Archive for the ‘International trade’ Category

North Korean coal trade: the questions that really matter

Tuesday, December 8th, 2020

By: Benjamin Katzeff Silberstein

I have long argued, on this blog and elsewhere, that the question of North Korea and economic sanctions is not a binary one. We don’t have either perfect sanctions implementation with complete suppression of trade, or smuggling and trade under the radar, with or without the complicity of the Chinese government, making sanctions on North Korea meaningless. Rather, sanctions were never going to work perfectly to begin with — government measures rarely do. What sanctions do do, however, is to impose high additional costs to anyone trading with North Korea. North Korea would still import and export sanctioned goods to some extent, but reap lower revenues from exports and pay more for imports.

US intelligence claims over the past few months have contained some information that is highly relevant to that end. Ship-to-ship (STS) transfers are complicated and expensive, but it seems that this method of transferring North Korean coal to Chinese buyers has begun to decrease. Wall Street Journal reports (paywall) that direct deliveries to China, through the Ningbo-Zhoushan area, have increased in frequency over the past few months. Chinese ships have also gone directly to North Korea’s Nampo port to fetch coal deliveries.

The UN Panel of Experts noted this trend already in its March 2020 report:

67. Ship-to-ship transfers in the Gulf of Tonkin (see S/2019/691, para. 20) have decreased substantially in favour of increased deliveries to the Ningbo-Zhoushan and Lianyungang port areas in China. The increase reinforces the need for port and customs authorities to heighten scrutiny of vessels and their shipping documentation, and to impound any vessel suspected of transporting prohibited items.

We still don’t know how widespread such trade is, but it significantly lowers the transaction costs of North Korea’s coal trade, and thereby lessens the impact of sanctions on North Korea’s export revenue.

What about proportions?

  • According to the WSJ report and US intel sources, North Korea exported 4.1 million metric tons of coal between January and September 2020.
  • No one knows what North Korea paid, but the WSJ report assumes a price of $80–100 per ton in 2020. This places the value of the exports between $330 and $410 million.
  • Is that a little or a lot? Well, it depends. According to UN Comtrade figures, North Korea exported on average 1.7 million metric tons of coal per month to China in 2015. In contrast, 4.1 million metric tons between January and September gives close to half a million metric tons per month. In April 2016, coal exports totalled 1.53 million metric tons, to the tune of $72.3 million.
  • The WSJ figures place North Korean revenue at $36.6-$45.5 million on average per month for January-September. Using the 2016 April figure as a benchmark, it is absolutely not an insignificant number. At the same time, it is nowhere near — really, less than half by one measure — what North Korea has received for its coal exports in the past.

This by no means gives a perfect representation of the proportions at hand. After all, both 2015 and 2016 were boom years for North Korean coal exports to China. At the same time, judging from this limited data, we should not assume that things are back to normal only because China’s sanctions implementation seems to have begun to taper off. At the moment, it’s also very difficult to tell what proportions of the downturn in trade originates from North Korea’s own, self-imposed border lockdown, and from sanctions respectively.

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September, 2020: the Latest UN Panel of Experts Report and the North Korean Economy

Tuesday, September 29th, 2020

By: Benjamin Katzeff Silberstein

The latest UN Panel of Experts Report is out. Some points relating to the overall state of the North Korean economy, after a quick read:

  • Ship-to-ship-transfers of fuel (“refined petroleum products”) continue. This is nothing new. Only between January and May 2020, North Korea is estimated to have broken the sanctions-mandated ceiling of 500,000 barrels per year. As I have argued elsewhere, many times, even with STS transfers and other illicit methods to flout sanctions, they are taking a toll on the North Korean economy since they are expensive. North Korea has to compensate sellers for the added risk of smuggling somehow. So sanctions, in this sense, are certainly not without impact.
  • Coal deliveries are also happening via STS and other transportation means. Again, this is not new, and rather, is part of the steady state for North Korea under sanctions. As with oil and fuel products, North Korea must be taking a financial hit to compensate buyers for the added risk of violating sanctions. The report says that coal exports resumed, after a Covid-19-pause, in March of this year.
  • The report does note that illicit tanker deliveries decreased thus far in 2020 as compared to 2019. Whether that means that less fuel was actually supplied is unclear. Indeed, according to the report, the delivery tankers had higher capacity than in the past.
  • Overall, it seems that judging from the PoE estimates, North Korea may not be suffering from fuel shortages at all, on the whole. Of course, we know next to nothing about how the illegally imported fuel is used and distributed within the country. Fuel prices have, however, not really been outside the span of the generally normal (or at times even lower), suggesting that the amounts coming in are roughly similar to normal times.

One quick reflection on the exports issue, particularly of coal and other sanctioned export goods: it’s clear that coal trade is happening, seemingly relatively undisturbed, on a scale that is troubling from a sanctions-implementation perspective. What’s tricky, though, is that we know fairly little about proportions. How much coal is North Korea actually able to sell, and to what prices?

As of now, all we know is that coal is being exported on a substantial scale. From an analytical perspective, that leaves a lot to be desired.

However, it is crucial to note the myriads of ways in which the government is able to at least partially compensate for the loss in export income stemming from sanctions. The report details several of these, including a wide range of cyber crime.

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North Korea and China strike agreement on border security

Tuesday, September 29th, 2020

By Benjamin Katzeff Silberstein

Since North Korea closed the border with China due to fears of Covid-19, there have been reports of Chinese citizens being shot at and, in at least one instance, killed by North Korean border guards. The North Korean government ordered border guards to shoot anyone from the Chinese side entering buffer zones it set up along the border.

All of this seems to have been done rather hastily and with little coordination with the Chinese side. Moreover, as is often the case with governance in North Korea, most has been done through relatively unclear decrees. The same factor could possibly explain the recent killing of a South Korean man apparently intending to defect to North Korea over the northern limit line (NLL), for which Kim Jong-un later expressed regret.

Now, Daily NK reports, North Korea and China have struck an agreement about border security in the age of Covid-19:

North Korea and China recently signed an agreement to help ease tensions along their border following shooting incidents involving North Korean border guards and Chinese nationals, Daily NK has learned.

According to a Chinese diplomatic source familiar with the agreement, the Chinese requested consultations with the North Koreans to “protect their citizens” and an agreement on the “working-level measures” came about at the North Korean embassy in China on Sept. 10.

Based on this agreement, China will raise customs duties three-fold on goods entering the country (from North Korea) if North Korean border guards “indiscriminately” and “recklessly” shoot and kill a Chinese national. The agreement also requires North Korea to compensate a shooting victim with RMB 1,200,000 (around USD 175,922).

On Sept. 11, the Ministry of State Security and General Staff Department ordered the North Korean border patrol to abide by details of the agreement. The order was accompanied by a directive telling the border patrol to “refrain” from shooting at people in China who cross into North Korean territory.

“From this past Spring until last month, North Korean soldiers shot and killed several Chinese near the border but North Korea failed to apologize properly, so the Chinese government proposed [the agreement] as a way to protect their citizens,” the source, who requested anonymity for security reasons, told Daily NK.

The source said that the closure of the border because of the COVID-19 pandemic means that North Korea is unable to import many of the things it needs from China. “That’s why North Korea had no choice but to acquiesce to China’s demands,” he added.

CHANGING TACTICS ON THE BORDER

Another source in China who spoke to Daily NK on condition of anonymity recently reported on signs that North Korean border guards seem to be taking a different approach to Chinese who cross the border.

The source said that two Chinese men had brought their cow down to the Yalu River to drink water near Changbai, Jilin Province, on Sept. 21. When the men and the cow moved toward the line demarcating the Chinese border with Yanggang Province, North Korean border guards started to approach them.

Given that the North Korean border patrol had shot and killed a Chinese smuggler in May, the two men were reportedly “tense” because they feared they may be harmed by the border guards.

Despite their fears, the North Korean border guards just threw rocks at the two men while yelling at them to return to Chinese territory; the men took their cow and left the area without incident.

(Full article and source: Jang Seul Gi, “N. Korea and China recently signed agreement aimed at easing border tensions,” Daily NK, September 25th, 2020.)

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What explains North Korea’s puzzling price stability?

Friday, July 17th, 2020

By Benjamin Katzeff Silberstein

Looking at the latest market price data from North Korea, things do not look like external conditions dictate that they should. Food prices are…low. Very low. In fact, for the July 1st price report, the average rice price for the three North Korean cities was the lowest on record since April 2019. Gasoline prices haven’t been this low since June of 2018. (Click for larger graphs.)

Average rice prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

Average gas prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

 

By themselves, these prices are not so surprising. Prices generally fluctuate with seasonal variation, in North Korea as everywhere else. Both gas and rice prices tend to drop around this time of year, at least over the past few years.

But there is nothing normal about 2020. In addition to harsh sanctions, Covid-19 has made almost everything more difficult to acquire from abroad, from fertilizer and food, to machine parts for industry. So these lower prices are puzzling, in a way because they would seem to indicate stability and normalcy at a time when there is nothing stabile and normal about the situation.

There are (at least) two possible explanations:

One is that North Korea’s external conditions are indeed steadily improving, and returning to some sort of normalcy. Strong signs suggest that trade between North Korea and China is picking back up, as relations deteriorate between the US and China and the North Korean issue becomes less and less central on the global stage. As Daily NK has reported, North Korea has been importing items such as construction materials and food from China, both in June and July. Gas prices, moreover, may partially be untouched by Covid-19 because much of the trade goes through a pipeline near Dandong.

Another possibility is that prices are going down because people simply cannot afford higher prices. This report on train ticket prices is perhaps instructive. In the words of one source inside North Korea: “Despite the fall in the number of train passengers, [black market vendors] seem to believe that raising prices would [make it harder to sell tickets],” the source said. “In other words, you could say that a ‘market price’ [for tickets] has appeared that train riders are willing to accept.” In other words, if consumers on a given market have a reservation prices – the highest price they’re willing to pay – underneath what sellers would really charge given the supply at hand, sellers can either cut down on their profit or minimize their losses by selling at a lower prices than those dictated by economic conditions.

As always, information is in short supply, and these market prices raise more questions than they answer.

Update, 23/7/2020:

Part of what’s so puzzling about all this is that reports keep suggesting that the regime is cracking down continuously and with growing vigor against cross-border smuggling and the like. According to this report by Daily NK, Pyongyang recently ordered provincial authorities to intensify their border monitoring.

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North Korea gearing up for hard times

Friday, July 10th, 2020

By: Benjamin Katzeff Silberstein

An editorial in today’s Rodong Sinmun emphasizes that fighting the “global pandemic” is more important than economic construction. For Korean-speaking readers, the message comes near the end of the editorial on Friday July 10th, and reads:

그것은 인민들의 생명과 건강을 보호하고 증진시키는것을 최급선무로, 가장 영예로운 혁명사업으로 간주하고있기때문이다.그 어떤 경제건설성과보다 대류행전염병의 침습을 막는것을 더 중요하게 여기고 이 사업에 최선을 기울여야 한다는것이 우리 당의 요구이다.

(Source: 김병진, “인민의 생명안전을 굳건히 지키는것은 우리 당의 제일중대사,” Rodong Sinmun, July 10th, 2020.)

This is not a new message, and it’s been re-stated in various forms in North Korean state media over the past few months. As I write in this article at 38 North, the recent emphasis on the chemical industry carries the same message: don’t expect any major changes in the external economic environment anytime soon, whether it be in conditions relating to sanctions or Covid-19.

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More anti-smuggling measures by the North Korean government

Wednesday, July 1st, 2020

By Benjamin Katzeff Silberstein 

The North Korean government is reportedly clamping down even further on smuggling across the Chinese border. As Daily NK notes, it’s a measure partially directed against corruption, which will most likely just increase bribery amounts. It’s also part of a broader state drive to assert its power over economic activity. Daily NK:

North Korean authorities recently ordered that ships travelling near the Sino-North Korean border must have a security official on board as part of efforts to crack down on smuggling, Daily NK has learned.

“The order concerns ships travelling along the Yalu River and states that they must have a Ministry of State Security [MSS] agent on board,” a source in China told Daily NK on June 25. “The order applies to all ships, regardless of whether they are container ships or fishing boats, and irrespective of their affiliation or purpose.”

Earlier this month, the MSS announced that anyone caught engaging in criminal activity near the border, including smuggling and attempting to defect, will be subject to strong punishments rather than rehabilitative measures, such as time at a forced labor camp.

The announcement of several measures pertaining to illegal activity near the border in the space of a month demonstrates how sensitive North Korean authorities are to smuggling and information leaks in the area.

BREAKING CORRUPTION

The order is also aimed at preventing corruption between local security officials and smugglers, according to the source.

Since it is common for smugglers to bribe local security officials, the MSS will reportedly send agents from the central government rather than local officers to work on the ships.

Smugglers say that the new order will only lead to more expensive bribes.

“You can earn up to RMB 10,000 [around USD 1,412] a day taking goods across the Yalu River,” the source said. “Because there’s so much money to be made, the measures won’t stop the smuggling. Smugglers will just have to pay higher bribes to the security officials.”

(Source: Jang Seul Gi, “N. Korea focuses on ending ship-based smuggling on border,” Daily NK, June 29, 2020.)

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The North Korean economy is doing badly, but keep some perspective

Tuesday, June 23rd, 2020

By: Benjamin Katzeff Silberstein

Sanctions and Covid-19 have fused together to put the North Korean economy in what can only reasonably be described as an awful situation. Trade first plummeted through sanctions, and then even further because of North Korea’s and China’s anti-Covid19 measures. And the fall continues, as these figures in Hankyoreh show:

Figures from the Korea International Trade Association (KITA) and Chinese customs authorities reviewed on June 18 show a major drop in the value of North Korean goods being exported to the Chinese market: US$10.7 million in January and February (-71.7% year on year), US$600,000 in March (-96.2%), and US$2.2 million in April (-90%). The value of North Korean exports to China, which stood at US$2.63 billion in 2016, has fallen since economic sanctions were toughened, decreasing to US$1.65 billion (-37.3%) in 2017 and US$195 million in 2018 (-88.2%). Exports rebounded in 2019, to US$285 million, but that was still less than a tenth of the value of exports in 2016.

But how bad are things?

Bloomberg ran an article yesterday with the angle that the North Korean economy is the “worst” in two decades, and that this is why the country is lashing out against South Korea with renewed vigor. To support the former claim, it cites figures claiming that the country’s economy will contract by a total of 6 percent this year due to the combination of sanctions and Covid-19.

But how reasonable is this take?

There is no doubting that things are bad, but some context is badly needed. One of course cannot equate an economic contraction with the overall situation. (Never mind that any number on this will be qualified guesswork at best.) A contraction is only the economy shrinking, and it means nothing if we don’t know what the starting point is. In 1997, North Korea was perhaps at the height of a devastating famine, after the economy crumbled following the collapse of the Soviet Union, and China vastly scaling back support.

Today, North Korea may be in an economic crisis of sorts. But it entered it on the back of several years of steadily increasing exports to China. These exports, in fact, grew by more than a factor of ten between 1998 and the record year of 2013. So the situation is so different that a comparison is hardly meaningful.

This is also true for the food situation. According to numbers from the World Food Program and the Food and Agriculture Organization, whose data is questionable but highly valuable, food production stood at 3.3 million tonnes in 2008, not an unusually low figure for the time. Contrast this with the projection that this year’s harvest will be 4.6 million tonnes. Not great, lower than it should be, lower than a few years ago, yes. But still not nearly the level of the disaster years.

Also, it is crucial to remember that even in ordinary times, a not insignificant proportion of trade with China occurs off the books. Throw an increasingly lower Chinese sense of caring what the US thinks about its sanctions implementation into the mix and you’ve got, well, likely a lot more trade happening under the radar. This is what news reports from inside North Korea have been saying for quite a while.

Not that things aren’t bad, or that North Korea’s recent actions have to do with sanctions (they almost certainly do). But don’t forget about context or proportions.

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Update on North Korea and Covid19: June 7th, 2020

Sunday, June 7th, 2020

By: Benjamin Katzeff Silberstein

A little over a week ago, I wrote an essay for Foreign Policy Research Institute about Covid-19 in North Korea. The long-term challenge of Covid-19, combined with sanctions, of course poses a major economic challenge for North Korea. However, as I attempt to lay out, there’s another issue. Much of Kim Jong-un’s legitimacy and policy focus has been tied up with economic construction and raising the people’s living standard. That looks like an increasingly distant prospect. With “just” sanctions, trade could have resumed and even expanded depending on the political moods in Beijing, and to a lesser extent, Moscow. Now with Covid-19, considerations are totally different:

Over the past few months, however, the tone of state rhetoric has changed. While before it breathed optimism, North Korean state propaganda now speaks much more—and more realistically—about problems and obstacles to economic development and about the old themes of autarky and economic self-reliance. For the time being, any plans to lift North Korea to a higher plane of economic development have largely been put on hold.

What does this mean politically for Kim Jong-un, who staked much of his credibility on delivering economic progress? The truth is that no one really knows. On the one hand, North Korea is perhaps the harshest dictatorship in the world, and the regime crushes even the slightest hint of dissent with an uncompromising iron fist. Over 100,000 people are estimated to be imprisoned in labor camps, many for crimes of political nature (or “speaking mistakes” as the Korean term goes), some for life. Kim Jong-un was in fact absent not just for one period of several weeks—the initial one that drew so much international attention—but for two different periods, and only appeared in North Korean media four times in all of April and May. Kim may be recovering from a medical procedure, but his absence may also be caused by caution against COVID-19. He may simply not want to conduct public visits or meeting sessions due to the risk of infection. In a system where so much power is centered around one single leader, his health is a top priority for national security in the eyes of the state, and will always be strongly guarded.

On the other hand, no dictatorship can truly function sustainably without any sense of at least tacit support from part of the population, such as the privileged, political core class. Kim has catered to this class in North Korea by overseeing their access to an essentially Western upper-middle class lifestyle in many respects, such as luxury department stores and a water park. The provinces have seen little of this development, and the massive and growing cleavage between the capital city and everywhere else is another long-term problem for the regime. Even so, life in the countryside has improved overall, albeit more marginally, thanks to the growth of the market system.

What happens when, over the course of a longer period of time, things not only cease to improve, but become markedly more difficult? The general public may heed the state’s call to get ready for some difficult times ahead for a while, but in the longer run, it may lead to widespread discontent. What that will mean for the North Korean regime, which has already survived challenges that seemed impossible, only time will tell.

(Full article here.)

In North Korea, it seems the regime is letting up on some of the strongest restrictions. For example, it will – and this says a great deal about the country’s complex economic system, where boundaries between illegal and legal trade are often unclear – “permit” smuggling to a greater extent:

North Korean authorities have decided to permit smuggling activities across some portions of the Sino-North Korean border from mid-June on the condition that smugglers pay foreign currency to purchase trade permits, Daily NK has learned.

According to a Daily NK source in North Korea on May 29, North Korea decided to allow traders in Sinuiju, Ryongchon, Uiju and Nampo Special City to conduct their activities from June 15. Traders who fall within the purview of the new measure include those working for trade companies affiliated with the military, Cabinet and other government agencies along with individual smugglers registered with companies.

WAKU BACK TO YOU

Traders must fulfill two conditions to restart their activities: 1) pay for their trade license (waku) in foreign currency; and, 2) in addition to their own imports, import items designated by the state and donate half of these imports to the government.

Even companies or individuals that already possess a waku must buy new permits with foreign currency because the permitted import lists on their trade permits must be changed to accommodate the import needs of the state.

North Korean authorities have reportedly ordered smugglers to include rice, flour, oil (cooking oil), sugar, MSG and other foods on their list of imports. Even traders who previously specialized in electric appliances or clothes must now include food items in their imports to be allowed to begin trading again.

The inclusion of these food items is likely the result of a measure handed down by the country’s Central Committee and Cabinet on Apr. 17 that restricted all “unnecessary” imports until the end of the year.

Following the announcement of the import restrictions, the prices of MSG, soybean oil and flour skyrocketed; there now appears to be great discontent among North Koreans about the scarcity of certain food products and the generally higher prices of food items. Daily NK’s source said that the addition of these food items to import lists is a direct result of this discontent.

North Korean officials have also announced that smugglers who hand over 70% of the food products – more than just the minimum of 50% – they import to the state will be given so-called “patriotic donation certificates.”

All in the all, the latest measure to open up smuggling across the border is aimed at both acquiring foreign currency (through the sale of trade permits) and stabilizing market prices by importing food items in demand.

UNEQUAL FOOTING

The decision to open up smuggling in certain areas is likely due to difficulties in controlling smuggling activities in places like Ryanggang Province and North Hamgyong Province.

Smugglers in those regions are reportedly faced with the significant burden of having to move their operations to North Pyongan Province or Nampo.

Moreover, they have to submit a “letter of intent” to a North Korean agency saying they will be importing items from a particular Chinese trader and the existence of these traders in China must be confirmed by the North Korean embassy in China. These traders also have to compete with traders already based in North Pyongan Province and develop trading routes from scratch.

Ryanggang Province-based traders have mixed opinions on the move to open up smuggling across the border. Some believe that they need to take the opportunity to start trade again, while others think they should wait until the authorities officially permit smuggling across the border in the province.

(Source: Jang Seul Gi, “N. Korea to permit smuggling over parts of Sino-NK border,” Daily NK, 1/6/2020.)

Meanwhile, schools are now open, with video clips to show it:

Schools in North Korea were supposed to start new semesters in early April, but the vacation period was extended repeatedly due to the coronavirus pandemic, though some colleges and high schools were allowed to open in mid-April.

In the footage, students were seen wearing masks, as were parents and teachers. Masks stayed on inside classrooms.

The resumption of schools might suggest concerns over the coronavirus have recently eased in North Korea or it could be aimed at projecting Pyongyang’s the country’s ability to contain the virus.

(Source: “N. Korean schools reopen during pandemic,” Yonhap, 3/6/2020.)

Meanwhile, news continue to come out of the country about deaths from symptoms similar to Covid-19, though of course, everything remains unconfirmed:

Dozens of people in two South Pyongan Province hospitals recently died after suffering symptoms similar to those caused by COVID-19 infections, Daily NK has learned.“The dozens of people who died recently were all patients at a facility caring for tuberculosis patients and the hepatitis care center at the Pyongsong City Hospital,” a source in South Pyongan Province told Daily NK on June 4.

The Pyongsong City Tuberculosis Care Center and the Hepatitis Care Center at the Pyongsong City Hospital are both focused on treating patients with infectious diseases. Patients in these facilities are typically discharged only after receiving permission from their doctors.

The patients who died were all being hospitalized for preexisting conditions, but expired while receiving intensive care after they began showing signs of COVID-19 infections.

Both hospitals quickly blamed tuberculosis or hepatitis for the deaths and hospital workers were ordered to stay silent about the dead patients, the source said.

The sudden spike in deaths led some patients in the hospitals to run away from the facilities out of fear of COVID-19.

“Groups of patients left the hospitals out of fear that they could die if they stayed there any longer,” the source told Daily NK, adding, “Local authorities along with hospital managers were alarmed by this.”

Local and hospital authorities were reportedly concerned that the runaway patients might infect broader society with their diseases.

Local rumors about the runaway patients reportedly focused on the reaction of the authorities, which suggested that officials are still concerned about COVID-19.

Late last month, public health authorities in South Pyongan Province reportedly conducted a province-wide survey of people who showed symptoms similar to those caused by COVID-19 infections.

According to the source, the survey found that there are around 1,500 people quarantined either at home or at medical facilities in the province after complaining of high fevers, coughing, difficulty breathing, and other symptoms. Most of them are self-quarantining at home, while only a few with severe symptoms are in medical facilities.

(Source: Jang Seul Gi, “Source: Dozens recently died at two Pyongsong hospitals,” Daily NK, 5/6/2020.)

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The wild fluctuations of North Korean exchange rates

Wednesday, May 20th, 2020

By: Benjamin Katzeff Silberstein

New market prices for North Korea came out recently, and lots is happening. Rice prices are down significantly, but compared to last year, the levels so far are quite normal. We should expect them to rise as the country goes further into the lean season between May and September (roughly). Foreign exchange rates, perhaps most interestingly, are fluctuating quite significantly, and the dollar especially so. The USD took a dive late last month, but it’s been fluctuating quite significantly before that as well, which would be more visible if not for the recent dive in the graph:

KPW-USD rates in three North Korean cities. Data source: Daily NK.

It seems that uncertainty itself is one of the main reasons. One in-country source told Daily NK:

“Even ordinary sellers who have long conducted relatively stable transactions in foreign currency are now afraid of losses because of dramatic fluctuations in the exchange rate,” the source told Daily NK. “Recently, the changes have been so frenzied that it’s not exaggerating to say that the prices in the afternoon will be different from the prices in the morning.”

“Wholesalers at the Pyongsong Market whose main patrons are other wholesalers throughout the country are complaining about the impact of the fluctuations in the exchange rate,” continued the source. “There are such major changes in the exchange rate between when wholesalers receive goods and then pass them along to retailers that uncertainty prevails.”

Citing exchange rate fluctuations of around KPW 1,000 in the past, some people reportedly do not believe that the fluctuations are a big deal. Yet, “most people think that we can’t sit idly by because the prices of imported goods are [also] increasing,” the source said.

“The damage done to businesses due to the exchange rate [fluctuations] and the increase in commodity prices are making things difficult for those who deal with transactions in foreign currency,” he added.

(Source: Kang Mi Jin, “Fluctuating exchange rates cause headaches for N. Korea’s business people,” Daily NK, 19/7/2020.)

It’s not just the government’s Covid19-measures themselves, such as the border closure, that impact the exchange rate. As noted on this website yesterday, the state is taking coercive actions of various forms to bring in funds, such as reportedly banning the use of foreign currency for domestic transactions in the hope that people will see no choice but to exchange their foreign money for domestic, bringing in much needed foreign exchange to the state.

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“New” bridge between China and North Korea getting a little closer to completion. But what does it really mean?

Tuesday, May 12th, 2020

By: Benjamin Katzeff Silberstein

Another day, some more progress on the so-called “bridge to nowhere”. It’s now been around six years since construction started on the new bridge between North Korea and China, crossing the Yalu river. The currently operational one between Dandong and Sinuiju already (in normal times) operates over capacity, and frequently needs repairs. Last year, in June, Xi Jinping supposedly promised Kim Jong-un funding to finally complete the bridge and to connect it to North Korea’s road networks to make it operational. Recently, work has finally taken off again on the North Korean side to do just that. Dong-a Ilbo:

North Korea resumed the construction of a road on last Sunday, according to multiple sources and photos posted on a Chinese social media platform.

With the help of China’s investment, the six-lane bridge was completed in 2014 as a replacement of the Sino–North Korean Friendship Bridge, an old and narrow bridge built in 1943. The New Yalu River Bridge was expected to boost trade between the two nations.

(Source: Wan-Jun Yun, “New Yalu River Bridge gears up to open six years after its construction,” Dong-a Ilbo, May 4th, 2020.)

The Dong-a headline appears somewhat premature, however, since customs buildings and other essential infrastructure still isn’t built. As Daily NK reports:

The opening of the bridge has long been delayed because North Korea had demanded that China pay for the construction of the North Korean road to the bridge.

While Daily NK has been unable to confirm whether any agreement on the payment issue has been reached, the efforts to complete the road suggest that the two countries have reached some sort of agreement.

There may, however, be obstacles in the way of the bridge opening any time soon.

“Customs-related buildings need to be built even if the road is finished,” the source said.

“The closure of the Sino-North Korean border due to COVID-19 and international sanctions on North Korea make it difficult to know when the bridge will open,” he added.

North Korean authorities are also highly sensitive to the threat of the COVID-19 pandemic despite their moves to restart the road construction.

“Sinuiju residents were practically confined to their homes when COVID-19 posed a clear threat to the city, but the authorities have restarted construction – perhaps because the threat has gone away,” the source said.

“That doesn’t mean, however, that Chinese engineers and materials are entering the country [in quantities] like before,” he added.

A Chinese company had been managing the construction of the North Korean road to the bridge before work was halted. Now the North Koreans have completely taken over the construction process – none of the Chinese workers and their equipment are present at the construction site anymore, the source explained.

The lack of Chinese labor and equipment may be due to the North Korean government’s fears over COVID-19, but the country’s efforts to finish the road suggest that North Korean leaders are keen to use the bridge when Sino-North Korean trade begins again.

(Source: Mun Dong Hui, “N. Korean road connected to New Yalu River Bridge nears completion,” Daily NK, May 11th, 2020.)

There are two quite different ways of looking at these developments. I’d argue the bridge is, despite how things may seem, not a very good metric for the prospects of trade between China and North Korea. Surely, China would not likely invest in a new bridge unless it envisioned growing economic activity along the border. There are good reasons to believe that this is indeed the case, and that these border regions in particular regard North Korea as a driver for local growth and advantage. At the same time, planned economies such as China often make investment decisions for reasons unrelated to actual economic prospects. Perhaps infrastructure like this is also intended to boost the region itself, or at least, make it look like that is what the central government is doing. Moreover, it is also possible that China and North Korea merely envision replacing the current bridge over time. Last but not least, it may well be a political gesture of good faith and friendship to North Korea. Or, most likely, a mix of all of the above.

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