North Korean Economy Watch

Daily NK
Min Cho Hee
5/11/2010

In a move sure to add weight to suspicions that North Korean industry is in the midst of a very serious funding crisis, a source has reported to The Daily NK that the Chinese partner has taken unprecedented power in a new mining joint venture in North Hamkyung Province.

The inside source reported on Sunday that when Saebyul Coal Mining Complex, a North Korean mining management organization, sealed a contract between Gogunwon Coal Mine, Ryongbuk Youth Coal Mine and a Chinese enterprise, it agreed to hand over an unheard of degree of discretion in affairs of personnel management, materials and working methods to the Chinese enterprise.

The source explained, “Now, the Chinese enterprise has authority over staffing, food distribution, wages and materials. Accordingly, it has reduced the administrative staff and drastically improved productivity.

According to the source, the Chinese are guaranteed operational independence free from the control and instruction of the Saebyul Party committee, and take 60% of net profits. If true, this is a new model of collaboration and cooperation in business between China and North Korea.

The source added, though, “The number of people in the Party committee has also been reduced, though it is unlikely to be got rid of completely due to the nature of the North Korean system.”

He said, “Since last year, North Korea has been trying to attract Chinese investment and three or four Chinese companies have been in negotiations over mine development in this way.”

The Chinese enterprise plans to convey the lignite produced in the mines to China, process it there and sell it domestically.

The source noted, “North Korean workers are delighted with this method of collaboration. They get guaranteed wages and food, and the working environment has also improved thanks to new, stronger mining timbers, so productivity has increase.”

In the cafeterias at the mines, they serve 900g of rice to everyone, and pork and eggs, which workers like. According to the source, “Workers want to take meals served in the cafeteria home for their family members. In this worker-friendly mood, Party cadres are unable to complain.”

Gogunwon Coal Mine and Ryongbuk Youth Coal Mine are both located in the “Gogunwon Workers” district of Saebyul, North Hamkyung Province. They both contain good quality coal seams, and are among the best coal mines in North Korea.

Another source from North Korea suggested on Monday that North Korea is losing a lot of control of the economy in its northern provinces, saying, “The purse strings in the border regions of our country have basically been handed over to China, and ‘our socialist pride’ is in the hands of China. Any factory where they produce even a small amount of goods has been invested in by the Chinese”

Andrei Lankov writes in the Korea Times:

So after months of rumors and a couple of false reports, Kim Jong-il finally departed for China. This time his visit produced a palpable irritation in Seoul. Suspicions about Pyongyang’s involvement in the Cheonan disaster are mounting, so some South Korean politicians saw China’s willingness to invite the North Korean leader as a sign of tacit support for Pyongyang’s policy. This led to an outpour of critical statements, which are certain to have no impact on China’s actions, of course.

To start with, China ― in spite of all rhetoric of “eternal friendship” ― is no admirer of Kim Jong-il’s regime and is frequently annoyed by the North Korean antics. China does not want Pyongyang to go nuclear, since nuclear proliferation threatens China’s own privileged position of a “legitimate” nuclear power. China also worries that North Korea’s nuclear program might trigger a nuclear arms race in East Asia, producing a nuclear Japan and perhaps, a nuclear Taiwan. Moreover, China rightly sees the North Korean economic system as irrational and wasteful.

Nonetheless, China supports North Korea. Throughout the past few years when South Korean and U.S. aid dried up, famine in North Korea was prevented, above all, by free or subsidized shipments of grain from China. China is the largest investor in and trading partner of North Korea. Why do Chinese continue to invest money into supporting the regime which they do not particularly like and do not see as their reliable ally?

From time to time some people in Washington and Seoul express their hope that China can be somehow persuaded to stop its support of the North or to use its supposed leverage to influence Pyongyang policy (like, say, pressing North Korea into denuclearization). After the second North Korean nuclear test in 2009, China chose to support the U.N. sanctions and there were statements that China finally was “in the same boat as the United States.” Alas, this is wishful thinking. China is not in the same boat, and will never be. There are good reasons why China supports the North, and these reasons are likely to remain valid for the foreseeable future.

Yes, China does not want a country in its neighborhood to acquire nuclear weapons. Neither it is happy about military provocations of any kind. However, there are two other concerns which are far more important for China to keep the region stable and to keep Korea divided.

Stability is a keyword for the Chinese policy. China concentrates on economic growth and needs a peaceful and predictable environment in order not to be distracted from this goal. Hence, any crisis in the vicinity of China is an anathema for the Chinese strategists and should be avoided at all cost.

Another, arguably less important, goal is to keep Korea divided. Taken into consideration the current balance of power, unification is likely to lead to absorption of the impoverished North by the rich South. For China it might mean the emergence of a stronger U.S. ally ― or, at least, another “unruly democracy” ― right on its border. China can survive such a turn of events, to be sure, but it would prefer to maintain North Korea as a strategic buffer zone.

Alas, in order to really influence North Korea’s behavior, one has to play hardball. Subtle measures will not work, since the North Korean government does not care that much about economy or even about survival of its own population. In order to have an impact, China would have to virtually close the border completely and stop all trade with the North. A senior South Korean diplomat described this problem in a private conversation by a good allegory: “China does not have leverage when it comes to dealing with the North. What China has is a hammer.”

But China must have a mighty good reason to wield this hammer since such extreme pressure can easily lead to a system collapse. This collapse will make the situation very volatile. Crowds of refugees, the nuclear weapons and material getting to the black market, numerous diplomatic complications ― those are not the problems China is eager to deal with. Finally, collapse is likely to produce a unified Korea which is not China’s most preferable outcome.

Therefore, China prefers to spend some resources keeping the North Korean regime afloat in order to maintain the status quo and prevent or, at least, postpone a major crisis. It also wants to minimize the risk of North Korea being involved in excessively dangerous actions, but this goal is of secondary importance.

At all probability, this time we will see another repetition of the old game. Chinese will insist that North Korea should come back to the six-party talks (Beijing’s pet project), and also should restrain itself. Kim Jong-il will claim his sovereign rights to run his state as he pleases while inquiring how much aid he is going to get for some minor concessions. The Cheonan affair is unlikely to be discussed at all ― even if Chinese bring up the question, the North will deny responsibility, claiming that all accusations are results of the “smear campaign waged by the South Korean warmongers.”

And what will be the net result? Perhaps, we can see the contours of a likely deal: North Korea will promise to go back to the six-party talks while China will reward Pyongyang for this by aid and subsidized trade. So, China will be satisfied with maintaining both its international prestige and stability in its neighborhood while the long-delayed six-party talks will finally restart, to continue for a while, until the next crisis. Will the talks ever produce their intended result ― the “complete and verifiable elimination of North Korea’s nuclear weapons programs?” Of course, not. But has that not been clear for years?

Read the full story here:
Why does China continue to support North Korea?
Korea Times
5/6/2010

Here are some articles about it:

North Korea’s Kim Jong Il arrives in China, amid internal, external tensions
Washington Post
Lauren Keane
5/4/2010

Kim Jong-il Arrives in China
New York Times
Choe Sang-hun
5/3/2010

North Korean leader in China seeking cash, clout
Los Angeles Times
Barbara Demick and John M. Glionna
5/3/2010

North Korea’s Kim seeks lifeline in China
Reuters
Royston Chan
5/3/2010

Kim Jong-il Stops Off in Chinese Boomtown
Choson Ilbo
5/5/2010

Who Is with Kim Jong-il on His China Trip?
Choson Ilbo
5/4/2010

North Korea’s Kim ‘visits China’
BBC
5/3/2010

Here are some photos of his train.

According to the Daily NK:

The chairman of North Korea’s State Development Bank, Jeon Il Chun visited China on April 8, reportedly to try and bring Chinese investment to Daebong Mine, located near Hyesan, Yangkang Province.

Daebong Mine is one of North Korea’s major gold mines, managed under the auspices of the No. 39 Department of the Central Committee, a special department charged with raising funds for Kim Jong Il’s personal use. Jeon Il Chun is the person in charge of the No. 39 Department.

Attempts to sell shares in a gold mine directly controlled by the 39 Department, Kim Jong Il’s own private safe, to China seem to indirectly imply that Kim is suffering from a debilitating foreign currency supply crisis.

One Daily NK source in China who is well-acquainted with North Korean affairs reported that while Jeon was in China, he met with the management of three or four Chinese enterprises which already have investments in North Korea, and suggested investment conditions under which the North could transfer some of its mineral rights to them and receive capital investments in return.

The source said, “For now, as far as I know, executive managers of the No. 39 Department have been in contact with Chinese enterprises. Since the Workers’ Party is trying to sell shares in a gold mine, it seems the funding of the Party might be serious.”

“It is not clear whether or not this attempt was done on Kim Jong Il’s instructions, but attracting foreign investment in a gold mine is not a commonplace affair,” the source pointed out, adding that an investor has not yet been put in place.

What is the Daebong Mine for?

The Daebong Mine is a relatively large gold mine on the border of Woonheung and Gapsan in Yangkang Province. Until 2001, a Yangkang provincial foreign currency earning enterprise and the foreign currency earning department of the People’s Safety Agency jointly managed it. However, in May, 2002, it became a No. 39 Department affiliated enterprise.

The No. 39 Department has been raising private funds for the leader and Party operations under the Finance and Accounting Department of the Central Committee since the mid-1970s. According to defectors, it has the highest authority and the largest funds of all North Korea’s foreign currency earning enterprises. Especially, it has the ability to mobilize tremendous financial resources since it manages and controls supplies of gold and silver and rare non-ferrous metals.

A source from Yangkang Province explained, “According to Chongjin University of Mining and Metals and Kim Chaek University of Technology, the purity of the gold from the Daebong Mine is more than 76 percent, while production from Hoichang and Eunsan in South Pyongang Province is 63 percent and 61 percent respectively. More than 150kg of solid gold is produced annually, so this mine is known as the ‘loyalty mine’.”

“People say that the government earns four or five million dollars a year through this mine. Neither Yangkang Provincial Committee nor Hyesan Municipal Committee is involved with the business of the mine.”

The source added, “Since the No. 39 Department deals with the mine, only those discharged soldiers with good family backgrounds are dispatched there by the Central Committee. In October of last year, around 200 discharged soldiers with good family backgrounds came to the mine.”

Almost all the gold produced in the Daebong Mine is stored in Swiss and Austrian banks in gold bars.

A Chinese company had a contract with the DPRK’s Musan Mine which has been canceled for an unknown reason.

Click here to see what I believe is the mine’s location.

Read the full article here:
No. 39 Department Hawking Shares in Key Gold Mine
Daily NK
5/3/010
Lee Sung Jin

According to Yonhap:

A North Korean remake of the Chinese opera A Dream of Red Mansions will premiere in Beijing next month, a Chinese-language daily reported Thursday.

The Hong Kong-based Takungpao said the staging of the Chinese classic of the same title, also known as “Hong Lou Meng,” by North Korea’s national Phibada (Sea of Blood) Opera Troupe will be staged in the Chinese capital city from next Thursday through Sunday.

A Dream of Red Mansions is a masterpiece of Chinese vernacular literature, written between 1749 and 1759. It is one of China’s Four Great Classical Novels.

The North Korean version of the opera reportedly debuted in the North last year as part of celebrations marking 60 years of diplomatic relations between the two allies.

North Korean leader Kim Jong-il was reported to have been directly involved in updating the 1961 version created by his father and the regime’s founder, Kim Il-Sung. Former Chinese leader Deng Xiaoping and other Chinese leaders watched the original version of the North Korean performance, newspaper reports from that era show.

The North’s Korean Central News Agency (KCNA) reported last October the North Korean leader and Chinese Premier Wen Jiabao watched the Chinese opera remade by North Korean artists at the Pyongyang Grand Theater, during the latter’s visit to North Korea. China’s Ministry of Culture donated costumes for North Korean artists involved in A Dream of Red Mansions.

The Takungpao report said more than 200 North Korean performers will visit Beijing for the staging of the opera, the largest foreign theatrical company to visit China in recent years.

The newspaper said that the leading and supporting actors are well-known stars in North Korea, most of them educated at the Pyongyang Kim Won Gyun Conservatory (Satellite image here), a higher educational institution for music named after a North Korean composer.

Kim Il-hwang, who stars as the protagonist Jia Baoyu, is the grandson of Kim Jong-hwa, who also played the protagonist in the 1961 version, according to Takungpao.

Read the full story here:
N. Korean version of classic Chinese opera to premiere in Beijing
Yonhap
Kim Young-gyo
4/29/2010

According to the Press Trust of India:

A Chinese tourist train entered North Korea for the first time today, carrying more than 400 passengers including a group of Finnish students, Chinese state news agency Xinhua reported.

The train embarked on the four-day tour from the Chinese province of Liaoning under a new arrangement with North Korea expected to attract tens of thousands of tourists, the agency reported from the provincial capital Shenyang.

The first train is mostly carrying tourists from China but also includes foreigners living in China, notably the Finns, resident in Guangzhou.

The tour comes amid heightened tensions between reclusive North Korea and South Korea, as Seoul has appeared increasingly suspicious that the North was behind the sinking of one of its naval ships last month.

It also follows reports that North Korean leader Kim Jong-Il plans to visit China soon.

Read the full story here:
Chinese tourist train makes first North Korea tour
Press Trust of India
4/25/2010

Michael Rank

Over 30,000 Chinese tourists are expected to visit Pyongyang this year, well above normal levels of around 20,000, and numbers are likely to increase further in future, the head of the Pyongyang-based Korean International Travel Company said recently.

In a rare instance of a North Korean official divulging meaningful statistics, Jo Seong-gyu 조성규 赵成奎 was quoted on a Chinese website as saying that in addition to the average 20,000 Chinese tourists who visit under national agreements, a further 20,000 Chinese visitors a year cross into North Korea as border tourists. He said these had been typical levels since a bilateral tourism agreement was signed in 1988. Although Chinese tourists typically number around 20,000 annually, there had been up to 50,000 in some years, as well as years when levels had dipped sharply, he added.

Jo was speaking to Chinese journalists visiting Pyongyang to mark a newly implemented bilateral tourism agreement. He did not say how many border tourists were expected this year, but several new local agreements have been signed recently, so that number is also likely to increase.

Jo said KITC had hired almost 90 Chinese-speaking guides to cope with the expected flood of Chinese tourists. Apart from the usual tourist sights of Pyongyang, the Myohyang mountains and Gaeseong, there are also plans for Chinese tourists to visit the Chinese Korean war cemetery in Hoechang 회창군 county (satellite image here), about 100 km east of the capital, where 134 “martyrs” of the Chinese People’s Volunteers are buried, including Mao Anying 毛岸英, son of Chinese leader Mao Zedong. The 90,000 square metre cemetery is the largest of dozens of such cemeteries in North Korea. Click here for photos of Premier Wen Jiabao visiting the cemetery last October.

Jo said Mt. Chilbo 칠보산 七宝山 on the Sino-Korean border will also be opened to Chinese tourists.

He said the increase in Chinese tourists visiting North Korea was due to a vogue for “red tourism”  – nostalgic tours to revolutionary sites which have become fashionable in China in recent years. These tend to appeal mainly to the older generation who remember the Maoist era, including perhaps the Korean war, and Chinese reports suggest that visitors to North Korea are often in their fifties and sixties.

Jo warned Chinese tourists to behave themselves, saying they should “respect Korean laws and regulations and moral standards and proceed from a standpoint of cherishing Korean-Chinese friendship, mutual understanding and tolerance.”

According to the Choson Ilbo:

North Korea spent more than US$5.4 million on fireworks displays along the banks of the Taedong River in Pyongyang on Wednesday to celebrate former leader Kim Il-sung’s 98th birthday the following day.

A North Korean source on Friday said the North had imported about 60 tons of fireworks from China for the display and invited foreign engineers for technical assistance. “They must have spent more than W6 billion for the fireworks and their display, transportation, and labor,” the source said.

The regime temporarily cut power and banned driving in an area near the Juche Tower for the fireworks spectacular to maximize the effect. The North’s state-run Korean Central Television broadcast the fireworks for an hour from 9 p.m. on Thursday, and reran it the following morning.
…
At the fireworks ceremony, Kim Ki-nam, a close aide to Kim senior and a secretary of the North Korean Workers’ Party’s Central Committee, said, “We put on the fireworks display full of hope today because we have held matchless great men in high esteem generation after generation.” Some interpret this as a hint at the succession from leader Kim Jong-il to his son Kim Jong-un.

You can watch the fireworks show on YouTube: Part 1, Part 2 (the new 10-minute CNC song kicks in at 5:10), Part 3.

Aside: I managed to get a great mp3 of the CNC song.  I am working on a CNC post and you will hopefully be able to donwload  it there.

UPDATE 4: Here is the DPRK Pavilion’s web page (h/t NKNews.org).

UPDATE 3: A video of the DPRK pavilion at the Shanghai expo can be seen here.

UPDATE 2: Voice of America offers a description of the interior of theD PRK’s Pavilion:

Inside, there is a replica of Pyongyang’s Juche Statue, a small waterway that represents the North’s Taedong River, a traditional bridge and large fountain with colored lights.

On top of the fountain, a group of white marble statues of naked boys encircle two others. One boy holds the other up in the air as he lifts a dove into the sky.

In one corner, there is a small cave that contains a reproduction of a mural from the North’s Koguryo Tombs, a World Heritage site.

Along a wall, beneath the phrase “Paradise for the People,” a row of television sets plays videos depicting everyday life in North Korea.

Some of the videos show North Koreans leisurely bowling, playing golf and ice skating. Although some of the footage appears to be recent, other shots seem to be decades old.

Many who visited the pavilion Tuesday say that aside from the fact that there were no lines to get in, they wanted to visit because, as they put it, North Korea is so mysterious.

UPDATE 1:  The Shanghai Expo has posted some information on the DPRK’s Pavilion. Here are some of the details:

Theme: Urban Development of Pyongyang, the Capital of DPR Korea (Prosperous Pyongyang based on the River Taedong Culture)

Pavilion Features: The pavilion perfectly merges national characteristics of DPRK together with its modern beauty. Outer walls are decorated with national flags and a winged steed bronze statue. Main items exhibited in the pavilion include Juche Tower, Taedong River, Korean-style pavilions, rockeries and small stone caves. All of them present a prosperous and modern Pyongyang based on the traditions of DPRK, where education, science, culture and sports have achieved great development during its long history.

Pavilion Highlights
Highlight 1: The Juche Tower Model — 4.5-meter-high model of Juche Tower is exhibited in the pavilion.
Highlight 2: Symbol of Taedong River — winding river flows across the pavilion, reminding people of the stretching Taedong River.
Highlight 3: National Section and Stone Caves — national section and stone caves are exhibited on the right side of the pavilion. Inside the cave the world heritage of tomb murals in Jiangxi County and paintings of DPRK style are displayed.

Here are some photos of the DPRK’s pavilion (h/t Daylife):

And here are some photos from the Shanghai Scrap blog:

ORIGINAL POST: According to the PRC’s People’s Daily:

China welcomes countries including the Democratic People’s Republic of Korea (DPRK) to participate in the 2010 Shanghai World Expo, a Foreign Ministry spokesman said Tuesday.

…

DPRK Chamber of Commerce Vice-Chairman Ri Song Un told Xinhua on March 18 that the country had already finished preparatory work for the 2010 Shanghai World Expo, its first Expo appearance.

Situated in an area of 5.28 square kilometers at the core the city of Shanghai to exhibitions, events and forums, the six-month expo starting from May 1 will attract about 200 nations and regions and international organizations’ participation, as well as 70 million visitors from home and abroad.

Read the full story here:
China welcomes DPRK in attending Shanghai World Expo: FM spokesman
People’s Daily
3/30/2010

Michael Rank

China Southern Airlines is planning flights to Pyongyang from the northeastern city of Changchun from June, a Chinese website reports.

It said flights will begin on June 20, but did not say how frequent the service will be or give any further details.

It said the Korean National Travel Company was in talks with the Jilin provincial tourism bureau about tours to North Korea from either Changchun, the provincial capital, or the border city of Yanji.

China Southern has operated Beijing-Pyongyang flights in the past does not do so at present.