainly consist of noodles, water, milk and the likes,” the ministry official said, ruling rice out.

The aid, if accepted, could open room for improvement in the inter-Korean relations, which have soured since South Korea blamed North Korea in May for the sinking of its warship. Pyongyang denies involvement in the sinking that killed 46 sailors.

Read the full stories here:
North Korea to receive aid from China
AFP
8/26/2010

S. Korea’s Red Cross proposes sending flood aid to N. Korea
Yonhap
Sam Kim
8/26/2010

According to an article in the Korea Times:

Approximately 100 small Chinese companies out of 150 that have investments in North Korea are based in Jilin and Liaoning Provinces near the northeastern border with the North.

Read the full story here:
Investments in NK limit China’s policy choices
Korea Times
Kang Hyun-kyung
8/20/2010

According to Reuters:

A northeast Chinese border city that is a key portal with isolated neighbour North Korea has launched a pilot scheme to settle export deals in China’s yuan currency, the city’s official newspaper said on Thursday.

North Korea’s struggling economy has come under greater strain after a chaotic attempt to re-denominate its currency last year hurt private traders and alarmed Chinese merchants.

The yuan’s trial use appears intended to boost Chinese exporters’ confidence in doing more above-the-table deals with the North, often a perilous gamble even in smoother times.

Many Chinese traders doing business with the North already use the yuan, dollar, euro in cash or even barter to settle export of food, clothes, appliances and other cheap goods in often informal or convoluted transactions. Smuggling and illicit deals are common along the border, marked by the Yalu River, a few dozen metres (feet) wide in many parts.

The Dandong Daily reported that approved exporters in Dandong will be able officially to carry out business in yuan.

The Chinese government announced in June that all of its trading partners would be able to invoice and settle imports and exports in yuan, but so far such transactions have been primarily confined to trade between China and Hong Kong.

“This means that state-designated export businesses in Dandong that engage in external trade can use the renminbi to settle transactions,” said the Chinese-language Dandong Daily (www.ddrb.cn) of the scheme, which began on Wednesday.

The renminbi is another name for the yuan.

“This will reduce exchange rate risks and the costs of doing business, and smooth out enjoying export tax rebate policies, as well as improving capital utilisation,” said the report.

The scheme will also cover approved small-scale exports passing through customs posts at Dandong, it said.

The new scheme will allow exporters to enjoy rebates and other benefits for trade, but will also depend on North Korean importers being allowed to deal legally in yuan.

Dandong lies on the Yalu, and at night its neon-lit riverfront faces the darkness of the electricity-starved North.

…

North Korea’s dependence on Chinese goods and aid has deepened as Pyongyang’s ties with South Korea have frayed.

According to Chinese customs data, in the first six months of 2010, China’s trade with North Korea was worth $1.3 billion (835.6 million pounds), a rise of 15.2 percent on the same time last year.

China’s exports to the North grew by a quarter, but its imports fell by 4.8 percent, the customs data show. As much as 70-80 percent of that trade passed through Dandong, according to earlier Chinese news reports, citing local customs officials.

Read the full story here:
China city launches yuan trade scheme with North Korea
Retuers
8/19/2010

According to the Daily NK:

Trade between North Korea and China for the first half of 2010 was $1.29 billion, a 16.8% increase over the corresponding period of last year.

Using Chinese customs statistics, the South Korean embassy in China revealed the details of Sino-North Korean trade on Monday. According to the statistics, North Korean exports to China fell by 1.1% in the same period to $350 million, while imports from China increased by 25.2% to $940 million.

As a result, North Korea’s trade deficit with China was $590 million, a 48.5% increase over the previous year.

According to the statistics, North Korea imported 140,000 tons of food, 300,000 tons of oil and 100,000 tons of fertilizer during the period. Notably, flour imports rose by 383%.

Reduced inter-Korean trade and other economic exchanges following the Cheonan sinking and reduced international humanitarian aid due to UN sanctions were two of the most significant causes of the burgeoning reliance upon China.

Read the full story here:
Sino-North Korean Trade Deficit Rises
Daily NK
8/16/2010

According to Reuters:

China said Thursday it had offered to help North Korea tackle cross-border crime — two months after North Korean soldiers killed three suspected Chinese smugglers, raising tensions between the allies.

Beijing, Pyongyang’s most important ally and trading partner, said it had handed over military equipment to North Korea’s National Defence Commission during a visit by China’s Deputy Public Security Minister Liu Jing on Sunday.

China said in a statement that it was willing to work with North Korea in cracking down on cross-border crime and building up its law enforcement forces.

The statement gave o details of what type of equipment China had provided or which type of crimes could be targeted.

Read the full story here:
China offers to help N.Korea crack down on crime
Reuters
8/12/2010

Accroding to the Choson Ilbo:

North Korea apparently offered a tour to the Mt. Kumgang resort to some 20  Chinese embassy staff last month but did not tell South Korea’s Hyundai Asan, which built the facilities there and has the exclusive right to run the tours. A Unification Ministry official said this was “a clear violation” of Hyundai’s operating rights.

According to the website of China’s Foreign Ministry, the officials toured the scenic mountain resort for three days from July 21 at the invitation of North Korea’s Foreign Ministry. The officials toured sites in Mt. Kumgang that require permission from Hyundai Asan. “The splendid peaks and strange rock formations of Manmulsang, the spectacular scenery of the Haekum River, the flowing waters of the Kuryong Falls… listening to the tour guide made us feel like we were in Shangri-La,” a participant wrote. There is also a photo of them in front of the Kuryong Falls.

In 2000, Hyundai Asan paid US$500 million to North Korea for the exclusive right to operate seven projects in the North, including tours to Mt. Kumgang. But Hyundai Asan said it was unaware of the tour for the Chinese diplomats. “When our tourism operations ran smoothly, North Korea always informed us when they were bringing guests into Mt. Kumgang,” a Hyundai Asan staffer said. “It’s objectionable that they offered the tour without notifying us.”

In April, North Korea froze real estate in Mt. Kumgang belonging to Hyundai Asan and the South Korean government and said it would allow Chinese travel agencies to operate tours to the resort. When a number of Chinese travel agencies began offering tours, the South Korean government and Hyundai Asan protested, and in May Culture and Tourism Minister Yu In-chon sent an official letter to the Chinese government explaining that the freeze was a breach of contract and asked Beijing to take the resort off the list of travel destinations.

“The fact that Chinese diplomats, who must have been aware of the delicate situation, visited Mt. Kumgang is simply puzzling,” a South Korean official said.

Read the full story here:
N.Korea Takes Chinese Diplomats on Mt. Kumgang Tour
Choson Ilbo
8/5/2010

According to the AFP:

North Korea has found Chinese partners to make up for losses in trade with South Korean firms, weakening the impact of Seoul’s measures to punish the communist country, a report said Sunday.

South Korea banned most cross-border trade in May after a multinational investigation concluded that a North Korean torpedo sank one of Seoul’s warships with the loss of 46 lives.

Before the ban was announced, the North had produced goods after receiving raw materials from more than 500 South Korean firms, Yonhap news agency said.

“After the South Korean companies became unable to send the raw materials, North Korean factories have been manufacturing products ordered by China,” a source familiar with North Korean affairs told Yonhap.

Seoul partially lifted the ban to allow South Korean firms to proceed on deals which had been signed earlier.

“North Koreans said they already signed contracts with Chinese firms and told us they will manufacture the orders from the Chinese side first,” the source was quoted as saying.

Most of the goods made on consignment trade with China are for export to Europe, Yonhap said.

The ban would cost the impoverished North hundreds of millions of dollars a year, a state think-tank here said last month.

Washington announced further sanctions last month to stop the North from selling nuclear weapons or related material as well as blocking money laundering and other illicit activities.

Read the full story:
Trade ban prompts N.Korea to find Chinese partners: report
AFP
8/1/2010

According to Bloomberg:

North Korea signed an economic and technical cooperation agreement with China today, a week after U.S. Secretary of State Hillary Clinton announced further trade sanctions to halt the regime’s nuclear-weapons program.

Liu Hongcai, the Chinese ambassador to North Korea, and Ri Ryong Nam, the nation’s Minister of Foreign Trade, signed the agreement during a ceremony held in Pyongyang, according to the state-run Korean Central News Agency. It didn’t elaborate.

Clinton announced sanctions that target government officials and the foreign banks that help sustain the North’s weapons industry during a visit to Seoul last week. The U.S. has backed South Korean claims that the North torpedoed one of its ships and has been pressing for an international effort to put more pressure on Kim Jong Il’s regime.

China has so far refused to condemn North Korea for the attack on the Cheonan, which killed 46 South Korean sailors. China accounted for 79 percent of the North’s 2009 international trade, according to the Seoul-based Korea Trade-Investment Promotion Agency. China provides almost 90 percent of energy imports and 45 percent of the country’s food, according to a July 2009 report by the New York-based Council on Foreign Relations.

China’s Foreign Ministry had no knowledge of the agreement and the Commerce Ministry didn’t immediately respond to a fax seeking comments.

Read the full story here:
North Korea, China Sign Agreement for Economic, Technological Cooperation
Bloomberg
7/29/2010

By Michael Rank

North Korea’s Air Koryo has begun twice-weekly direct flights between Shanghai and Pyongyang, a Chinese website reports.

The flights will run each Tuesday and Friday until October 5, leaving Shanghai at 1700 hours, arriving Pyongyang at 1950 and leaving Pyongyang at 1300 hours with the arrival time in Shanghai given rather vaguely as 16 hours.

It quotes the Korean Travel Agency as saying many Chinese [so-called] volunteers want to visit North Korea for the 60th anniversary of the Korean war, while August-October is the Arirang [Mass Games] season, so now is the time to come.

The report also says there is strong interest in visiting North Korea in eastern China around Shanghai, but it until now passengers had to change planes in Beijing or Shenyang which added to the cost and was inconvenient.

It says the first flight was on July 16 and gives the flight numbers as JS522/21. It also gives phone numbers, etc for tourists interested in booking a seat.

According to Arirang News:

China has temporarily issued a ban on tours to North Korea’s Mount Geumgang resort.

A source in Beijing says the government has ordered local travel agencies to tentatively hold off on selling tour packages to Mount Geumgang and most agencies have responded by taking down such offers from their websites.

Observers say the latest move could be in line with Seoul’s request to Beijing in May to refrain from holding tours to certain areas of Mount Geumgang as North Korea has violated the terms of the contract by seizing South Korean assets at the resort.

While tours to the North Korean resort have been suspended since April following the sinking of the Cheonan China has been operating tours to Mount Geumgang since March.

Read full story here:
China Bans Tours to N. Korea’s Mount Geumgang Resort
Arirang News
7/23/2010