North Korean Economy Watch

UPDATE (2012-7-1): Barbara Demick, author of Nothing to Envy, follows up on the story of North Korean workers in China. She writes in the Los Angeles Times:

The deal, which has not been publicly announced by either Beijing or Pyongyang, would allow about 40,000 [not the 20,000 initially reported below] seamstresses, technicians, mechanics, construction workers and miners to work in China on industrial training visas, businesspeople and Korea analysts say. Most of the workers’ earnings will go directly to the communist North Korean regime.

…

The first North Korean workers under China’s new program arrived a few months ago in Tumen, a sleepy town hugging the North Korean border.

“They are already here,” said a Tumen-based businessman, who asked not to be quoted by name. He said he knew of 140 North Koreans who were working in an underwear factory in town.

Other workers were reported to be arriving in Dandong, a larger border city on the Yalu River, famed as the crossing point for Chinese Communist troops during the Korean War, and in Hunchun, a border town on a new road leading to the North Korean shipping port of Rason, where China is also developing port facilities.

Under the new arrangement, each North Korean worker should bring Pyongyang cash remittances of about $2,000 per year. Out of salaries of $200 to $300 per month, workers are likely to keep less than $50. Nevertheless, the jobs are considered a privilege because wages at home are well under $10 per month and food is scarce for many families, experts say.

ORIGINAL POST (2012-5-28): According to China Daily:

China is issuing 20,000 working visas to people from the Democratic People’s Republic of Korea (DPRK) to attract working labor to the northeast of the country, the website of Seoul’s Chosun Ilbo newspaper reported on Monday.

“To ease a manpower shortage in the three provinces in Northeast China, the (Chinese) authorities have decided to introduce 20,000 people from North Korea in the form of industrial trainees,” a diplomatic source based in Seoul told the newspaper.

According to the report, a company in Tumen, in the Yanbian Korean autonomous prefecture in Jilin province, has employed 29 women from the DPRK this month, for the first time. A further 160 DPRK women have been dispatched to the region.

Media in Northeast China also carried advertisements for DPRK labor, it said.

The newspaper said DPRK citizens can work in sectors including manufacturing and services after getting working visas, It said the monthly salary was above $150.

The average monthly pay of DPRK workers at the Kaesong Industrial Park, a collaborative economic development by the DPRK and the Republic of Korea, is $110.

China is issuing the visas to help the DPRK, while Pyongyang is actively pushing forward the move to help the country accumulate foreign exchange, said the report.

The Chinese government has yet to confirm the report.

Click here to read about the DPRK’s selection process for overseas workers.

Read the full story here:
China issues 20,000 work visas to DPRK
China Daily
Li Xiaokun
2012-5-28

UPDATE: The PRC’s China Daily has published a timeline and related information on the “Hikacked” fishing vessel.

ORIGINAL POST (2012-5-25): Leonid Petrov writes in the Asia Times:

China often describes its relations with North Korea, its closest regional ally, as intimate but not substantial. For more than half a century, Beijing’s attitude towards the Korean Peninsula has revolved around the avoidance of three scenarios: “No new war on the Korean Peninsula”; “No regime change in North Korea” and “No American troops on the Sino-Korean border”.

But can the developments of recent weeks shake this strategic alliance tested by time, wars and revolutions?

Read the remainder of the article below…
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According to the BBC:

China has launched a drive against illegal immigration in a north-eastern region bordering North Korea.

The campaign in the Yanbian Korean Autonomous Prefecture in Jilin province mainly focuses on North Koreans fleeing poverty and persecution at home.

China is known to routinely repatriate North Koreans who often slip across the border undetected.

Human rights groups say many face punishment when they return.

“Foreigners who illegally enter, work and overstay are hidden troubles, and they might pose potential threats to social stability,” Li Yongxue, a police official from Yanbian, was quoted by state-run China Daily newspaper as saying.

The police say they want to stamp out criminal activities to maintain order. They add that those without proper documents will be sent back.

Many of these illegal immigrants have relatives in China, some come to work, while others use China as a staging post before moving to other countries, according to the BBC’s Michael Bristow.

A police officer from the province told the BBC that it was a sensitive year in China, with officials stressing the need for stability ahead of a leadership change this year.

Read the full story here:
China targets illegal immigration at North Korea border
BBC
2012-5-25

According to the Hankyoreh:

South Korean businesses have suffered losses of up to ten trillion won (US$8.3 billion) from the cutbacks in inter-Korean economic cooperation under the Lee Myung-bak administration, figures show.

The losses taken by South Korean firms are fives times the 1.8 trillion won (US$1.7 billion) North Korea’s estimated losses. The results show an unintended effect of Seoul’s May 24 sanctions, which were meant to punish North Korea economically for the shooting death of a tourist at the Mt. Kumkang resort, the sinking of the Cheonan warship, and the shelling of Yeonpyeong Island. North Korea has offset these losses with increased cooperation with China.

Read more below…

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The Joongang Ilbo reports some recent statistics from, the Kaesong Industrial Zone and some trade statistics between the two Koreas and China.

Inter-Korean and China trade (Joongang Ilbo):

Exactly two years ago, on May 24, 2010, in the aftermath of the deadly sinking of the Cheonan warship, the Lee Myung-bak administration imposed sanctions against North Korea that forbade all inter-Korean trade and South Korean investments in the North.

[…]

Statistics from the Korea International Trade Association show that the volume of inter-Korea trade in 2011 dropped by 10.4 percent, falling to about $1.7 billion from $1.9 billion in 2010. The Kaesong Industrial Complex, which was exempted from the sanctions, accounted for most of the inter-Korean trade.

In contrast, the volume of trade between North Korea and China surged by 62.4 percent in 2011, from $3.4 billion in 2010 to $5.6 billion.

“After stopping trade with South Korea, factories in Pyongyang and Nampo cities turned to Chinese companies and now work for them,” a South Korean businessman said on condition of anonymity. “It took so much time and money for us to teach North Korean employees and now Chinese companies enjoy the fruits of our labor.”

The North Korean government responded to the South Korean sanctions:

As talks between the two authorities have been halted, North Korea has unilaterally decided to raise taxes on income and management of the complex.

In fact, the North Korean regime earns significant money from the complex. South Korean firms pay the North Korean government an average of $126.4 per month for each North Korean worker. The government then distributes 5,000 won of North Korean currency and some food coupons to each employee per month. This wage is desirable compared to other worker payments in the North.

Analysts calculate that the regime is holding at least $50 million from the $77.8 million of the North Korean employees’ annual income.

At current black market rates, there are appx 4,450 DPRK won to for US$1.

The article notes, however, that the Kaesong Industrial Zone continues to grow:

Located only three kilometers away from the Military Demarcation Line, the inter-Korean complex has 123 South Korean companies and about 51,000 North Korean employees.

…

Currently, the South Korean government is implementing a scheme to build more roads and infrastructure for South Koreans crossing the border to commute to the complex (see here and here).

“Although Kim Yong-chol, former head of the policy planning office of the North’s powerful National Defense Commission, who has exerted a huge influence on operating the Kaesong complex, repeatedly threatened to shut down the complex since the May 24 sanctions, he’s recently been more cooperative, saying ‘Let’s make it better,’” a high-ranking government source told the JoongAng Ilbo.

Unlike the frosty inter-Korean relations, the sales performance of the joint industrial complex is positive. For the past three years, 55 South Korean firms additionally moved into the complex and the annual output value surpassed $400 million in 2011, jumping from $180 million in 2007.

Last year’s volume is 30 times that of the $14.91 million in 2005, when the complex made its first yearly outputs. The total output value since 2005 has accumulated to $1.5 billion.

[…]

Currently, roughly 160,000 people are living in Kaesong city and approximately one out of three are working in the complex

The article also reports on additional DPRK-China projects that are not necessarily a result of higher barriers to commerce between the two Koreas (dredging, mining, labor mobility, and SEZs):

“A Chinese firm based in Yanji is now implementing a 60-kilometer-long (37-mile) dredging project in the Tumen river bed,” a government-affiliated research official said.

“It’s not simple dredging work, but a plan to mine the iron ore buried nearby.”

“In the river bed, about 30 percent of the sand contains iron ore,” the official said.

The regime also exports their labor forces to their closest ally.

“Most of the local people left for South Korea to get a decent job and the average wage for a Chinese worker is increasing,” a Chinese factory manager in Yanji said. “So we are planning to hire North Korean workers instead.”

Pyongyang and Beijing are also focusing on developing the two special economic zones, Rason and Hwanggumpyong in northeastern North Korea.

When Chen Deming, the Minister of the Chinese Ministry of Commerce of China, and South Korean Trade Minister Park Tae-ho had a bilateral meeting on May 2 to start negotiations on the Korea-China free trade deal, they included a provision stating the two countries will allow preferential tariffs on goods produced in designated zones.

“Hwanggumpyong is like a Kaesong Industrial Complex to China,” a South Korean authority said. “The Hwanggumpyong zone has the same function as Kaesong, composed of China’s capital and technology and North Korea’s land and labor forces.”

In the Rason Economic Zone, China has finished construction paving the 53-kilometer-long road connecting the Rason zone and a local tax office in Wonjong-ri, a North Korean village close to China.

The Chinese government also arranged a harbor near the Rason area, constructing a pier that can accept a three million-ton ship and building a bus route between an express bus terminal in China and the zone.

“If China uses the Rason harbor, they can save $10 per metric ton,” Jo Bong-hyeon, a senior official at the Industrial Bank of Korea, said. “It’s really good business for China, enough to invest money on building infrastructure in the zone.”

Read the full story here:
Kaesong complex running well despite sanctions
JoongAng Ilbo
2012-05-23

By Michael Rank

The Chinese embassy in Pyongyang has posted photos of the latest batch of Chinese students who have come to study in North Korea. There are sixty students in total, but the report gives no details of what they are studying or at which universities.

They are casually and colourfully dressed, as if on an American campus in fact, for the group photos which were taken at Sunan Airport and at the Chinese embassy when they attended a briefing by the consular section on “current conditions in Korea, consular protection and assistance and life as a student in Korea”.

The students pledged to “study hard, take advantage of good conditions for [learning] the language, make the most of their studies abroad to obtain the best results and to contribute their utmost for Sino-Korean friendship and cooperation,” according to a caption.

The students arrived in Pyongyang on May 4 and attended the embassy reception on May 6. The website says these students are state-sponsored, implying that there may also be Chinese students in North Korea who pay their own way or are sent by local authorities.

Little is known about Chinese students in North Korea, but earlier this year Sino-NK posted a translation of a fascinating article with some surprisingly frank quotes from an earlier group of Chinese students in the DPRK.

At least one former Chinese student in Pyongyang has risen high in the Communist hierarchy. Zhang Dejiang, 65, a vice premier who oversees industrial and energy policy, in March replaced the disgraced Bo Xilai as Party chief in the southwestern city of Chongqing after the biggest scandal in China in living memory involving the death of a British businessman and alleged large-scale corruption.

From 1978 to 1980 Zhang studied economics at Kim Il Sung University, where he was secretary of the Communist Party branch committee of Chinese students studying there.

According to Yonhap:

First quarter bilateral trade between North Korea and China reached an all-time high of US$1.37 billion, Voice of America reported Tuesday, citing data from China’s Ministry of Commerce.

The volume for the January-March period marked a surge of 40 percent from a year ago, when a record $972 million was reported in the two-way trade.

North Korea’s first-quarter exports to China rose 40 percent to $568 million, while its imports of Chinese goods also increased at the same rate to $800 million, according to the data.

As a result, Pyongyang’s quarterly trade deficit with China increased to $232 million, up from $170 million a year ago.

Read the full story here:
N. Korea-China trade hits record high in first quarter
Yonhap
2012-5-1

UPDATE 1 (2012-4-25): Better late than never!  The statue of Kim Jong-suk has finally been unveiled. According to KCNA:

A hall where stands a wax replica of anti-Japanese war hero Kim Jong Suk was opened at the International Friendship Exhibition House of the DPRK.

Standing in the hall is a wax replica depicting woman commander of anti-Japanese guerillas Kim Jong Suk in uniform of the anti-Japanese guerrilla army on the table land full of azaleas in full bloom against the background of Mt. Paektu.

The gifts she received from personages and people of various countries are on display there.

An opening ceremony took place on Tuesday.

Present there were Kim Ki Nam and Choe Thae Bok, members of the Political Bureau and secretaries of the Central Committee of the Workers’ Party of Korea, and others.

Present there on invitation were staff members of the Chinese embassy here and the chief of the hall of wax replicas of great persons in China and his party.

Choe Thae Bok expressed deep thanks to personages of the Chinese hall for representing the wax replica of Kim Jong Suk.

He said the noble life of Kim Jong Suk was the most brilliant one of an outstanding woman revolutionary.

Zhang Molei, chief of the hall, in his speech bitterly grieved over the demise of leader Kim Jong Il, saying it was their wish to successfully represent the wax replica of Kim Jong Suk so they could please leader Kim Jong Il.

Expressing the will to do more things to contribute to the building of thriving socialist nation in the DPRK, he expressed belief that the Korean people would overcome difficulties and win great victory under the leadership of the dear respected Kim Jong Un.

The participants paid tribute to Kim Jong Suk and looked round the gifts on display.

You can see video of the unveiling here (KCNA, YouTube).

ORIGINAL POST (20120-10-19): According to the Korea Times:

China plans to send North Korea a life-size statue of Kim Jong-il’s biological mother as a gift, a local newspaper said, citing a North Korean document.

The waxwork statue of Kim Jong-sook, reportedly proposed by Kim Jong-il and accepted by China, will be shipped to the North in early December, Dong-a Ilbo said Saturday.

This year marks the 70th anniversary of the marriage between Kim Il-sung, the founder of North Korea, and Kim Jong-sook.

The project will be carried out by the China Waxwork Museum for Great Figures, which in the past also built famous Chinese individuals such as Mao Zedong and Jiang Zemin, the report said.

The North Korean Embassy in Beijing thanked the museum for carrying out the task which will “further enhance ties between the peoples of the two countries,” the report said, citing a North Korean embassy document dated July 15, which it obtained.

The newspaper didn’t say how it obtained the document.

Once completed, the statue will be sent to North Korea by a 10-member Chinese delegation and will be placed next to the wax statue of Kim Il-sung, which was also donated by China in 1996, it said.

Read the full story here:
China to donate statue of Kim Jong-il’s mother
Korea Times
10/16/2010

Andrei Lankov writes in The Asian:

However, the decades-long experience of dealing with North Korea leaves little doubt: international sanctions do not work. When the sanctions were first introduced after the October 2006 nuclear test and tightened after the second 2009 nuclear test, many a hardliner believed that this was the way to press the North Korean government into a corner and make them consider denuclearization. In academic articles, newspaper pieces and blog entries, many a hawk was ready to interpret pretty much every piece of news that emanated from the North as a sign of ‘sanctioning beginning to bite’.

But what has happened to the North Korean economy over the past five to six years? Contrary to expectations, the era of sanctions has been, rather, a time of mild economic recovery and growth. The expectations of hardliners therefore have as yet, come to nothing.

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Pictured above: (L) The location of the new Haedonghwa Center under construction in Pyongyang (Google Earth), and (R) a representation of the building’s exterior

The Korea Pyongyang Haedanghwa Foodstuff Company (조선평양해당화식품회사는)  has launched a new web page  on the Naenara portal providing content in English, Korean, and Chinese.

This new web site hosts pages of information not just on the company, its subsidiaries, its employees, and its products, but also on Korean food, culture and health. Among the more interesting claims made on the page:

Our service workers come from normal families, and they are not ones grown in the special environment or conditions.

The web page also provides addresses and maps of the subsidiary restaurants and factories in China and the DPRK.

Using information from the web page I was able to locate the position of the Haedanghwa Center (pictured at the top of this post).  It is obviously still under construction.  The lot on which the center is being built has been empty for the last dozen years and lies directly across the Taedong River from the new construction on Mansudae Street.