North Korean Economy Watch

From the Daily NK:
10/23/2006
Kang Jae Hyok

According to a North Korean source, while international community has been worried that North Korea will undergo “the second march of tribulation”, recently the number of North Korean people who lay in rice has been increasing.

Kim Jong Hee(pseudonym, 39), Chungjin resident said on the phone interview with the DailyNK that, “In spite of Fall, the price of rice is not decreasing”, and “These days the number of people who buy rice is sharply increasing”.

Kim added that from last June the price of rice is 1,000~1,200 won (0.30 US$~0.36 US$) per 1kg and in August it increased up to 1,300 won, yet even in October(now) the price is not decreasing. The price of corn wet up to 300 or 400 won.

It is natural that in fall the price of rice goes down and in spring goes up. So people lay in rice in fall. However, given that the price of rice does not go down until now, in the next spring it will be expected to go up more. Because of it, it seams that people lay in more rice in advance.

The exchange rate of yuan in black market is 360won of North Korea per 1 yuan. In 1990, the exchange rate was 1:25 and in 2002 after the 7.1. Economic Management Improvement Measure it was 1: 300. Recently it goes up to 1: 360. In addition, 1 dollar is 3,300 won of North Korea.
“Only interested in survival, never in nuclear test”

Responding to a question “do you know North Korea did nuclear test?”, Kim said that, “I do not care about whether the North Korean government did the test or not. I am busy supporting our family so I have time to think about that”. According to him, because there have been electronic lights there, people cannot know about what happened in the world.

Kim who is a vendor selling Chinese goods in Sunam market, Chungjin said that for a few days Chinese vendors have not come in Chungjin and now are around Haeryung. In the past the Chinese vendors came in once a week, yet now it is letting up at the same time the price of goods are increasing.

Regarding this trend, some people explained that because of the tension in Korean peninsular caused by the nuclear test the Chinese vendors have visited less and less and because of the censoring in goods introduced in North Korea, the amount of goods coming in North Korea has decreased.

Kim said that now Chinese goods in North Korean markets amount for more than 80%. If the sanction of China against North Korea is taken, the North Korean Jangmadangs will be negatively influenced.

Kim also said that, “Unless the Chinese goods are not introduced, we cannot survive”, and now it is the time to lay in rice for the next spring. This is what is most important to us now”.

Yonhap:
10/19/2006

China has closed three customs offices in northeastern China that handle trade with North Korea following Pyongyang’s nuclear test on Oct. 9, a report by the Communist Party-owned Global Times said Thursday.

The daily said the closures involved border offices in Donggang and Shanghekou, both in Liaoning Province, and one in the city of Tumen, in Jilin Province. Before the actions were taken, Beijing formally operated a total of four customs points with its neighbor.

It said at present only the customs point of Dandong, facing the North’s border city of Shinuiju across the Amnok River, was open to handle bilateral trade.

The paper also said that as of Tuesday, the number of vehicles coming over to Dandong stood at under three, compared to between 20 and 30 in the past.

The Global Times did not say if the closure or lack of vehicle traffic is due to the tensions surrounding North Korea’s nuclear weapons test. It added that Chinese merchants have started to ask for money in advance before shipping goods to North Korea, which is different from past practices when the delivery was sometimes made in advance of payment.

China, which is one of the five permanent members of the U.N. Security Council, signed off on a resolution last week authorizing economic sanctions to be imposed on North Korea. Pyongyang had disregarded warnings by Beijing not to test its nuclear device, which has raised speculation that the close ties that existed between them may have become frayed.

Related to the strained business ties, another Chinese weekly magazine claimed that a Chinese bank that provides funds to construction firms has stopped transactions with North Korea’s trade bank starting this year. The United States had been urging financial institutions around the world not to make transactions with North Korea that could help that country’s illicit trade and alleged money-laundering practices.

Another Chinese newspaper claimed that authorities have tightened their inspection of all cargo leaving North Korea since last week.

New York Times:
10/19/2006
Norimitsu Onishi
Su-hyun Lee

Last March, Lee Chun-hak, a 19-year-old North Korean, went to the Chinese border to meet with a North Korean money trafficker. Using the trafficker’s Chinese cellphone, Mr. Lee talked to his mother, who had defected to South Korea in 2003. She told him she was going to get him out.

Mr. Lee missed his mother and his sister and brother, and he had a persistent, if half-formed, desire. “I wanted to go to a country that is more developed,” he said, “even more developed than South Korea.”

In June, a young North Korean man appeared suddenly at his home with a message: “Mother is looking for you.” The man then took him by bicycle and foot to the border and handed him over to a North Korean soldier. At the soldier’s direction, Mr. Lee was ordered to leave his identification card and his Kim Il-sung badge, which is worn by all North Koreans to honor the nation’s founder.

The soldier then escorted Mr. Lee across the Tumen River, where on the other side two Chinese men in plainclothes handed the soldier his bribe. Mr. Lee was free to go.

The increasing ease with which people are able to buy their way out of North Korea suggests that, beneath the images of goose-stepping soldiers in Pyongyang, the capital, the government’s still considerable ability to control its citizens is diminishing, according to North Korean defectors, brokers, South Korean Christian missionaries and other experts on the subject. Defectors with relatives outside the country are tapping into a sophisticated, underground network of human smugglers operating inside North and South Korea, China and Southeast Asia.

Learning anything about such a secretive and unpredictable country as North Korea, which isolated itself further by carrying out a nuclear test on Oct. 9, is difficult. Scraps of information provided by defectors often prove unreliable, influenced as they can be by the organizations that shelter and support them while also championing political or religious causes.

But snapshots of life inside the North, and a picture of this smuggling network, emerged from interviews with 20 North Koreans in Bangkok, as well as with brokers, Christian missionaries, government officials and people working in private organizations, in both Thailand and South Korea. The North Koreans in Bangkok were interviewed independently and had all recently arrived in Thailand.

Pieced together, the accounts provide glimpses of a government that, while still a repressive police state, is progressively losing the paramount role it used to enjoy in society, before it found itself incapable of feeding its own people in the famine of the 1990’s. The power of ideology appears to be waning in this nation of about 22.7 million as people have been left to scrounge for themselves, and as information has begun to seep in from the outside world.

The effects of money and corruption appear to have grown sharply in recent years, as market liberalization has allowed ordinary people to run small businesses and has enabled people with connections to prosper in the booming trade with China.

In a country whose borders were sealed until a decade ago, defectors once risked not only their own lives but those of the family members they left behind, who were often thrown into harsh prison camps as retribution. Today, state security is no longer the main obstacle to fleeing, according to defectors, North Korean brokers, South Korean Christian missionaries and other experts. Now, it is cash.

“Money now trumps ideology for an increasing number of North Koreans, and that has allowed this underground railroad to flourish,” said Peter M. Beck, the Northeast Asia project director in Seoul, South Korea, of the International Crisis Group, which has extensively researched the subject in several Asian countries and is publishing a report. “The biggest barrier to leaving North Korea is just money. If you have enough money, you can get out quite easily. It speaks to the marketization of North Korea, especially since economic reforms were implemented in 2002. Anything can be bought in the North now.”

“The state’s control is weakening at the periphery,” Mr. Beck said, explaining that most refugees came out of the North’s rural areas but few from around Pyongyang, where the state’s grip remained strong.

During the North’s great famine in the mid- to late 1990’s, a tide of 100,000 to 300,000 North Koreans is believed to have simply washed into China, and tens of thousands are still believed to be living there illegally, according to human rights organizations. These days, the number of refugees is believed to be much smaller, though there are few reliable figures.

According to the South Korean government, of the 8,740 North Koreans who are known to have fled to the South since the end of the Korean War in 1953, nearly 7,000 arrived in the last four years alone.

But the cost of getting out is significant, according to experts, defectors, brokers and missionaries. There are bribes for the soldiers stationed at the heavily guarded border, a regular cut to their supervisors, money handed to a chain of officials. And that is just on the North Korean side.

At the high end, $10,400 will buy a package deal to get someone out of North Korea and, armed with a fake South Korean passport, on a plane or boat to South Korea within days, according to brokers and a 40-year-old North Korean woman now in South Korea who recently extracted her 14-year-old son. But most North Koreans in South Korea pay on average about $3,000 to get relatives out through China and then Southeast Asia or Mongolia.

Some exits are short-term. One 37-year-old North Korean in Seoul, an employee at a large auto parts maker, said he went to China in April to meet a friend, a journalist in North Korea whom he had not seen in 10 years. For a few hundred dollars, smugglers took the journalist to Yanji, a bustling Chinese town on the border with North Korea, where the two spent the weekend drinking and catching up, the man said in an interview in Seoul.

Like many interviewed for this article, he asked that his name be withheld, for fear of reprisals against friends and relatives still in North Korea. He carried stacks of a South Korean newspaper, The Chosun Ilbo, for the journalist, who had no interest in reading the political stories. Instead, he devoured the business pages, though he puzzled over words like “online,” and marveled at how far the South had outpaced the North economically.

At the end of the weekend, the defector returned to Seoul and his journalist friend to North Korea.

“Doing this would have been unimaginable a few years ago,” he said. “This kind of corruption didn’t exist back then. Now, everything revolves around money.”

Escaping a Shaky Economy

After the end of the cold war, North Korea’s economy collapsed and its leaders adopted a strategy of trying to secure its energy and other essentials by threatening to become a nuclear power. They have adhered to this strategy even as they put into effect economic reforms in 2002, adopting market prices, allowing citizens to run small businesses and joining with South Korea in economic projects.

Though still shaky, the North’s economy has improved thanks to trade with China and South Korea. It grew by 2.2 percent in 2004, the sixth consecutive year of expansion, according to the Bank of Korea, South Korea’s central bank. Defectors and brokers said North Koreans were fleeing their country to rejoin relatives in the South or to look for economic opportunities — not because they were starving, as they were in the 1990’s. The threat of political persecution remains, of course.

In Seoul, Do Sung-hak, 39, a North Korean who came to the South in 2002, said his older brother was sent to prison three years ago after someone reported the brother’s private comments that North Korea was not opening its economy fast enough.

A few months after his release early this year, the brother fled the North with Mr. Do’s help. He is now in Thailand.

Mr. Do, who works as a security guard, said he had arranged to get about 20 people out of the North, using ethnic Korean-Chinese contacts he had made while living for six years in northeast China.

After receiving a request, Mr. Do said he would call a Korean-Chinese intermediary, who would then call a North Korean with a Chinese cellphone that works inside North Korea near the border. The North Korean or a partner would then travel to the relative’s hometown — the price of the service varying according to the distance — and take that person back to the border, where he or she would then talk to the relative in South Korea on a cellphone and make arrangements.

“It doesn’t matter if the person lives in the middle of the country — of course, it takes longer, maybe 10 days,” Mr. Do said. “It’s only a question of money.”

North Koreans living in the South also send money to their relatives back home through the same method, with the brokers taking at least a 20 percent fee, brokers and North Korean defectors said.

A 49-year-old broker in Seoul — nine of whose clients have arrived in Thailand recently — said she operated the same way, adding that those involved in the business in North Korea were Communist Party members.

“You can do that kind of work — being able to travel freely inside North Korea — only if you’re a party member,” said the woman, who added that she earned $2,500 to $3,000 a month.

The demand for this smuggling service has risen along with the increasing number of North Koreans living in South Korea. The North Koreans in the South pay to get their relatives out by working to pay for the fees, borrowing money or using resettlement money awarded to them by South Korea.

One River, Many Hardships

The case of Lee Chun-hak, the 19-year-old who fled the North on June 28, is a typical one. For the past two months, he has been in the Immigration Detention Center in Bangkok, where his mother, Kim Myung-shim, 46, visited him from Seoul the other day.

Mrs. Kim fled to South Korea in 2003, remarried and began working to arrange the defection of Mr. Lee and her two other children, who lived with her former husband in a province bordering China.

The three children were set to leave in late 2005. But before crossing the Tumen River into China, Mr. Lee balked — he did not want to leave his father and grandmother. His older sister and younger brother went ahead and, thanks to the $5,200 paid to brokers, were smuggled into Mongolia and arrived in South Korea last February.

Mr. Lee returned to his everyday life, going to school and, like many others, earning a little money by working at a nearby gold mine. People farmed corn and beans in the area where the surrounding mountains have been stripped bare for firewood.

The economy had improved in recent years, as the authorities allowed people to moonlight at places like the gold mine and to start small businesses. Local residents ate regularly, Mr. Lee said, though the portions were small. Still, he saw perhaps only two or three cars a day, and most people walked or rode bicycles.

After a few months, his sister in Seoul persuaded him to leave. Mr. Lee was now an adult and would find it hard to keep living with his father, who had remarried, Mrs. Kim said.

So on June 27, after his sister had made arrangements with a broker, the North Korean man picked Mr. Lee up in his hometown and took him by bicycle to a spot near the border, where he spent the night, he said. The next afternoon, they rode the bicycle and then walked to the Tumen River. Mr. Lee waded across, accompanied by the soldier.

“As long as you pay the soldiers, you can cross,” Mrs. Kim said, adding that she had paid $3,600 to the brokers for her son’s escape — $1,000 for the North Korea leg and $2,600 for China.

He found his way through China and Laos to Thailand where, following the advice of the brokers, he gave himself up to the authorities. Thailand does not repatriate North Korean refugees, incarcerating them instead while their cases are processed through the Office of the United Nations High Commissioner for Refugees in Bangkok. The process takes about three to four months, after which the North Koreans are sent to South Korea, though the United States recently accepted nine North Korea refugees.

Having learned that news in Bangkok, Mr. Lee said he no longer wanted to go to South Korea. “I want to go to the United States to study and become a scientist.”

Doubts About an Ideology

Many of the North Koreans interviewed in Thailand said they wanted to go to the United States, even though they were reared in a country that has demonized America for decades. In school in the North, one defector said, she had had been taught that Americans were “inhuman, promiscuous and dictatorial.”

“Even today, I still sometimes refer to the United States as ‘Imperialist America,’ ” she said, laughing.

But as a fourth grader, the woman said, she began to have doubts about that image of America, after she happened upon a photograph in a magazine. As she recalled, it showed a tightrope walker balanced on a wire between high-rise buildings in Washington. The implicit message was that the United States was such an inhumane country that it forced people to perform such jobs, she said.

“But what I remembered about that photo was the tall buildings,” she said. “There was also a beautiful park and clean, wide streets. It was fascinating. There was nothing like that where I grew up.”

North Korea still unleashes daily attacks against the United States through its official media, but the desire of many of the defectors interviewed to go to the United States suggests that the power of ideology is waning.

“After spending a few months in China, they change their minds about the United States,” said a South Korean missionary who regularly visits the North Koreans at the detention center. “In China, they have access to so much information. They look at Web sites and exchange instant messages with people in South Korea.”

Lee Chan, 36, who fled North Korea one year ago and entered Thailand in June, agreed that anti-American ideology was not as strong as it was in the past.

“People’s perceptions of the United States have changed inside North Korea,” he said. “I’ll give you one example. If you’re caught watching an American movie, the authorities will just swear at you — nothing else.”

In Bangkok, where South Korean Christian missionaries care for the defectors while trying to convert them, Lee Chun-hak’s mother, Mrs. Kim, was worried that her son had become too friendly with Mr. Lee, the defector who had emerged as a leader of the detainees. She was angry that her son had started smoking under Mr. Lee’s influence.

“Please look after Chun-hak,” the mother said to Mr. Lee, adding that her son had birthmarks on his head and face that foretold a great future. “That’s why I’m sending him to America.”

“Please guide my son,” she said, “even though he’s doing well alone.”

Mr. Lee, showing her a pack of Marlboros, said, “He’s doing well — he doesn’t smoke expensive cigarettes like I do.”

“Stop smoking!” the mother said.

A missionary began praying for Lee Chun-hak.

“Pray to God to send you to America,” the mother exhorted her son.
 

From the Daily NK:
If a Second Tribulation March Arrives?
10/17/2006
Han Young Jin

On the 14th, the Rodong Shinmun, a N. Korean state newspaper, urged “We must take a strong conviction in regards to socialism and go out to fight with faith and optimism.” On the 13th, the Minju Chosun (Democratic Korea), the government organ, claimed “Even if we have to face the second and third ‘Tribulation March,’ you need not worry. Rather we must fight with overt confidence and audacity.”

Ever since the nuke experiments government channels have been using this propaganda This suggests that North Korean authorities were already prepared for sanctions by the international community.

People’s mentality “If you trust the nation, you will die of starvation”

During the first “Tribulation March” in the mid-90’s, about 300,000 people died over a period of 3 years from starvation. What would happen if the second tribulation march was to occur as a result of the U.N. North Korea resolution? How would it differ from the first?

The reason that 300,000 people died from starvation lies in the fundamental man-made disaster, where Kim Jong Il’s political ideology of “government teachings” and development of reform were abandoned after his death to “revival of one’s own strength.”

Beginning with munitions workers, about 50,000 people who trusted and were loyal to the government, including many intellectuals such as scientists and technicians died of starvation.

When comparing the past to the present, the people of the 90’s trusted only in their government as they did not have any other knowledge. Thus they were hit with a sudden blow, however this time it is different, as the North Korean people are already filled with “immunity.”

Above all, North Korean people are now aware of their own existence and are saying “If you trust the nation, you will die from starvation.” At the time, people tacitly in trade knew that they would not die of hunger. Today, high officials have changed their mentality and have abandoned the ideology of being the “People’s emissary” to ‘I must devise a plan to live, while I have the power.’

Since 2000, irrespective of whether or not the nation distributed rations in the fall, people have begun to devise their own ways to live. While city dwellers are living off their trade, villagers are providing their own rations through cultivation and farming off mountains.

After the 7.1 economic measures, capitalism was steadily introduced and the people’s spontaneity increased. Hence, this time it seems that the mass starvation of the mid-90’s may be escaped.

However, as a result of long term malnutrition, it is possible that many deaths will occur from disease and infectious epidemics.

A complete breakdown in industry and infrastructure

According to data from the World Food Program (WFP) and Food and Agriculture Organization (FAO), North Korea’s output of grain in 95~96 was 4,070,000 tons and 2,874,000 tons in 96~97. This is a significantly low figure compared to the necessary amount of 6,400,000 tons.

Even today, little has changed. Last year, the typhoon caused an output of 4,800,000 tons of crop. Hence, the insufficient rations of the 90’s ‘Tribulation March’ period, is similar to this time.

During the first tribulation march, there was no electricity so factories ceased operations and workers began to sell equipment taken from their workplace in trade of rations. What happened was a collapse in the main infrastructure of factories.

The worker’s riot in 1996 that arose from suppression of operations at the Yellow Sea Iron Works, also originated from workers taking factory materials to trade for food. A defector from ‘September Iron Works’ in Pyongan said “During the tribulation march, everyone took materials from work to trade. If it occurs again, people will most probably dig up the main support.”

The infrastructure collapse of the 90’s was near to impossible to rebuild by North Korea alone. Since 1998, the economy has somewhat stabilized, however full reconstruction has never been acheived and rather only parts of the country has recovered.

The key point will be when China participates in the North Korea sanctions

If the second tribulation march was to occur, the main point will be commerce with China. Last March, Professor Xuwenji of Northeast Asia Research and Development Institute, Jilian University visited North Korea. He said “About 70% of North Korean markets are made up of Chinese products, 20% of products are made in North Korea and the remaining 10% is either Japanese or Russian products.”

Currently, daily necessary products such as toothbrushes, toothpaste, and soap, welding rods and even tires at North Korean markets are all made in China. In the case that the trade of daily necessities is disconnected, this will undoubtedly affect North Korea dramatically. In the end, the key point is to what extent China will compliantly follow the North Korea resolution.

The number of Chinese enterprises trying to evade North Korean investments is also variable. After North Korea’s nuclear experiment, rumors spread that Chinese banks beginning from Dandong had ceased remitting funds to North Korea and that many Chinese businesses had begun to suspend or terminate North Korean investments.

If commerce is suspended between North Korea and China, North Korea will not be able to satisfy all of its necessary daily products by relying on illicit trade.

There are also rumors that barbed wire will be placed bordering the region of the Yalu River, which will further affect smuggling of goods. As official trade between the two countries becomes illegal and daily necessities cannot be supplied from China through smuggling, the North Korean people will experience yet another fatal blow to their lives.

Furthermore, if North Korea does proclaim its second tribulation march and returns to the times of the mid-90’s, the Kim Jong Il regime could be greatly affected.

Above all, as the mentality of the people has changed, no longer will they listen submissively to the government. Rather, they will be more inclined to find ways to sustain their own life existence and make all attempts to defect to China. Amongst these circumstances, there may even be bloodshed between soldiers and the people.

Also, if high ranking military officials and soldiers decide that they cannot possibly live amongst these circumstances, it is possible that they will abandon their barracks. One thing is certain they will not simply sit around and wait to die from starvation. If high ranking military officials and soldiers did withdraw from their barracks on the mass, it is possible that the Kim Jong Il regime will face a threat to destruction.

From the Korea Herald:
Sanctions will cripple N.K. economy: KIEP
10/17/2006
Kim So-hyun

The international sanctions to be imposed on North Korea will further cut into the country’s moribund trade volume and drag it deeper into recession, a South Korean think tank said in a report released yesterday.

The sanctions – being taken under a U.N. Security Council resolution – will likely reduce the North Korean economy to a state worse than in the mid-1990s when millions died of hunger, the Korea Institute for International Economic Policy said.

“The North Korean economy is expected to contract much more severely than in the so-called ‘marching in torment’ times (in the mid-1990s),” the KIEP report said. “More financial sanctions and a block on foreign capital inflow will deepen the shortage of foreign currency, resulting in a wider gap between market and official exchange rates.”

The official exchange rate of the North Korean currency was 137 won to the U.S. dollar in the first half of 2005. However, the dollar was traded for between 1,900 won and 2,600 won in the market, up to 19 times higher than the official rate.

The prohibition of financial transactions and capital inflow is regarded as the most powerful punitive measure since it has been cited by Pyongyang as one of the main reasons for boycotting six-party talks and pressing ahead with its reported test of a nuclear device.

“Although trade accounts for less than 15 percent of North Korea’s gross domestic production, trade and support from neighboring countries allowed its economy to inch up a bit recently,” said Choi Soo-young of the Korea Institute for National Unification.

“Whereas the North could ask for international help when it suffered natural calamities such as draughts in the mid-1990s, it now has to live without such generous aid.”

Since the U.N. resolution bans direct or indirect supply of weapons or any materials that could contribute to the North’s weapons of mass destruction programs, a reduction in Chinese imports of related materials could trigger stagnation in the nation’s machinery, electronics and chemicals output, the KIEP report said.

“The trade volume between North Korea and China has surged by some 30 percent a year since 1999, and this has accelerated the North’s economic growth by 3.5 percentage points annually,” KIEP researcher Chung Seung-ho said.

China accounts for about 40 percent of North Korea’s relatively small volume of trade. South Korea, Thailand, Russia and Japan each take up 26 percent, 8.1 percent, 5.7 percent and 4.8 percent, respectively, according to Chung.

It remains to be seen whether neighboring countries will take individual measures in addition to the sanctions under the U.N. Security Council resolution.

The United States, Japan and Australia are considering harsher measures of their own while South Korea and China seem reluctant to follow suit.

“As China’s involvement in the sanctions is likely to be only symbolic, the level of South Korean participation will determine the degree of the North’s economic decline,” KINU’s Choi said.

China could consider reducing its uncompensated grants to North Korea, which soared 162 percent to $38 million last year, according to KIEP.

“China is expected to partially or entirely stop the trade of machinery and electronics that could be related to weapons of mass destruction in North Korea, but it wouldn’t go as far as forbidding private commercial trade across the border,” the report said.

“Stopping the supply of crude oil, for which North Korea depends entirely on China, is unlikely.”

From the Asia Times:
Business as usual across the Yalu
10/17/2006
Ting-I Tsai

Pyongyang’s proclaimed successful nuclear test, which has sparked anger and fear around the world and prompted passage of more UN sanctions, is not deterring Chinese business people living on the border from doing business with North Korea. They are confident that Beijing will not enforce really harsh punishments.

“For North Korea, reform and development is still its goal. It is just a matter of time. We are still keen on doing business there,” said Zeng Chengbiao, chairman of the Zhongxu Group which is based in Shenyang, capital of Liaoning province. Zeng has been planning to operate a department store in Pyongyang and is also interested in investing in mining there. Zeng said his company is preparing to announce a major investment after the Chinese Lunar New Year in February.

Zeng is a typical example of the hundreds of Chinese business people who remain enthusiastic about trading with or investing in North Korea, despite the international furor and unconfirmed reports about Pyongyang’s running out of electricity and food while major players in the Security Council debate punishments for North Korea’s nuclear test.

A sense of normality in Pyongyang and continuing routine bilateral interactions with China could be the reasons for these businessmen’s calm. “Everything is the same as usual. Lots of my clients are in town for business [after the test’s announcement],” said an anonymous Beijing-based trader, who has dealt with North Koreans for more than a decade.

In the Chinese city of Dandong on the North Korean border, and even in Pyongyang, Chinese businesspeople and citizens all claim confidence. “I checked with my friends at the customs, and they said that goods are in and out as usual,” said Liu Yen, a church worker from Dandong.

In Pyongyang, Chinese traders are still answering calls made to their North Korean 10-digit mobile phones, hoping to find more sources for soybean oil, sugar, monosodium glutamate and flour. Michel Ji, representative of Jilin Cereals, Oil, Foodstuffs, Import and Export Group in Pyongyang, who has been traveling back and forth between the two nations for four years, said that his company has imported up to10 million tons of sugar, MSG and oil from North Korea. Prices of products from China, he said, are still too high.

“There will definitely be sanctions, but none of them will affect people’s livelihoods,” Ji said.

Since Pyongyang initiated economic reforms in July 2002, Chinese businessmen have crowded into North Korea – perhaps the last virgin territory for capitalism. China’s non-financial direct investment in North Korea was about US$14.37 million in 2005 and $14.1 million in 2004, according to the Chinese Commerce Ministry.

Bilateral trade reached almost $1.4 billion in 2004, and jumped to about $1.6 billion in 2005, while during the first eight months of 2006 it hit $1 billion.

Some 40 Chinese companies from Liaoning province alone have just returned from North Korea after attending the second Pyongyang Autumn International Commercial Exhibition. A Pyongyang-Tianjin joint-venture bicycle manufacturing company, which reportedly produces 300,000 bicycles annually, dominates North Korean’s bicycle market, while more companies are waiting for the two governments’ approvals for investing in the slowly opening nation.

Shortly after Pyongyang’s announcement of its nuclear test, Tokyo declared a total ban on North Korean imports and prohibited North Korean-flagged ships from entering Japanese ports. North Korean nationals are also prohibited from entering Japan, with few exceptions.

Over the weekend, the Security Council approved the US-sponsored resolution for imposing punishing sanctions against North Korea. The sanctions demand that the North abandon its nuclear weapons program and orders all countries to prevent North Korea from importing or exporting any material for weapons of mass destruction or ballistic missiles. It orders nations to freeze assets of people or businesses connected to these programs and bans individuals from traveling there.

Furthermore, the resolution calls on all countries to inspect cargo leaving and arriving in North Korea to prevent any illegal trafficking in unconventional weapons or ballistic missiles. The final draft was softened from language authorizing searches, but was still unacceptable to China – the North’s closest ally – which said it would not carry out any searches.

“China will not go too far,” predicted Cui Yingjiu, a Beijing-based retired academic who was Kim Jong-il’s classmate during his studies at Pyongyang’s Kim Il-sung University in the early 1960s. Aside from concern about China’s national interests, analysts in Beijing also doubt the significance of any harsh punishment, as they believe the North Korean economy is relatively independent.

“They can still live by simply eating grass. What would these economic sanctions really do?” said Niu Jun, professor at the Peking University’s School of International Relations, who visited North Korea in July.

Shortly after the UN resolution passed, US ambassador to the UN John Bolton told reporters that the next step was to start work on implementing the resolution. But none of the current moves are scaring away Chinese businessmen.

From the Choson Ilbo:
Chinese Banks Restricting Cash Flow to N.Korea
10/17/2006

Major Chinese banks are currently stopping or restricting remittances or payments to North Korea after the North’s announcement of what it claims was a nuclear test, it emerged Monday. Chinese banks in Dandong, where cross-border trade is concentrated, recently started restricting banking transactions with North Korea, an official with the South Korean Embassy in China said. The restrictions, in fact, started in March this year, when the U.S. imposed financial sanctions on Macau’s Banco Delta Asia after designating it Pyongyang’s “primary money laundering concern.”

But not all Chinese banks are doing so, each bank and branch having its own policy. Sources say it does not look as if the Chinese government is ordering them to do so; rather banks have started doing so on their own. Rumor is spreading among traders doing business with North Korea in China that all financial accounts with North Korea including those by North Korean traders in China could be frozen.

North Korean workers in China are leaving the country in droves after North’s claimed nuclear test. A businessman operating a sewing factory in Shenyang, China, said, “Some 100 North Korean workers in my factory returned home three days ago because the Chinese authorities didn’t renew their work permit.” Banks in Dandong and Shenyang, where many businesses trading with North Korea have accounts, are seeing an increasing number of them not receive payments for exports to the North. “Since the U.S. froze North Korea’s accounts in the Macau bank, it takes three or four times longer for us to get paid for imports to the North, and this is hurting us badly,” a businessman trading with the North said. “We can’t do business with the North any longer.”

As official trade between the North and China shrinks, smuggling between the two countries is thriving, local people say. An ethnic Korean in Dandong said if a North Korean vessel ships 1,000 tons of iron ore to a port here, it officially reports only 100 ton of them and smuggles the rest. Smuggling covers almost everything from iron ore to bronze, TVs, computers, petrochemical products, antiques and maritime products. That is why many feel how determined the Chinese authorities are in cracking down on smuggling will determine the success of sanctions against the North. Locals say they have not heard of any Chinese crackdown on smuggling to and from the North, nor do they expect one.

China clearly stated its opposition against military action in the UN resolution against the North over its claimed nuclear test, calling for “an appropriate level” of sanctions. Beijing says the ultimate goal should be getting the North to return to the six-party talks on its nuclear program, not forcing regime collapse. Some expect China to reduce, rather than stop, its supply of oil to the North.

Meanwhile, China is preparing for an emergency in North Korea. It is setting up barbed-wire fences along the border near the Yalu and Tumen rivers where the military units of the provinces there took charge of guarding the area three years ago. The barbed-wire fences are being extended near Changbai County and the Tumen River. A Chinese official said the fences “were put up after consultations with the North because we needed to draw up a clear border between us and North Korea because of the narrowness of the river or newly built roads.” But some say the main goal is to prevent a mass exodus of North Koreans when the regime falls apart. Experts say another reason China is building up its military strength and carrying out more military exercises near the border with the North is to prepare for regime collapse in the north. The new 60-km long road along the Yalu River is also said to serve strategic military purposes.

From the Associated Press:
China erects barbed wire fence along border with North Korea
10/16/2006
Alexa Olesen
Jae-soon Chang

China has been building a massive barbed wire and concrete fence along parts of its border with North Korea in the most visible sign of Beijing’s strained ties with its once-cozy communist neighbor.
 
Scores of soldiers have descended on farmland near the border-marking Yalu River to erect concrete barriers 2.5 to 4 meters (8 to 15 feet) tall and string barbed wire between them, farmers and visitors to the area said.
 
Last week, they reached Hushan, a collection of villages 20 kilometers (12 miles) inland from the border port of Dandong.
 
“About 100 People’s Liberation Army soldiers in camouflage started building the fence four days ago and finished it yesterday,” said a farmer, who only gave his surname, Ai. “I assume it was built to prevent smuggling and illegal crossing.”
 
Though the fence-building appears to have picked up in the days following North Korea’s claimed nuclear test last week, experts said the project was approved in 2003. Experts and a local Hushan official, who requested anonymity because of the project’s sensitivity, said the military was in charge of the building.
 
A Defense Ministry spokesman, Ye Xing, declined comment, saying he was not authorized to release information on border security.
 
The fence marks a noticeable change in China’s approach to its North Korean neighbor. In the decades following their shared fight against U.S.-led U.N. forces in the Korean War, China left their border lightly guarded, deploying most of its forces in the northeast toward its enemy, the Soviet Union.
 
But the border became a security concern for Beijing in the past decade, as North Korea’s economy collapsed and social order crumbled in some places. Tens of thousands of refugees began trickling across the border into northeast China, fording the Yalu and Tumen rivers or walking across the ice in winter.
 
Professor Kim Woo-jun at the Institute of East and West Studies in Seoul said China built wire fences on major defection routes along the Tumen River in a project that began in 2003, and since September this year, China has been building wire fences along the Yalu River.
 
“The move is mainly aimed at North Korean defectors,” Kim said. “As the U.N. sanctions are enforced … the number of defectors are likely to increase as the regime can’t take care of its people … I think the wire fence work will likely go on to control this.”
 
But he said he also believes that Beijing wants to firmly mark its border with the North along the two rivers.
 
Kim said China and the North drew their border in a secret treaty. That treaty wasn’t reported to the United Nations and therefore does not apply to a third country, like South Korea. China is concerned that South Korea may claim a different border after absorbing or unifying with the North.
 
Reporters who visited the border area in the past week saw about 500 meters (1,640 feet) of newly erected barbed wire fence north of Dandong, mainly along river banks and occasionally broken up by mountain areas or military guard posts.
 
A duck farmer in Hushan, who would only give his surname Han, said that soldiers began putting up the fence near his farm last Monday afternoon — the same day that North Korea claims to have carried out an underground nuclear test.

From NK Zone:
Michael Rank
10/15/2006

The Chinese businessman who is planning to develop the North Korean port of Rajin under a 50-year agreement with the border city of Hunchun says the deal remains on track despite NK’s nuclear test.

Fan Yingsheng, a property developer from Hunan province, said a road between the two cities should be completed within 15 months but gave few other details.

He told the Shanghai Evening Post [in Chinese] that U.N. sanctions “are something that we are expecting, and won’t have much effect on us.”

“After the nuclear test, North Korean colleagues did not tell my company about anything being different, I didn’t even receive any phone calls from them, which shows that it’s business as usual.

”So I am still planning to fly to Pyongyang to sign an agreement as planned, and haven’t thought of changing my schedule.“

Fan was speaking from Hunchun on October 12, shortly after meeting a group of North Korean officials, and was about to head across the border to Raseon where his company apparently has its main North Korean office. He said this visit had been scheduled a month ago.

The ceding of Rajin, an ice-free port with a handling capacity of three million tonnes a year, will give access to the sea to inland areas of northeast China which at present must send freight long distances by rail to the port of Dalian on the Bohai gulf.

The agreement also provides for the construction of a 5-10 square km industrial zone and a 67 km highway, and envisages that the Rajin area will become a processing zone for Chinese goods which will then be re-exported to southern China.

Fan is reported to have put up half the initial capital investment of 60 million euros ($70 million). The sum could not be denominated in dollars for political reasons.

Fan said in July that the Chinese side had approved the leasing of the port as had the city of Raseon, and “all we are waiting for is for the Korean central government to give its approval…”

From the Wall Street Journal:
Let Them Go: China should open its border to North Korean refugees
10/15/2006
Melanie Kilbatrick

If China is to assume what it considers to be its rightful place as a great power, now is the moment. The world is looking to Beijing as the only government with a measure of influence over its lunatic nuclear ward in the Hermit Kingdom. The question is, will it use it?

China says it favors “punitive” actions on Pyongyang for its apparent nuclear test last week, and there’s talk–so far desultory–of sanctions. But no one is speaking publicly about Beijing’s biggest source of influence: the 900-mile border it shares with North Korea. Opening the frontier to refugees would put pressure on Kim Jong Il to give up his nukes or watch his regime implode. As Mark Palmer, U.S. ambassador to Hungary in 1989, has noted, the East German refugees who passed through that country en route to West Germany sped the collapse of the Soviet Union.

The plight of North Korean refugees hiding in northeastern China is a humanitarian crisis that has received scant global notice. No one knows how many are in hiding or how many Beijing has deported back to North Korea in violation of its obligations under the Convention Relating to the Status of Refugees. China refuses to let the United Nations or other countries help the North Koreans.

Now, three official Chinese government documents–obtained privately and smuggled out of the country–show that the humanitarian crisis may be more dire than widely believed and the burden on China heavier. Two of the documents are from the Public Security Bureau–one from the Border Police and the other from a police station along the border. The third is from the Finance Bureau of the Yanbian Korean Autonomous Prefecture in Jilin Province, home to many ethnic Koreans.

The documents were obtained by a U.S.-South Korean group that helps North Korean refugees navigate the underground railroad to safety out of China. The group prefers to remain anonymous for fear that its work could be endangered. They have been vouched for to me by two other sources, one on Capitol Hill and another at an international human-rights organization.

The Border Police document, dated Jan. 10, 2005, begins blandly enough: “From the start of illegal border crossings in 1983,” it says, “the number of illegal immigrants from North Korea that have stayed in China has increased every year.” It adds, “Public Security and Armed Police departments have strengthened preventative and deportation efforts.”

The numbers it reports are newsworthy–and staggering: “To date, almost 400,000 North Korean illegal immigrants have entered China and large numbers continue to cross the border illegally.” And, “As of the end of December 2004, 133,009 North Korean illegal immigrants have been deported.” While Chinese authorities obviously know how many refugees they have deported, by definition they can’t know how many are in hiding. The estimate of 400,000 is sure to be low.

The Yanbian Finance Bureau document, dated Oct. 19, 2004, provides further evidence of the extent of the crisis. It is a letter to provincial authorities requesting more money to help with deportation efforts. “According to statistics from the Public Security, border police and civil administration, more than 93,000 refugees are still living in Yanbian Prefecture.” The letter goes on to say that although the Border Police Bureau has established “six new refugee-deportation and detention centers,” it does not have sufficient funds to do the job. Yanbian requests 30 million yuan ($3.8 million) a year “to solve this financial problem.”

It’s the third document, though, that puts this “financial problem” in human terms. It’s a report, dated Oct. 7, 2003, from a police station in Badaogou Precinct, near Baishan City, in Zhangbai Korean Autonomous County, also in Jilin Province.

“At 7 a.m. on Oct. 3, 2003,” Case Report No. 055 begins, “a report was received from the public of several corpses floating in the Yalu River. Officers from the Precinct immediately responded and organized personnel and by 10 a.m. 53 corpses had been recovered.

“At 5 a.m. on Oct. 4 an additional three corpses were recovered for a total of 56 corpses. There were 36 males and 20 females, including seven children (five male and two female). After examination of the personal effects it was determined that the dead were citizens of the DPRK [North Korea]. Autopsies confirmed that all 56 had been shot to death. It is estimated that the dead were shot by Korean border guards while attempting to cross into China.”

While Pyongyang bears ultimate responsibility for the abuse of its citizens, China is complicit. Its policy of tracking down and repatriating refugees amounts to a death sentence for many returnees. It’s a crime to leave the workers’ paradise, and North Koreans who are caught and deported are shipped off to internment camps or worse.

If Beijing wants to send a message to Pyongyang about its nuclear program, it could announce that, effective immediately, it is taking several steps: It will stop deporting North Koreans, allow the United Nations to set up refugee camps, and permit the resettlement of refugees in third countries, from which they could go to South Korea, whose constitution codifies its moral responsibility to accept its Northern cousins, or to other countries willing to take them in. The U.S., which so far has accepted a mere eight North Koreans, could step up to the plate here.

The Border Police document notes that since the early 1980s there have been six instances of mass migrations that have coincided with North Korea’s famines. Now, winter is coming, and there are already reports of food shortages. Allowing the world to help the North Korean refugees in China would help Beijing deal with a problem that is likely to get worse.