North Korean Economy Watch

According to KBS (h/t RoK Drop):

The number of North Koreans who fled to South Korea in 2009 is known to be close to three-thousand.

A Ministry of Unification official said more than 2,200 women and almost 680 men from North Korea entered South Korea in 2009, totaling more than 2,950 in a preliminary tally.

The official added that this makes the cumulative number of North Korean escapees total approximately 18-thousand, which is almost certain to surpass 20-thousand in 2010.

Soms interesting supplementary information was posted at Yonhap:

The number of North Korean defectors hiding in China is estimated to have shrunken in recent years to almost one tenth the level seen in the late 1990’s, a U.S. demographer said Thursday.

The assessment is a controversial but important factor in shedding light on the conditions of those North Koreans who live in China. The defectors live under the constant fear of deportation because their country considers defection a capital crime.

Activists and relief groups say tens of thousands of North Korean defectors live in China, but Dr. Courtland Robinson at Johns Hopkins University Bloomberg School of Public Health said the number may have dropped to between 6,000 and 16,000 as of 2007.

“About a decade ago, people were literally being starved to death and fleeing to China,” Robinson said in an interview, putting the 1998 figure between 50,000 and 130,000. Famine had reportedly killed as many as 2 million people in North Korea in the mid-1990s.

An official at South Korea’s Unification Ministry, which handles affairs involving North Korea, said he could not support the figures given by either activists or Robinson, arguing it was impossible to determine the exact number of those defectors in hiding.

Robinson, speaking on the sidelines of a conference on North Korean defectors in Seoul, said he had turned to local residents in China as informants to assess the number of defectors living in their towns. He then applied demographic methods to come up with what he called “plausible ranges” of a population.

“The very essence of these measurements is to start selecting sites randomly, not sites where you think North Koreans may be living,” he said.

“It’s a combination of things that has contributed to the decrease. Tightened border security on both sides is one,” Robinson said. “Defectors have also evolved in terms of their understanding of how difficult it is to live in China.”

China reportedly stepped up its crackdown on North Korean defectors ahead of its hosting of the Summer Olympics in August 2008. Under a treaty forged in 1998, China is believed to arrest and repatriate North Korean defectors even though they could face imprisonment, torture and even execution.

Chinese residents are reportedly rewarded with cash if they report North Korean defectors, who find it difficult to hide their identities or get a job because they can’t speak Chinese.

Robinson said defectors have apparently accelerated the pace at which they “move on through China,” heading to countries such as Thailand where it is deemed safer or easier to go to South Korea.

Over 16,000 North Koreans have come to South Korea since the 1950-53 Korean War that ended in a truce rather than a peace treaty. The annual number of defectors is increasing year by year and the Unification Ministry expects the accumulated figure to top 20,000 this year.

According to CNN:

The Beijing-based Jinghesheng Investment Company has partnered with the Democratic People’s Republic of Korea (DPRK), North Korea’s formal name, to exhibit — and sell — 60 oil paintings and 30 traditional Korean ink paintings.

“They were all carefully selected by the DPRK’s Ministry of Culture,” said exhibit director Li Xuemei. Although North Korean artworks may be available in some galleries in China and other countries, said Li, “you don’t really know where they came from, but ours are surely authentic artworks from DPRK.”

Inside a hall, the gallery showcases works of twenty North Korean artists affiliated with museums and art academies in Pyongyang. Li said the gallery receives as many as 100 visitors a day on the weekend and about 60 on weekdays.

The pieces depict landscapes and modern life. Many were painted by seasoned Pyongyang artists who hold honorific titles as “People’s Artists” and “Merit Artists.”

One oil painting, a socialist realist piece entitled “Huge Waves in the East Sea,” is three meters high and ten meters long and covers an entire wall of the gallery. Four artists collaborated on the painting using a wide scope of greens and blues to create textured and turbulent waves crashing into taupe gray rocks against a backdrop of blue sky.

The collection also includes watercolors, elegant portraits of Korean women in modern and traditional dress and wildlife.

Li said the artwork is only sold to elite customers, typically Chinese entrepreneurs in affluent cities like Hong Kong, Guangzhou and Dalian. She said 30 percent of the works on display have already been sold, but she declines to quote any prices.

“Many people chose to collect this art because North Korea is a country still closed to the outside world, although it is seeking to open up in the future,” Li said. “This makes North Korean artworks a good investment. Some artists have already passed away, making their work more unique and valuable.”

While the arts’ value may increase over time, their North Korean artists will not see any cash returns.

“In North Korea,” Li said, “art is not private property and the value made from the sales will go directly to the state.”

One artist and three North Korean government officials flew into Beijing to attend the opening of the show but stayed away from the media and declined to be interviewed.

…

While contemporary North Korean art is typically laden with a heavy message, the artworks showcased in the 798 art district leaves out traces of politics or propaganda. New collections of North Korean art will rotate through the gallery until in the coming months.

“We’ll show artworks on rotation,” Li said. “We’ll show different styles in the next collection.”

Additional Information:

1. The gallery is located in Beijing’s 798 district located here.

2. Pictures of the gallery and art can be seen here.

3. Nick Bonner has his collection on display in Beijing as well.  His new web page is here.  His old web page is here. Mr. Bonner recently showed some North Korean art in Australia.

4. Felix Abt offers pieces by artists at Pyongyang’s Paekho Art Studio here.

5. David Heather sells North Korean art here and here from the Mansudae Art Studio.

6. A separate web page claims to be the official site of the Mansudae Studio here.

7. The Mansudae Art Studio is located here.

8. Here is another page claiming to sell North Korean art.  It seems to be based in Germany.

9. Here are a couple of books on North Korean art: Art Under Control in North Korea, North Korean Posters

10. Here is a book review of North Korean Posters which offers additional information.

By Michael Rank

China is planning cruises to North and South Korea, Russia and Japan from the northeastern border city of Hunchun 珲春, according to a Chinese-language report.

Ports of call will include Raseon (Rasŏn/Naseon/Nasŏn) 라선 on North Korea’s northeast coast, Sokcho 속초 in South Korea, just south of the DMZ, and Vladivostok, the report says, quoting Jilin province officials.

“There are still a number of questions to be resolved concerning the cruises, such as different visa requirements among the five countries concerned,” it quotes a Jilin  tourism official as saying. But he also says tourism officials from the five countries have “decided to take joint action and are making great efforts to open this tourist route.”

The head of the Jilin tourism bureau, He Baiping, is quoted as saying Jilin has seven border crossing points and that the number of tourists visiting Russia and North Korea is on the increase, which is good for the local economy.

The report gives no more details, but notes that Hunchun is close to the borders with North Korea and Russia and says the cruises will promote tourism in northeast Asia.

UPDATE:  China plans development zone on North Korean border
By Michael Rank

China is planning a major new development zone along the North Korean border aimed at boosting trade with its reclusive neighbour and throughout northeast Asia, a Chinese-language website reports.

The plan is to come to fruition under two separate deals: the border cities of Dandong in Liaoning province and Tonghua in Jilin province have signed an (unpriced) “development and opening up vanguard zone cooperation agreement” as well as a 440 million yuan ($64 million) “six-party cooperation agreement” with the Shenyang Railway Bureau, Changchun Customs, Dandong Port Group and Tonghua Steel (Tonggang) to build a “Tonghua inland port” with a duty-free zone, warehouses and international transit facilities that will be ready in 2012.

The Tonghua-Dandong Economic Zone will apparently stretch over most of the western half of the Chinese-North Korean border, a distance of around 350 km. The city of Tonghua is in fact some 80 km north of the border, but the report says the new zone will include the border post of Ji’an which is administered by Tonghua.

It gives few further details, but notes that when Premier Wen Jiabao visited North Korea last month he signed an agreement on building a new bridge across the Yalu river which would further boost Chinese-North Korean trade.

It also quotes the acting mayor of Tonghua, Tian Yulin, as saying that the new zone will transform the city from “inland” to “coastal” and “will promote trade between the inland cities of the northeast and North Korea and with the whole of northeast Asia.” The report adds that almost 60% of China’s trade with North Korea passes through Dandong.

This is not the only new development zone in China’s rustbelt northeast, which has been in severe economic decline in recent decades: a separate Chinese report announces the creation of another zone in Jilin, stretching from the capital Changchun in the centre of the province to the city of Jilin (or rather just part of it, for some unstated reason) as far as Yanbian on the North Korean border. This report does not mention North Korea directly but says the new zone will make the eastern border city of Hunchun an “open window” for regional trade, with Changchun and Jilin city “important supports.”

One-third of Jilin’s 26 million population live in the zone and it accounts for half of the province’s economic output, the report adds. See also this English-language report.

State-owned Tonghua Steel’s involvement in the Tonghua-Dandong zone is somewhat surprising as the ailing company has been rocked by unrest following an abortive attempt at a takeover deal by rival company Jianlong earlier this year. There was strong opposition to the deal on the part of workers who feared they would lose their jobs, and their fears turned to violence last July when a senior manager was murdered in mysterious circumstances.

The Chinese business magazine Caijing told how “the man’s death at the hands of unidentified killers uncovered an often antagonistic network of competing business interests and investors involved in Jianlong’s botched attempt to buy Tonggang.”

Tonghua Steel was in 2005 planning to sign a 7 billion yuan ($865 million), 50-year exploration rights deal with a North Korean iron ore mine, said to be the country’s largest iron deposit. The Chinese company was hoping to receive 10 million tonnes of iron ore a year from the Musan mine as part of its plans to increase steel production from a projected 5.5 million tonnes in 2007 to 10 million tonnes in 2010.

Tonggang boss An Fengcheng said at the time that agreement had already been reached with China Development Bank on 800 million yuan worth of soft loans and 1.6 billion yuan of hard loans, while “the remaining investment will come in in stages”. But it seems that the deal was never signed.

Caijing told how An, the steel mill’s chairman and Communist Party secretary, had “basically unlimited managerial control of Tonggang” and that the takeover by Jianlong was cancelled just a few hours after the murder of the manager Chen Guojin, who had come from Jianlong and was one of two Jianlong representatives on the board of Tonghua.

“There is no evidence to suggest An’s involvement in Chen’s death. But two weeks after the incident, he was sacked and stripped of all power by the Jilin provincial government. No other details of his removal were announced,” the magazine added.

ORIGINAL POST: According to the P.R. of China’s Global Times (Xinhua) via Adam Cathcart:

The Chinese government has approved a border development zone in the Tumen River Delta to boost cross-border cooperation in the Northeast Asian region, the provincial government of Jilin announced on Monday.The information office of the government said the pilot zone covering 73,000 square kilometers involved the cities of Changchun and Jilin as well as the Tumen River area.

Han Changbin, governor of Jilin, said the Changchun-Jilin-Tumen pilot zone was China’s first border development zone.

It is expected to push forward cross-border cooperation in the Tumen River Delta.

The delta, a 516-kilometer-long river straddling the borders of China, Russia and North Korea, was set up as an economic development zone in 1991 by the United Nations Development Program (UNDP) to promote trade.

In 1995, five countries – China, Russia, North Korea, South Korea and Mongolia – ratified the agreement on the Establishment of the Cooperation Commission for the Tumen River Economic Development Area (web page here). Japan participated in the program as an observer.

In 2005, the five signatories agreed to extend the agreement for another 10 years.

They also agreed to expand the area to the Greater Tumen Region and to further strengthen cooperation for economic growth and sustainable development for the peoples of Northeast Asia.

“Before the Changchun-Jilin-Tumen pilot zone was initiated, the Chinese part of the Tumen River area was mainly Huichun, a port city in Jilin, that has involved in the cross-border cooperation,” said Zhu Xianping, director of the Northeast Asia Research Institute of Jilin University in Changchun.

The 5,145-square-kilometer port city with a 250,000 population had limited industrial development capacity to develop infrastructure projects that will match the cross-border cooperation, he said.

Du Ying, deputy director of the National Development and Reform Commission, said that by bringing the two cities of Changchun and Jilin into the border zone, the zone could serve as a strategic platform to support the cross-border cooperation in the Greater Tumen Region.

Zhao Zhenqi, an assistant to the Jilin governor, said the central government has allowed the pilot zone to try new land use and foreign financing methods, such as sharing ports and sea routes with other countries in the region and setting up free trade zones.

Under the initiative of the pilot zone, local governments in the region could better interact to tackle development bottlenecks, he said.

The Northeast China region, rich in natural resources including coal and oil, is China’s traditional heavy industry base and granary. However, it also faces the challenges of industrial upgrading, resource depletion and financing bottlenecks.

Random thoughts and links:
1. The challenge facing north east China (as they see it) is the lack of a port city on the East Sea (or the Sea of Japan if you prefer).  This is where North Korea comes in.  China and Russia have long been trying to establish  use rights and/or control of Rason and Chongjin.  Russia recently built a “Russia-gague” railroad line from Rason to the DPRK-Russian border. The Chinese have been busy building roads.

2. (speculation) China is the DPRK’s largest trading partner.  International sanctions have given China monopsony power vis-a-vis the DPRK.  This means the Yuan goes farther in the DPRK than in other countries and it gives the PRC a financial incentive in the continued economic isolation of the DPRK.

3. Here is CCTV video.

4. Forbes covers this story here.

Radio Free Asia
Song-wu Park
11/19/2009

North Korea is pulling back from Chinese mining investments in an effort to independently develop its industry and use the profits to create a self-reliant economy, according to a well-informed North Korean defector.

But analysts say it is unlikely that North Korea will be able to lock China out completely, because it lacks the infrastructure and capital needed to develop the country’s vast mineral resources.

The defector, who said he had worked as the director of a state trading agency controlled by the military in a major North Korean city, refuted South Korean news reports that suggested China was taking control of North Korea’s underground natural resources.

“Such statements are exaggerated and different from the truth,” the defector, who uses the pseudonym Kim Ju Song, said in an interview.

Kim attended closed-door sessions with U.S. legislators and congressional staff in Washington on Wednesday.

Several South Korean news organizations, including the Yonhap news agency, recently reported that China has increased its investment in North Korea, established firm control over North Korea’s underground natural resources, and plans to utilize North Korea as its “natural resource base.”

The reports said Beijing had laid out a U.S. $1.2 billion investment plan for North Korean mine development and that Chinese firms had bid for the long-term rights to mine anthracite, iron ore, and molybdenum deposits in the country.

But Kim Ju Song called the reports “distorted,” adding that the North Korean regime is averse to such investments because its current objective is to create a “self-reliant” economy.

“With its own style of self-reliant national economy as the foundation, North Korea hopes to develop and employ its own technologies to extract and process its underground natural resources, prior to selling them on the world markets,” Kim said.

“However, under the current circumstances, simply selling those natural resources at a bargain price would not earn North Korea that much money,” he said.

Kim said that while North Korea will sell China minerals that it is unable to exploit due to technological limitations, “it would be inconceivable for the North Korean regime to cede its mines to China.”

John Park, a senior research associate at the Washington-based United States Institute of Peace, said it is unlikely that North Korea will be able to effectively develop its mineral industry independent of China.

“It’s a chronic issue for the North Koreans to develop the transportation infrastructure that links up their mines,” Park said.

He added that much of North Korea suffers from shortages of the electricity required to develop profitable mines.

Park added that mining requires a “tremendous” amount of startup capital in order to purchase the equipment needed for mine development and mineral extraction.

“The Chinese state-owned enterprise model is so interesting is because of their government funding…These types of state-owned enterprise vehicles can actually sustain these early stage losses that private sector firms cannot,” Park said.

“From that functional capability standpoint the Chinese state-owned enterprise is one of the very, very few that can partner up [with North Korea],” he said.

Jennifer Lee, a researcher with the Peterson Institute for International Economics in Washington, said she doesn’t see North Korea “significantly” backing away from Chinese investment.

“But I can see why North Korea might want to lessen China’s near-monopoly state in that industry … with their Ju’che ideology and all,” Lee said, referring to the official state ideology of North Korea that roughly translates as “the spirit of self-reliance.”

Lee said she had heard reports that one of a group of North Korean delegates that visited New York last month was “eager to attract foreign investment other than from China.”

“I believe that they’re concerned that they are depending way too much on China alone,” she said.

But she acknowledged that North Korea lacks the infrastructure to refuse Chinese investment, particularly in light of international sanctions leveled against Pyongyang following testing of missiles and a nuclear weapon earlier this year.

Lee added that Beijing would be unwilling to allow North Korea to shrug off Chinese interests.

“They’re hungry for North Korean resources, especially because they can get [them] cheaper—being the only country with proper access to [North Korea],” she said.

‘Wary of Chinese influence’

Andrei Lankov, a Seoul-based North Korea expert who works as a commentator for RFA, said that while talks of a “Chinese takeover” are not unfounded, they may be exaggerated.

“North Korean leaders … certainly would not welcome an excessive growth of Chinese influence inside North Korea,” he said.

He called North Korea’s leaders “ethnic nationalists of a rather extreme kind” who dislike foreign influence over their domestic affairs.

“Some contacts are taking place and some agreements have been concluded,” Lankov said.

“North Korean feels ambivalent about these contacts—it needs Chinese money, but is wary of Chinese influence,” he said.

Park called Chinese premier Wen Jiabao’s October visit to the North Korean capital Pyongyang “the culmination of a Chinese process to rebuild the bilateral relationship” between the two countries, noting that Wen had presented a comprehensive package of suggested partnerships to North Korea’s leadership.

“But with all things related to North Korea, it’s up to North Korea if they want to accept it or what portions of it they want to accept,” Park said.

“North Korea does have a record of renegotiating, which has definitely scared off other foreign investors in the past,” he said.

Lee added that even if North Korea decides to lessen China’s impact on its mining industry, such a decision would not involve a significant break with its northern neighbor.

“It would probably go towards the diversification route, trying to attract other foreign investors and possibly replacing some of the Chinese investment in the long run.”

She said North Korea now thinks of its mining industry as a “cash cow” and is working towards making it more attractive to foreign investors through development and a crackdown on corruption.

Blane Harden wrote an excellent article for the Washington Post on the KPA takeover of state-owned trading companies and how these companies are increasing natural resource exports to China.  (As an aside, China has just recently ceased publishing North Korean trade data).  This is interesting because just a year-and-a-half ago we were discussing Jang Song-thaek’s anti-corruption campaign which was supposed to be closing down KPA companies and making them reapply for export licenses with the Ministry of Foreign Trade (meaning the WPK could start dipping into the revenue pools).

Quoting from Mr. Harden’s article:

The potential profits are eye-popping: China is one of the world’s most voracious consumers of raw materials, and North Korea’s mineral reserves are worth $5.94 trillion, according to an estimate by South Korea’s Ministry of Unification. China has been critical of North Korea’s nuclear program and missile tests, but it also has vastly increased its economic ties with Kim’s government.

Kim is increasingly creaming off a significant slice of Chinese mineral revenue to fund his nuclear program and to buy the loyalty of elites, according to “North Korea, Inc.,” a recent report by the United States Institute of Peace, a Washington-based group funded by the U.S. Congress.

The report echoes the views of North Korean analysts in South Korea, Japan and the United States, who say the military has elbowed out other ministries and the Korean Workers’ Party to take control of exports that earn hard currency. The military is also sending trucks to state farms to haul away as much as a quarter of the annual harvest for its soldiers, analysts say.

“The military is by far the largest, most capable and most efficient organization in North Korea, and Kim Jong Il is making maximum use of it,” said Lim Eul-chul of the Institute for Far Eastern Studies in Seoul.

North Korea is perhaps the world’s most secretive and repressive state, but it makes no attempt to hide the ubiquitous role the military plays in the daily lives of the country’s 23.5 million people. Soldiers dig clams and launch missiles, pick apples and build irrigation canals, market mushrooms and supervise the export of knockoff Nintendo games. They also guard the country’s 3,000 cooperative farms, and help themselves to scarce food in a hungry country.

…

Missile sales were for many years major earners of foreign currency, according to a report for the Strategic Studies Institute by Daniel A. Pinkston, who is now a Seoul-based analyst with the International Crisis Group. But the cost of the arms trade has gone up and sales have declined as a result of U.N. sanctions imposed after the North’s nuclear tests in 2006 and this year, South Korean analysts say.

The military has thus turned to its new Chinese cash cow. As the army has taken over management of mines in North Korea, mineral exports to China have soared, rising from $15 million in 2003 to $213 million last year. Led by those sales, the North’s total trade volume rose last year to its highest level since 1990, when a far more prosperous and less isolated North Korea was subsidized by the Soviet Union.

A unique advantage the Korean People’s Army brings to foreign trade is a well-disciplined workforce that has to be paid — nothing. Soldiers receive food, clothes and lodging, but virtually no cash. This competitive edge makes military-run trading companies especially attractive to the North’s leadership, according to the Institute of Peace report.

Based on confidential interviews with recent North Korean defectors, four of whom said they worked for trading companies run by the military, the paper concludes that a “designated percentage of all revenues generated from commercial activities . . . goes directly into Kim Jong Il’s personal accounts.” The rest of the revenue flows into the operating budget of the military.

The full article is worth reading here.

Additionally, the report by the Institute of Peace cited above, “North Korea, Inc.”, can be downloaded here. The paper is on my reading list this weekend, but here is the introduction and conclusion:

Introduction: Assessing regime stability in North Korea continues to be a major challenge for analysts. By examining how North Korea, Inc. — the web of state trading companies affiliated to the Korean Workers’ Party (KWP), the Korean People’s Army (KPA), and the Cabinet — operates, we can develop a new framework for gauging regime stability in North Korea. Insights into the Democratic People’s Republic of Korea (DPRK)1 regime can be gained by examining six core questions related to the DPRK state trading company system. First, what are DPRK state trading companies and how did they emerge? Second, how do DPRK state trading companies operate? Third, what roles do they play? Fourth, why are DPRK state trading companies important? Fifth, what major transformations are taking place in the DPRK state trading company system? Sixth, what are the implications of the manner in which this system is currently functioning?

Conclusion:  Despite lingering problems with the fragmented Public Distribution System, the challenges of chronic food shortages, and a deteriorating economic infrastructure system, the DPRK regime has proven to be remarkably resilient. By operating North Korea, Inc. — a network of state trading companies affiliated to the KWP, the KPA, and the Cabinet — the regime is able to derive funds to maintain the loyalty of the North Korean elites and to provide a mechanism through which different branches of the North Korean state can generate funds for operating budgets. During periods when the DPRK’s international isolation deepens as a result of its brinkmanship activities, North Korea, Inc. constitutes an effective coping mechanism for the Kim Jong Il regime.

While North Korea remains an opaque country, we now have greater access to unique defectors with the following characteristics — prior experience working in DPRK state trading companies and current business dealings with former colleagues in North Korea through channels in China. By closely examining DPRK commercial activities and capabilities, a new field of North Korea analysis can be structured to produce insights into the internal dynamics of the DPRK regime. This new line of inquiry would help to broaden our understanding of an evolving North Korea.

China has ceased publishing its balance of trade with North Korea. Since China is the DPRK’s largest trading partner, this story has significant implications for all those who study the DPRK.

According to Reuters:

China has stopped publicly issuing trade data about North Korea, veiling the potentially sensitive numbers about its wary neighbour under another category while the two countries seek improved ties.

Destination and origin statistics on China’s imports and exports for September issued on Monday gave no separate numbers for second straight month for the Democratic People’s Republic of Korea, the formal name of the North, as they have long appeared in the tables.

The trade tables for coal, crude oil, oil products and cereals issued by China’s General Administration of Customs instead used another category, “other Asia not elsewhere specified”, which for those commodities at least appeared to cover exclusively trade flows between China and the North.

Analysts and officials have used Chinese statistics to gauge otherwise opaque ties between the two communist neighbours. But North Korea has stopped appearing in the Chinese data since last month, when statistics for August also avoided mention of it.

The change may help Beijing to obscure shifts in economic flows with the North, which relies on China for most of its trade and aid.

In the build-up to North Korea’s first nuclear test in Oct. 2006, the trade data showed China cut crude oil shipments to the North in September, although it was unclear whether the stoppage was a calculated gesture or due to more prosaic problems.

An official in charge of data services at the Customs Administration told Reuters that the change would last, but would not say why. Reuters and other companies buy the data.

“We’re no longer issuing trade data about North Korea,” said the official, who declined to give her name. “We’re not allowed to issue the data anymore.”

She declined to answer further questions, referring them to another data services official.

That official, Xu Xianghui, said the data could not be released because of a “technical fault”. But Xu said it was unclear if that fault would ever be fixed.

This is a rather blunt statement by the unnamed Chinese official.  There was not even an attempt to offer a justification. The decision to cease publishing the data obviously originated at the top of the Chinese leadership and the employees at the Chinese Customs Administration were probably told to relay (exactly) the simple message delivered above.

I wonder how long the Chinese officials at the top sat around trying to think of an acceptable public justification before just giving up.  I am trying to think of one now but not having much luck.

Lets hope that his policy is eventually reversed.

UPDATE (quasi-related) from the Choson Ilbo:

When Chinese Premier Wen Jiabao’s visited Pyongyang in October, North Korea and China boasted they had opened a new era of cooperation. The two countries described their talks as “constructive” even though no palpable progress was made in the North’s nuclear issue. But according to a senior source in North Korea, one significant step was a secret agreement to restore intelligence cooperation.

No details have been disclosed, but it is presumed that this refers to cooperation between traditional intelligence agencies including North Korea’s External Liaison Department and Operational Department rather than in ferreting out and repatriating North Korean defectors. The source said the two sides put the agreement into writing to strengthen their defense against South Korea, the U.S. and Japan.

North Korea is said to have asked China to provide intelligence about North Korean defectors and anti-North Korean government activities in China, while China reportedly asked the North to cooperate on cracking down on drug trafficking and counterfeiting of dollars or yuan.

Read the full article here:
China hides North Korea trade in statistics
Reuters
Chris Buckley
10/26/2009

According to the Financial Times:

North Korea’s mineral wealth is receiving close scrutiny, with South Kor­ea’s government this week valuing reserves at $6,000bn (€4,070bn, £3,670bn). Encouraged by data on metals, Goldman Sachs last month predicted the economy of a unified Korea could rival Japan’s by 2050.

…

Trade with China is growing, reaching $2.8bn last year from about $2bn in 2007. But military authorities in North Korea are perceived as hostile to the changes in society and infrastructure that foreign investment could bring.

“If the North opens its mineral resources to foreign countries, that is tantamount to taking a military, social and political gamble, jeopardising their security,” said Lim Eul-chul, of Seoul’s Institute of Far Eastern Studies.

A South Korean diplomat closely involved with nuc­lear talks doubted Pyong­yang would allow China to make big investments inside its border. “They cannot permit that kind of influence,” he said.

Although they were long communist allies, North Korea and China have a mutual mistrust, partly tied to territorial claims.

Still, limited foreign investment in the sector is not impossible. Colin McAskill, executive chairman of Koryo Asia, says he has signed a letter of intent and memorandum of understanding to invest in North Korean metals and argues his model would not interfere with sovereignty issues that concern Pyongyang.

Switzerland’s Quintermina has posted reports on its website saying it is looking to extract magnesite in North Korea.

Chinese investors are believed to have some metals interests and are also involved in coal mining.

“The Chinese companies that have tried to do business in North Korea complain a lot that the regulations change frequently and that the power supply is erratic,” said a Chinese academic in Beijing.

One quote in this article struck me as a little off:

A South Korean diplomat closely involved with nuc­lear talks doubted Pyong­yang would allow China to make big investments inside its border. “They cannot permit that kind of influence,” he said.

First of all, China has already made plenty of investments inside the DPRK and the Chinese government and companies already exert influence.  There is a difference between having influence and being in control.  Secondly, China is the largest market for North Korean exports.  Even though they might not “own” the North Korean assets from which they purchase the goods, the North Koreans are limited in terms of who will/can trade with them.  In this sense China earns surplus through either bulk purchase discounts or monopsony power.

Read the full story here:
China eyes N Korea’s mineral wealth
Financial Times
Christian Oliver
10/6/2009

By Michael Rank

North Korea is spreading its net wider in its quest to attract more tourists from China, and now has its eye on the southern province of Guangdong as well as Shanghai.

A Chinese website (link here) reports that a delegation of North Korean travel agents is expected to travel to Guangzhou next month and that local tour operators in Guangzhou and nearby Shenzhen, on the Hong Kong border, are eager to do business.

Tourists will have a choice of two routes to North Korea – they can either fly to Shenyang or Dalian in northeast China and then take the train to Pyongyang via Dandong, or they can fly to Pyongyang via Shenyang. It puts the price at 5,000 yuan ($730) but doesn’t say how many days the tours last or any further details. It says the main attractions will be the usual ones of Pyongyang, the DMZ at Panmunjom, the Myohyang mountains and the annual Arirang pageant.

As NKEW reported in July, North Korea is also targeting Shanghai as a source of tourism revenue, and there is further talk of charter flights from Qingdao in Shandong province to Pyongyang.

Quite apart from the question of how many Chinese are likely to be tempted to visit a Cultural Revolution-type theme park like North Korea, there are also bureaucratic hurdles to overcome. North Korea does not have “approved destination status” for Chinese tourists, which means in theory at least that travel there is restricted to business groups and official delegations. (Incidentally, South Korea doesn’t seem to be an ADS country either).

As the website notes, “An important issue within ADS is to avoid possible illegal immigration through tourism channels. All tourism groups travelling within the ADS framework are supposed to be monitored by both Chinese and foreign authorities to ensure they return to China. Embassies and consulates apply different methods to monitor the return of the Chinese tourists. Whenever a tourism group member does not return to China, the local travel agency is held responsible and sanctions are applied.” Not that there is much likelihood of Chinese tourists defecting to North Korea.

Furthermore, China is encouraging tourists to counter the world recession by spending their money at home, and although this is China-DPRK year marking the 60th anniversary of diplomatic relations, a further obstacle is the fact that Chinese citizens now need a passport to travel there, not just a border pass that was all that was needed previously to cross into the country at Dandong by train.

Nick Bonner of Koryo Tours says: “We have noticed a sharp drop in Chinese tourists visiting DPRK in comparison to this time last year – even though the spectacle of the 100,000 strong performance of the mass games is still going on and has been extended to October 15th.

“I think next year Chinese tourism will be coming back strong – there is a certain ‘busman’s holiday’ attraction for Chinese tourists to visit DPRK.”

According to Yonhap:

Trade volume during the January-June period totaled US$1.1 billion, down 3.7 percent from a year earlier and the first decline since 1999, the Korea Trade-Investment Promotion Agency (KOTRA) said in an emailed release that cited official Chinese data. The drop was in striking contrast with a 41 percent increase during the same period last year and a 16 percent gain in 2007.

North Korea was put under U.N. sanctions for its nuclear test in May, barring its weapons trade and strictly limiting cash flows into the country. The sanctions, however, do not appear to have affected North Korea’s trade with China, an official at South Korea’s Unification Ministry said.

Prices of crude oil, which account for a quarter of North Korean imports from China, subsided this year after steep hikes in 2007 and 2008, said Jeon Dong-myeong, a ministry official overseeing North Korean trade.

“It’s not a steep decline. The 3.7 percent decline in trade volume can arise from price differences,” Jeon said.

North Korean imports from China amounted to $750 million, down 8.4 percent, while exports increased by 8.2 percent to $352 million, according to KOTRA.

By item, North Korea’s crude oil imports showed the steepest decline of 54 percent, or $111 million.

Food imports slightly increased to $23 million, and fertilizer imports considerably grew to $11.9 million, close to the amount the North brought in during all of 2008, $12.7 million.

Despite the international sanctions on the country, North Korea’s trade with Germany gained by 46.53 million euros during the first half of this year, according to KOTRA. Citing Germany’s figures, it said trade volume was up 160 percent from the same period last year, and up 30 percent from the total trade volume the two countries registered for last year.

Read the full story here:
N. Korean trade with China falls slightly in first half of 2009
Yonhap
9/23/2009

Further information and requests:
1. Here is the PR of China’s Ministry of Commerce database where trade data is published (does not work well with Mozilla). The usual caveats apply.

2. I have given up on the KOTRA web page.  Can someone please send me the KOTRA email mentioned in the Yonhap story?

3.  Here are general stories about North Korea’s trading activities. Here are stories mentioning specific trade statistics.