North Korean Economy Watch

Choson Ilbo
8/2/2007

North Korea early this year declared Shinuiju, a border town in North Pyongan Province, a special economic zone, North Korean officials said. Some 3,000 households in Pyongyang are to be relocated to Shinuiju under an urban development project launched there in June.

During a recent visit to China, a North Korean official told an official from the Chinese border city of Dandong the North will relocate Pyongyang citizens to the Shinuiju Special Economic Zone since they are “ideologically prepared.” Some will be assigned as workers to an industrial complex, who will be joined by officials from the Ministry of Public Security and the State Security Department, and police officers and their families.

A Dandong official said, “I understand that housing prices in the Shinuiju area have skyrocketed due to rumors that Pyongyang citizens will move in.” He said North Korean authorities plan to evict 3,000 households from Shinuiju to the city’s suburbs to make room for the newcomers. Public and state security officers in Shinuiju have begun making a list of those with dubious backgrounds and who are ideologically suspect, which rumor has it will result in a roster for eviction.

Meanwhile, the Yalu River estuary is being dredged and all private houses near Shinuiju Railway Station are being demolished, while the special economic zone is being surrounded new by barbed-wire tangles and fences.

A North Korean source based in Dandong said an earlier Shinuiju special economic zone project promoted by Yang Bin, a Chinese, was aimed at making money through casinos and entertainment facilities. But on North Korean leader Kim Jong-il’s instructions, the current project is designed to build a city that can play the same role as both the Kaesong Industrial Complex and the Najin-Sunbong Free Trade Zone.

Now available on Google Earth! 
(click above to download to your own Google Earth)

North Korea Uncovered v.3

Google Earth added a high-resolution overlay of the area between Pyongyang and Nampo.  In it, most of the Koguryo tombs listed with UNESCO are now distinguishable.  In addition, viewers can see the latest Kim Jong Il palace (including a yacht), the DPRK’s premier golf course, and the Chinese-built Taean Glass factory.  I have also made some progress in mapping out the DPRK electricity grid.

This is the most authoritative map of North Korea that exists publicly today.  Agriculture, aviation, cultural institutions, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

Naturally, I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds on the more “controversial” locations. In time, I hope to expand this further by adding canal and road networks.

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

Download it to your Google Earth here! 
(substantial improvements over version 1)

Using numerous maps, articles, and interviews I have mapped out North Korea by “industry” (or topic) on Google Earth. This is the most authoritative map of North Korea that exists publicly today.

Agriculture, aviation, cultural, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

Naturally, I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds on the more “controversial” locations. In time, I hope to expand this further by adding canal and road networks.

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

For international readers: The Congressional Research Service is an organization that puts together issue briefs and legislative histories for congressional staff.  They are one of the first places US Congressional staff go to learn about a topic.

In April, the Congressional Research Service published a document on the North Korean Economy.  The full report, as well as some past reports, can be downloaded here.

Executive Summary

This report provides an overview of the economy of the Democratic People’s Republic of Korea (DPRK) or North Korea, its external economic relations, attempts at reform, and U.S. policy options. Along with the United States, North Korea’s major trading partners — China, Japan, South Korea, and Russia — form the socalled “six parties,” who are engaged in talks, currently restarted, to resolve issues raised by the DPRK’s development of nuclear weapons.

The economy of North Korea is of interest to Congress because it provides the financial and industrial resources for Pyongyang to develop its military, can be used as leverage in negotiations, constitutes an important “push factor” for potential refugees seeking to flee the country, creates pressures for the country to trade in arms and illegal drugs, is a rationale for humanitarian assistance, is tied to Pyongyang’s nuclear program, and creates instability that affects South Korea and China. The North Korean threat to sell nuclear weapons material could be driven in part by Pyongyang’s need to generate export earnings. The dismal economic conditions also foster forces of discontent that potentially could turn against the Kim regime — especially if knowledge of the luxurious lifestyle of communist party leaders becomes better known or as the poor economic performance hurts even Pyongyang’s elite.

Economic conditions in North Korea currently seem to be improving but have been dismal for those out of the center of power. Mass starvation — eased only by international food aid and other humanitarian assistance — has stalked the countryside. Over the past 15 years, industrial production in North Korea has shrunk considerably. The country has embarked on a program of economic reforms that include raising wages, allowing prices to better reflect market values, reducing dependence on rationing of essential commodities, trimming back centralized control over factory operations, and opening foreign trade zones for international investment.

North Korea has extensive trading relationships with China and South Korea and more limited trade with Japan and Russia. Because of U.S. economic sanctions and lack of normal trade relations status, U.S. imports from North Korea in 2006 were nil, while U.S. exports consisted of $3,000 worth of books and newspapers.  The DPRK has been running an estimated $1.8 billion deficit per year in its international trade accounts that it funds primarily through receipts of foreign assistance and foreign investment as well as through various questionable activities, such as sales of weapons, transporting and producing illegal drugs, and counterfeiting brand name products and currency.

U.S.-led financial sanctions on North Korea have disrupted that country’s trade. In the six-party talks, economic assistance (including fuel oil) is a major bargaining chip. Economic policy options include increasing or easing economic sanctions, preventing shipments of illicit cargo, normalizing relations with Pyongyang, negotiating a trade agreement, allowing the DPRK to join international financial institutions, and removing the country from the terrorism list. This report will be updated as conditions warrant.

American Enterprise Institute Book forum
4/17/2007

A couple of weeks ago, I had the opportunity to attend a book forum at the American Enterprise Institute on Nicholas Eberstadt’s new book, The North Korean Economy: Between Crisis and Catastrophe.  It was very informative to hear three different perspectives on the direction of North Korea’s economic reform. 

Panelists included:

Nicholas Eberstadt, AEI
Andrei Lankov, Kookmin University
Deok-Ryong Yoon, Korea Institute for International Economic Policy

In summary, Mr. Eberstadt and Mr. Lankov are pessimistic about the North Korean leadership’s desire to enact reforms–knowing that information leakages will undermine their political authority.  As Mr. Lankov pointed out, the North Korean nomenklatura are all children and grandchildren of the founders of the country who are highly vested in the current system.  They have no way out politically, and as such, cannot reform. 

They argue that the economic reforms enacted in 2002 were primarily efforts to reassert control over the de facto institutions that had emerged in the collapse of the state-run Public Distribition System, not primarily intended to revive the economy.  Lankov does admit, however, that North Korea is more open and market-oriented than it has ever been, and  Mr. Yoon was by far the most optomistic on the prospects of North Korean reform.

Personally, I think it makes sense to think about North Korean politics as one would in any other country–as composed of political factions that each seek their own goals.  Although the range of policy options is limited by current political realities, there are North Koreans who are interested in reform and opening up–even if only to earn more money.  In this light, even if the new market institutions recognized in the 2002 reforms were acknowledged only grudgingly, they were still acknowledged, and their legal-social-economic positions in society are now de jure, not just de facto.  The North Korean leadership might be opposed to wholesale reform, but that is economically and strategically different than a controlled opening up on an ad hoc basis–which is what I believe we are currently seeing. Anyway, dont take my word for it, check out the full commentary posted below the fold:

(more…)

Yonhap
3/23/2007

North Korea is considering establishing a special economic zone on two small islands bordering China to help resuscitate its moribund economy, a South Korean source said Friday.

The North has been pushing to form a free trade zone on the Bidan and Wihwa islands on the Yalu River on the western border between North Korea and China, and has sounded out South Korean companies on their investment plans for the area, the source privy to inter-Korean economic projects said.

“The North has been mulling building the zone since early last year but hasn’t made headway in the wake of its nuclear test. The idea is being considered again now, however, as conditions became favorable following the Feb. 13 agreement,” the source said on condition of anonymity.

The source referred to a landmark six-party agreement in which North Korea promised to begin dismantling its nuclear programs in return for aid. The agreement, signed by the two Koreas, the U.S., China, Russia and Japan came four months after the North defiantly tested a nuclear weapon, prompting worldwide condemnation.

The economic zone is to specialize in such sectors as trade, distribution, light industries, tourism and finance, the source said.

In 2002, the North designated Sinuiju, a city bordering China, as a special economic zone, but the plan fell through after Beijing arrested its governor Yang Bin, a Chinese-Dutch entrepreneur, on bribery and kickback charges. Since then, the plan has been put on hold amid the North Korean nuclear standoff and China’s alleged opposition.

North Korea has been resorting to outside handouts since mid 1990s, when its state-controlled economy collapsed due to mismanagement and natural disasters.

Daily NK
Han Young Jin
3/20/2007

Daesung Trading Company and Maebong Company, Two Pillars of North Korea’s foreign currency

In the 80~90’s, the aim of the People’s Army of North Korea was to make foreign currency and consequently, each division of the government began to operate trading companies. However, there were many kinds of trading companies.

The Maebong Company under the General Staff which was established in the 80’s, Birobong Trading Company, Yongsung Trading Company, Manpoong Trading Company and Danpoong Trading Company founded in the 90’s, all under the top 5 trading companies in North Korea. Of these, Maebong Company is the most well-known; once also known as Kwangmyung Trading Company until 2000.

Following “Military First Politics,” Maebong Company became one of North Korea’s active traders with Daesung Trading Company belonging to the Worker’s Party Division 39.

One of the reasons that the military became directly involved in foreign currency came from the fact that the nation was unable to acquire the necessary war supplies itself due to the economic crisis. Further, as the Soviet Union and the East European bloc collapsed, trade was changed from bartering goods to dollars and hence, North Korea was in a dire state of insufficient currency.

Presently, the Maebong Company’s main office is in Pyongyang with branches throughout the country such as the border districts of Shinuiju, Haesan and Hoiryeong.

In order to attract powerful Chinese traders, Maebong Company only appoints those who have experience with foreign money as regional directors such as North Korean citizens with relatives in China. After giving the title of regional director, a permit is given. Though the regional director is registered as a tradesman for the military, actually he/she is in fact not a soldier.

With a certificate which states their position of foreign tradesmen, regional directors have the privilege of freely entering and exiting China.

Trading branches in each city, trading with Japan in the opensea

Trading partners are mostly China and Japan. Traders from Maebong Company dealing with China exchange goods such as second hand cars, medicinal herbs, silk cocoons and seafood.

With copies of Kim Jong Il’s orders distributed by Maebong Company, trading partners are able to transport secured goods supplied by foreign currency directors as far as the border regions without much difficultly from security posts.

One defector from Shinuiju said “In 1995, hundreds of trading companies were established in Shinuiju… Maebong Company was one of these companies which served as a shabby storage factory stocking 10tons of flour and medicinal herbs in which people could exchange for aluminum. At that time, these people who were called foreign currency directors wore overcoats made of dogs fur and rode second hand bicycles made in Japan.”

At one point, Maebong Company illegally sold second hand cars along the border region and gained considerable income. Nowadays, medicinal herbs and minerals are more popular and whereas more of the traders from the West Coast export seafood such as shells and razor clams to China, expectedly, export seafood to Japan occurs mainly on the East Coast.

Conceal illegal foreign currency, smuggling of gold prohibited

In 1997, authorities conducted a thorough investigation against traders in order to straighten the chaotic mess created by border tradesmen. After the investigation, Kim Jong Il ordered every trading company to be merged under the control of each agency. As a result, trading companies which had once been organized by the military divisions were disintegrated and became incorporated as part of the Maebong Company, now an integrated trading group.

After becoming a director for Maebong Company in Hoiryeong, “Kim” who had once lived a tough life is now known to be one of the richest people living in the area, frequently traveling to China.

According to one defector who had worked under the Korea Service Bureau of Workers’ Party division 16, there were 6 employees at the Hoiryeong Maebong Company located in Manghyang, which planned to earn $100,000 annually. Also, additional funds are kept in celebration of national events such as Kim Il Sung and Kim Jong Il’s birthday.

There is a great number of Maebong Company employees who engage in corrupt activity and ultimately are defaced. There is a saying in North Korea, “earning foreign currency is educational punishment,” meaning that though earning foreign currency is an occupation preferred by the many, it does at the same time involve greatest risk. In 1997, an investigation was made targeting central authorities. Many of these directors in charge ended up receiving severe punishment.

Once, “Park” a director of Shinuiju Maebong Company was convicted under the suspicion of depositing foreign currency into a Chinese bank and while undergoing the preliminary hearing was known to have attempted self-injury by swallowing a spoon. On another occasion, ‘Kim’ of Chongjin Maebong Company was known to have been executed for being involved in a case of smuggling gold.

Bloomberg
Bradley Martin, Allen Cheng
3/6/2007

Chinese entrepreneur He Ho was burned by his first North Korean investment, a bakery in the shabby border city of Sinuiju. He lost his entire $20,000 when the plan to make the city a special economic zone stalled in 2003.
   
If another opportunity comes along, though, “I’ll be the first to go in,” the 34-year-old said in an interview in Dandong, the bustling Chinese city facing Sinuiju across the Yalu River. “North Korea’s a good investment because so many things are lacking.”
   
Business executives in Dandong, one of the main conduits for trade in and out of North Korea, see opportunity in the recent six-nation agreement to end Kim Jong Il’s nuclear-weapons program. They think the 65-year-old North Korean leader will now focus on fixing his country’s nearly flattened economy and may revive plans for a special economic zone — an area designed to promote foreign investment, with fewer rules and regulations than elsewhere in the country — on the western border with China.
   
“Most of North Korea’s trade with China is via Dandong, so a special zone in this corridor could make sense,” said Marcus Noland, senior fellow at the Peterson Institute for International Economics in Washington. “This could be the North Korean equivalent of the Chinese coastal SEZs in the early years of the Chinese reform.”

No Guarantee

There’s no guarantee against another disappointment for entrepreneurs like He Ho, said Peter Beck, Seoul-based Northeast Asia project director for the International Crisis Group, a Brussels-based organization that works to resolve crises around the world.
  
“The eternal optimist in me hopes that Kim will see the light and recognize the direction in which he needs to lead the economy,” Beck said in a telephone interview. “But the jury’s still out.”
 
At the same time, “the North Koreans have been talking about putting a special economic zone in the far northwest aimed at China for a decade,” said the Peterson Institute’s Noland. “If they get the politics right, this venture could work.”
 
China is North Korea’s top trading partner, with 2006 exports of $1.23 billion and imports of $468 million, according to its Ministry of Commerce.
 
A little over a year ago, Kim visited six booming Chinese cities, including the special economic zone of Shenzhen, bordering Hong Kong. North Korea’s Central News Agency described the nine-day trip as a visit to places “where the cause of modernization is being successfully carried out.”

Executives’ Speculation

Business executives in Dandong speculate that North Korea will develop a new zone in Cholsan County, a peninsula on the east side of the mouth of the Yalu some 50 to 60 kilometers (31 to 37 miles) south of Dandong and Sinuiju. China’s commerce and foreign ministries and North Korea’s embassy in Beijing didn’t respond to faxed requests to comment on their plans.

In 1991, North Korea built a special economic zone at Rajin-Sonbong, in the remote northeast of the country, which has failed to attract much foreign investment because of its location.  Another zone near the southern border at Gaeseong, only 60 kilometers from Seoul, has proven more popular, especially with South Korean manufacturers in search of low-cost labor.

In 2002, North Korea announced plans for the zone in Sinuiju, which would have included export factories and casinos to lure gamblers from China. Kim named Dutch-Chinese businessman Yang Bin governor of the zone. China, which hadn’t given its approval, squelched the plan by arresting Yang and jailing him in 2003 on charges of fraud and illegal land use.

Strained Relations

Kim’s test of a nuclear device in October, which strained relations with the Beijing government, didn’t halt commerce on the border, according to Shen Yuhai, general manager of Dandong Jade Ocean Trade Co. “We didn’t stop trading at any time,” he said in a recent interview.

Shen’s office overlooks a busy parking lot where Chinese customs officials examine trucks departing neon-lit, high-rise Dandong for the run-down and darkened Sinuiju.

The trucks cross on the Friendship Bridge’s single lane in the morning with manufactured goods and return in the evening, either empty or carrying minerals, silkworm cocoons and seafood, Shen said. Four trains a week cross in each direction, connecting the North Korean capital of Pyongyang with Beijing.

China is supplying its neighbor with “daily necessities, home electrical appliances and, in this season, farming tools and chemical fertilizer,” said Shen.

While business is booming, he said he’s still cautious about the risks. He requests payment in yuan, dollars or euros, not North Korean won, and accepts bank transfers only after business relations have been established.

Even then, he said, “sometimes we are cheated.”

–With additional reporting by Hideko Takayama in Tokyo and Lee Spears and Dune Lawrence in Beijing.

For a copy of a list of banned goods to North Korea: http://www.state.gov/t/isn/76138.htm

Asian Survey
November/December 2006, Vol. 46, No. 6, Pages 898-916
Jae Cheol Kim
Professor of International Studies at the Catholic University of Korea, Seoul.

PDF here: chinainDPRK.pdf

Conclusion:
China’s investment efforts suggest that it has begun to engage North Korea economically. By investing, the Chinese leadership has attempted to push the North to embrace economic reforms, which in turn could improve the North Korean economy and reduce the country’s potential for political instability. In order to lead the North to embark on reform policies, Beijing has tried to provide it with seed money and technology by encouraging Chinese companies to invest. This suggests that despite expectations and allegations from the West that China might abandon its long-time ally, China is committed to supporting North Korea.

The Chinese investment, however, has increasingly been influenced by commercial considerations. Officials in Beijing have stressed that economic exchanges with the North must be mutually beneficial. Chinese companies, which have become responsible for the majority of the investment, have paid increasing attention to market share and natural resources. That China has increasingly tried to gain economic advantage in the North suggests that Sino-North Korean relations are being transformed from being ideology-motivated to interestmotivated.

Despite a stiff increase over the past couple of years, it is hard to say that Chinese investment is either full-fledged or irreversible. Because the instability of North Korea prevents Chinese entrepreneurs from fully embracing the country, Chinese investment must be seen as a pilot project, with Chinese companies and entrepreneurs testing the water. Looking to the future, Chinese investment in North Korea is likely to increase. Despite problems, the Chinese leadership will probably continue to encourage further investment in an effort to exploit developmental opportunities while simultaneously curtailing the flow of direct aid to the North. In addition, China’s dynamic economic growth will propel its overseas investment. As China’s capital account is gradually liberalized, cash-rich Chinese companies will look for markets and resources abroad to fuel their development. The potential appreciation of the yuan will further force firms to relocate factories producing low-end products to countries where the labor cost is lower. Seen from this perspective, North Korea is a good candidate for future Chinese investment—if there is no major turbulence in bilateral relations.

Highlights:
North Korea has been reluctant to follow China’s path of reform and opening because it worried that the policy may create political problems. In an apparent response to China’s recommendation in the late 1990s for reform, for instance, Kim asked Beijing to respect “Korean-style socialism.” But China’s support for reform is not unconditional. Although Chinese leaders have repeatedly urged the DPRK to embrace market-driven reforms (even taking Kim Jong Il is on tours to see the results of China’s economic reforms), when North Korea decided to set up a special economic zone in Sinuiju, apparently without prior consultation with Beijing, China aborted the project by arresting Yang Bin, whom North Korea had designated head of the zone, in October 2002.

China, however, does not want to see turbulence on the Korean Peninsula, which could not only lead to the economic and political collapse of a socialist regime on China’s border but could also threaten regional stability. China thus has tried to sustain the Pyongyang regime by providing economic assistance–believing that reform and opening would not only revive the North Korean economy but also reduce the need for regular aid to prop up the regime, Chinese Premier Wen Jiabao said that the Chinese government would encourage more of its companies to invest and establish their businesses in North Korea.

For Chinese firms, the prime minister’s statement amounted to a government directive, with some entrepreneurs understanding that Wen’s statement was a signal for Chinese companies to invest.  Organizations were formed to smooth such investment, including the Shenyang Municipal Association of Entrepreneurs (Shenyangshi Qiyejia Xiehui), Dandong Municipal Economic Consultation Center for the Korean Peninsula (Dandongshi Chaoxianbandao Jingji Zixun Zhongxin), and Beijing Sino-Korea Economic & Cultural Exchange Company (Beijing Chaohua Youlian). They organized explanatory meetings on investment, drawing numerous applicants.

Beijing attempted to boost investors’ confidence by signing an “Investment Encouragement and Protection Agreement” with Pyongyang in March 2005 when Premier Park Bongju visited Beijing. The framework for economic and technological cooperation was made clearer through the signing of an “Agreement on Economic and Technological Cooperation” that October. Chinese officials have given financial incentives and guarantees to firms that invest in North Korea. China’s state-run banks have not only provided companies with investment capital but also have underwritten Chinese investment for joint ventures. Beijing granted preferential treatment to products processed in the North, allowing them better access to the Chinese market. Products that were processed in the Rajin area with Chinese materials and then imported to China, for instance, were labeled domestic trade and were thus exempted from customs inspection.

The deputy CEO of Beijing Sino-Korea Economic & Cultural Exchange Company, a Beijing company that helps Chinese companies invest in the North, has been quoted as saying that whether a company is able to invest in North Korea depended not on the company’s will but on whether the North would accept it or not. Foreign investors, he added, needed to meet the criterion of “political reliability.” In practice, concerns about political contamination limit North Korea’s economic cooperation with South Korea, whose government has eagerly pushed economic integration with the North. North Korea’s opening therefore means an opening toward China, and this in turn gives Chinese companies very rare advantages.

Labor costs in the DPRK are low [compared to China], running only 70–80 yuan (about US$10) per month.  Building a factory is very cheap, up to one million yuan (about $120,000).  Chinese entrepreneurs see that what North Korea needs is largely light industrial products. Because brand consciousness there is weak, these investors believe that many Chinese companies, even small- and medium-sized ones, can compete in the North Korean market.  The scope for making profits is bigger in North Korea than in China because manufacturers can charge more for similar products in the North. For example, the price of a cigarette lighter is three to five yuan ($0.36 to $0.60) in Pyongyang but only 0.5 yuan ($0.06) in Wenzhou, China.

Although big state-owned companies account for the majority of Chinese outward investments, they rarely invest in North Korea, leaving this to small- to medium-sized companies. In the past, most Chinese investors were Korean-Chinese merchants from two areas in China: Liaoning Province and the Yanbian Korean Autonomous Prefecture. They do not expect that they can make profits in the North Korean market right away; rather, they plan to be ready for when the North opens to the world, by moving into the market early.

Chinese investment projects in North Korea are not only small in number but also weak in scale. There are no detailed data available on their average size, but they likely are no exception to the fact that China’s outward investment is generally characterized by its small scale and low level of technology. 

Although North Korea wants capital in such sectors as home appliances, construction materials, electronic communications products, and machine building, Chinese investment is heavily concentrated in the sectors where China’s needs lie, such as resource extraction, or where its companies can make a profit, such as service sectors. The official Chinese guideline for outbound investment, noted above, recommended investment only in such manufacturing sectors as textiles, clothing, and food products, leaving aside other sectors for which North Korea wants investment.

The North lacks basic frameworks needed for drawing in foreign investment. Policies, laws, and regulations about tax, for instance, are not in place. There is no well established market mechanism for running the economy. The government is still heavily involved in economic management; therefore, potential investors need to have personal networks to open doors, a point that worries potential Chinese investors.  North Korea lacks a sound political environment for enticing foreign investment. The country’s economic policies, especially those related to reform, shift continuously, raising questions about the official commitment to reform.

Pyongyang Department Store No. 1
Zeng Changbiao, chief executive officer (CEO) of the Zhongxu Group, in a much publicized deal in 2004, signed a contract to run Pyongyang’s Department Store No.1 for 10 years. He said his main motive for investing was to take over the North Korean market. He wants to be dominant in the North Korean retail business by securing and expanding market share. But it is not clear whether the contract was put into practice.  An article in a journal published by the National Development and Reform Commission, a ministry-level organization of the Chinese government, suggested that little had changed at the department store by the middle of 2005. South Korean officials also say that the store is still run by North Korea. Zhongxu Group’s Zeng received the lowest tax rate—5% income and 5% import—in the North Korean tax system.

This is one of three big department stores that were being run either by the Chinese alone or jointly.  Shenyang Municipal Association for Trade Promotion opened Daesong Market in Pyongyang, the first wholly foreign-owned company in a non-science sector.

Musan
China has shown an interest in joint resources development projects. The best known case is the project to develop the Musan iron mines. It is not easy to draw an exact picture of Chinese investment in the mines because many press reports suggest different stories. According to a Korean report, a Chinese company from Jilin Province planned to invest about $500 million in the mines. Ta Kung Pao, a Hong Kong newspaper, reported that three companies from Jilin—Tonghua Iron & Steel Group (Tonggang), Yanbian Tianchi Company, and Sinosteel Corporation (Zhonggang)—contracted rights to exploit the Musan iron mines for 50 years. According to the report, the Chinese companies were going to invest 7 billion yuan (about $865 million) and planned to produce 10 million tons of iron ore each year.  In the case of the Musan mines, 2 billion yuan (about $240 million) out of the 7 billion China committed to invest was allocated to building roads and railways from Musan to Tonghua in China. Sizable investment levels might help Jilin secure access to seaports in North Korea.

Similarly, the Chinese press has reported that the Musan iron mines development project was canceled by officials in North Korea, embarrassed by publicity over the deal because it highlighted the degree of foreign investment, a subject that Pyongyang would prefer to handle quietly.

Raijin
Rason International Logistics Joint Company-Rason International secured the exclusive rights to run the No. 3 and No. 4 piers of Rajin port for 50 years. In order to secure the rights, China committed to investing 30 million euros ($36 million) to build an industrial park, tourism facilities, and a road from the trade district of Rason city to Rajin Port. North Korea in turn committed to providing China with 5 to 10 square kilometers of land to build the industrial park.

From Yonhap:

Cross-border trade in China’s northeast region bordering North Korea went on as usual Saturday amid lingering tension abroad over the North’s missile launches this week, ethnic Koreans said.

A Japanese daily reported the same day that China appeared to begin restricting trade with North Korea as a punitive action against the North’s missile firings on Wednesday.

“We don’t feel much that there is a particular change here after the missile launches,” an ethnic Korean living in the border city of Dandong said, requesting anonymity. “Even yesterday, I saw trucks and cars come and go across the Sino-Korean Friendship Bridge,” he said, referring to the bridge over the Amnok River, also called Yalu in Chinese, which defines the territory of the two sides.

Dandong serves as the main trade gate between the two ideological allies, and is bustling with logistics trucks that transport industrial goods to the North’s Sinuiju from Monday through Friday.

Japan’s Yomiuri Shimbun said in a dispatch from Dandong earlier in the day that cargo trucks traveling there via the river bridge have virtually vanished. The report suggested China has frozen trade with the North as a punitive action over its missile launches.

Korean-Chinese businesspeople and North Korean workers, however, denied that China imposed sanctions on the North and said the seemingly reduced trade was a seasonal factor.

“Usually in summer there’s less trade. If the trading goods and personnel have reduced over the bridge, it’s more likely from the seasonal influence. It is a far-fetched idea if they think it was that China began controlling the trade after the missile launches,” an ethnic Korean businessman said, also asking not to be named.

“We cannot even think of the Chinese government blocking private-level trade with Pyongyang. And I’ve not even heard that China was controlling the transportation of goods going into North Korea,” another businessman said.

But a resident in Shenyang said that the Chinese customs authorities were strengthening checks on trade goods that could be used to make military arms in North Korea. His comment could not be immediately verified.