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Chinese to boost investment in Rason

Friday, January 7th, 2011

UPDATE 1 (2011-1-19): According to the Wall Street Journal:

A Chinese firm has signed a letter of intent to invest $2 billion in a North Korean industrial zone, representing one of the largest potential investments in Kim Jong Il’s authoritarian state and a challenge to U.S. policy in the region.

The agreement was signed with little fanfare in Pyongyang on Dec. 20—a day otherwise marked by pitched tension on the Korean peninsula following the North’s shelling of a South Korean island—according to documents viewed by the Wall Street Journal. Confirmation of the deal comes as Chinese President Hu Jintao visits Washington this week in a bid to forge closer security and economic ties with the U.S.

U.S. officials said the administration is aware of the possible Chinese investment, but noted that previous projects haven’t gone anywhere. “No investment project will enable North Korea to meet the needs of its people as long as its government continues its destabilizing behavior,” said a senior administration official.

The letter of intent involves China’s Shangdi Guanqun Investment Co. and North Korea’s Investment and Development Group. An assistant to the managing director of Shangdi Guanqun, who identified himself only by his surname, Han, said his company’s planned investment is focused on the Rason special economic zone, situated near North Korea’s border with Russia.

The zone was called Rajin-Sonbong when it was established in 1991, but failed to attract sufficient investment. It was revived, and re-named Rason, following a visit there in 2009 by Mr. Kim.

Mr. Han said the plan is to develop infrastructure, including docks, a power plant and roads over the next two to three years, followed by various industrial projects, including an oil refinery, over the next five to 10 years. He said the company was waiting for a response from the North Korean government before applying for approval from China’s Ministry of Commerce.

“It’s all pending at this stage, and it’s really up to the Korean side to make the decision,” Mr. Han said. He added that the $2 billion figure was what the North Korean side had hoped for, not necessarily what his company could deliver.

The company’s Web site says the company was “under the administration” of a state-owned enterprise, Shangdi Purchase-Estate Corporation. Mr. Han, however, said his company was “100 percent private.”

For the Obama administration, securing China’s cooperation in restraining North Korea’s military and nuclear-proliferation activities is a cornerstone of a warmer bilateral relationship. But the potential investment is a reminder of possible limits of Chinese cooperation.

The U.S. wants to step up sanctions to force Kim Jong Il to give up his nuclear-weapons arsenal and military activities. China, meanwhile, is increasingly promoting business projects and direct investment to influence the North, say Chinese and American analysts, arguing financial pressure hasn’t worked.

China is North Korea’s biggest trading partner and aid donor, but the scale of this deal raises concerns in Seoul that Beijing is running its own version of the “Sunshine” policy under which the South boosted investment in the North from 1998 to 2008.

This policy disconnect is expected to be one of the issues Chinese and U.S. officials discuss this week. “These types of deals pursued by China generally present a real challenge to the sanctions” being effective, said Victor Cha, a North Korea expert who helped oversee Asia policy in George W. Bush’s National Security Council. “The net effect is that it does make it more difficult for these sanctions to have the desired effect.”

Such deals have emerged in the past and have come to nothing, analysts said, and it is possible this one, too, could peter out. A number of similar North Korean economic zones have failed to live up to their billing because of poor infrastructure and corruption, and a lack of economic reform. News of the deal was first reported in the Korean-language press, including the Voice of America’s Korean service.

It is unclear how long the agreement has been in the works. But its Dec. 20 signing came on the day South Korea conducted a closely watched artillery test from Yeonpyeong Island near North Korea.

The test marked a high point in tensions after North Korea’s surprise late November shelling of Yeonpyeong, which killed four South Koreans. Pyongyang had threatened a swift military response should Seoul carry out an announced artillery test on Dec. 20. But the day’s drill came and went amid high security in the South, with the North saying in a statement it “did not feel any need to retaliate.”

Top administration officials have recently both praised and chided the Chinese over the North. On a trip to China last week, Defense Secretary Robert Gates commended the Chinese for their “constructive” role in reducing tensions on the peninsula after Pyongyang’s recent shelling of a South Korean island. Secretary of State Hillary Clinton in a Friday speech pressed China to be more aggressive in helping tamp down the North’s nuclear program.

The proposed investment is among the strongest evidence yet of China’s strategy of using direct investment rather political pressure to push for change in North Korea. Chinese experts say that after North Korea’s first nuclear test in 2006, China tried to make improved bilateral relations dependent on Pyongyang dismantling its nuclear program. But after a second test in 2009, China changed tack.

Beijing now believes, according to Chinese experts, that the North Korean regime won’t respond to political pressure and could collapse completely if China cuts off aid and investment, triggering a flood of refugees into northeastern China, and bringing U.S. troops right up to the Chinese border.

The investment strategy was cemented when China’s Premier Wen Jiabao visited North Korea in October 2009 and signed a slew of economic and trade agreements. One of those agreements was for China to fund construction of a $250 million bridge across the Yalu River that separates the two countries.

Construction of the bridge, which would link China with another North Korean special economic zone, had been slated to start in August. Local officials said in November it appeared to have been put on hold indefinitely. Now they say a ground-breaking ceremony was held Dec. 31.

U.S. officials are particularly concerned about how China’s financial links to North Korea may be facilitating Pyongyang’s weapons programs. In November, Pyongyang showed a visiting American scientist 2,000 centrifuges stationed at a cover site, drastically raising fears about the North’s ability to expand its nuclear-weapons arsenal.

“China’s increased economic support undercuts the rest of the region’s efforts to convince Pyongyang that there will be consequences for further belligerence, nuclear weapons development or transfer of nuclear capabilities,” said Michael Green, who also served as a senior official on Asia during the Bush administration.

Read the full story here:
Chinese Firm to Invest in North Korea
Wall Street Journal
Jay Soloman and Jeremy Page
2011-1-19

ORIGINAL POST (2011-1-7): According to the Joong Ang Ilbo:

A Chinese state-run company recently agreed to invest $2 billion in North Korea’s Rason free trade zone, the JoongAng Ilbo learned yesterday from documents related to the deal.

Shangdi Guanqun Investment Co., Ltd. signed a 10-point memorandum of understanding with Pyongyang’s Investment and Development Group on Dec. 20 in Beijing, the documents showed.

The signing ceremony was attended by Mi Chang, president of Shangdi Guanqun Investment, and Kim Chol-jin, president of the Investment and Development Group.

The goal of the investment, stated in the documents, is to build Rason, a northeastern North Korean city on the East Sea that borders both China and Russia, into the “biggest industrial zone in Northeast Asia” in around 10 years.

The project calls for coal-fired power plants, roads, piers and oil refineries in the North Hamgyong Province city, the documents said.

According to the documents, the deal is “a strategic joint project based on trust between high-level figures” in China and North Korea, which suggests it may have been negotiated by North Korean leader Kim Jong-il during two visits to China last year, on which he met Chinese President Hu Jintao.

The North’s economy has suffered under international sanctions on trade and financial services overseas, imposed after its nuclear weapon tests, and is desperately seeking foreign investment.

China is investing in Rason as an export base to serve markets in Japan, southern China and Southeast Asia.

Rason is a merger of two towns, Rajin and Sonbong, and was designated the first free trade zone in the North in 1991. It was promoted to a “special city,” which means it has fewer restrictions on businesses.

“We have a deep interest in North Korea’s ample natural resources,” an official of Shangdi Guanqun Investment Co., Ltd. told the JoongAng Ilbo. “To facilitate the export of natural resources [from the region], we will invest $300 million first and construct a coal-fire power plant at the coal mine and build a railway, roads, and harbors and piers [near it].”

The Chinese firm’s official said the company opened an office in Pyongyang at the end of last month.

Shangdi Guanqun Investment, established in 1995 by the Chinese government, is a trading firm specializing in oil processing, natural resources and international financial services. It is one of the key companies in China’s 12th five-year economic development plan that starts this year.

North Korea’s Investment and Development Group is in charge of developing the country’s four free trade zones. The other economic special zones are in Kaesong, Mount Kumgang and Sinuiju.

The Shangdi Guanqun Investment official said the company will build an oil refinery in Rason, where it plans to refine crude imported from the Middle East and Russia and sell the output to China or other countries.

I believe this Chinese story also relates to the same project.

Read the full story here:
China backs North’s Rason project
Joong Ang Daily
Ko Soo-suk
2011-1-7

Posted in China, Chosun International Development Trust Company, Economic reform, Foreign direct investment, hangdi Guanqun Investment Co., International trade, Korea Taepung International Investment Group (Daepung Investment Group), Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013), State Development Bank | 2 Comments »

Rason port facilitates intra-China coal distribution

Tuesday, January 4th, 2011

Click image to see the Chinese, Russian, and North Korean piers

UPDATE 5: No more intra-Chinese coal shipments through Rason have been reported following this 2011 experiment.

UPDATE 4 (2011-6-4): KCNA reports some additional details on the coal being shipped from Hunchun to Shanghai via Rason. According to the article:

It was against this backdrop that China was in the process of transporting 20,000 tons of coal to Rason Port via Hunchun from May 14 and then transporting it to Shanghai by a cargo ship.

Yanbian Ribao, conveying this news on May 18, reported that the Shanghai branches of the Hunchun Mining Group and the Chungjiang Group would transport 500,000 tons of coal to Shanghai by this method this year. This would be tantamount to more than 14,000 truck loads. An official concerned of the Mining Group said that transport of loads to various provinces of Southern China by this method would help sharply cut down the time and transport charges, etc. as compared with the inland transport.

So apparently the 20,000 tonne pilot project what supposed to pave the way for a 500,000 tonne project that never materialized.

UPDATE 3 (2011-1-25): China ships coal from North Korean port for first time. According to Michael Rank:

China has for the first time shipped coal from the North Korean port of Rajin following a deal by a Chinese company to renovate the port, a Chinese website reports.

The 20,000 tonnes of coal, mined in Hunchun, about 80 km north of Rajin, was shipped to Shanghai last month. After going through customs inspection at Hunchun, it was transported by road via the Wonjeongri border post near Dumangang, the report said.

It noted how shipping the coal from Rajin saved the cost of transporting it to the nearest suitable Chinese port of Yingkou or further afield by train and how the deal to renovate and expand Rajin’s no 1 dock would help to boost trade from northeast China more generally.

It said the Dalian-based Chuangli Group reached a deal to lease the dock in 2008 and the following year agreed to renovate it and expand its capacity to one million tonnes a year, although news was not announced until last spring.

But when this reporter visited Rajin last September there was no sign of the port being renovated and expanded, and although a couple of small North Korean vessels were moored at the port, there was little sign of any activity and the area was largely deserted.

China does have ambitious hopes for Rajin, however, and last month a Chinese company, Shangdi Guanquan Investment Co, was reported to have signed a letter of intent to invest $2 billion in an industrial zone in the region.

The Wall Street Journal quoted an assistant to the managing director to Shangdi Guangqun as saying the plan was to develop infrastructure, including docks, a power plant and roads over the next two to three years, followed by various industrial projects, including an oil refinery, over the next five to 10 years. He said the company was waiting for a response from the Pyongyang government before applying for approval from China’s Ministry of Commerce.

“It’s all pending at this stage, and it’s really up to the Korean side to make the decision,” the assistant, named only as Han, said, according to the WSJ. He added that the $2 billion figure was what the North Korean side had hoped for, not necessarily what his company could deliver.

North Korea has implausible dreams of turning the city into an international freight brokerage, export processing and finance hub, and has even made a computerised promotional video about its plans to build glitzy skyscrapers along the seafront.

Photo of Rajin port here.

UPDATE 2 (2011-1-14): According to Every China:

As the first cross-border cargo ship for domestic trade in China, 10,000 tonner “Jinbo”, loaded with 21,000 tons of coal, arrived safely at Shanghai and docked steadily at the pier of Waigaoqiao Terminal at 4 p.m. on January 14. This marked the success of the maiden sail for cross-border domestic trade in our nation.

It is introduced that this 10,000 tonner Jinbo is a freight ship serving for Hunchun Chuangli Shipping Logistics Co., Ltd. of Jilin Province. There was totally 20,000 tons of coal in this cross-border transport produced by Hunchun Mining Group, departing from Hunchun Quanhe Port on December 7, 2010 to Rajin Port of North Korea and cargo concentration in port was accomplished there after one month. Special purpose vessel Jinbo ship docked at No.1 pier of Rajin Port of North Korea at 15 o clock on January 6 this year. The shipment began on 7th and the ship departed from Rajin Port at local time 10:30 on January 11 and arrived safely at the pier of Waigaoqiao Terminal, Shanghai after over 3 days voyage. Currently, related procedures for customs and inspections are in process.

Successive notices on pilot cross-border domestic trade transport in Jilin Province have been issued by General Administration of Customs, Ministry of Transport and General Administration of Quality Supervision, Inspection and Quarantine of the People s Republic of China since last year. Now, the successful arrival of the first cargo ship at the destination is an important achievement gained by Hunchun City or even Yanbian Autonomous Prefecture from implementing the forerunning policy of The Planning Outline of Cooperation in the Exploitation of Tumen River Zone, China. It is also a significant breakthrough in new international land-sea joint transport passage of Hunchun City or even Jilin Province, marking a crucial progress in the Launching out to sea through borrowed port strategy of Jilin Province.

Not only the coal resource of Hunchun City, but also that of Heilongjiang Province, closely adjacent to Yanbian area, can be transported to South China after Rajin Port exit is available. Because of the relatively low transport cost compared with that of other ports at home, this sea passage may become the Golden Passage for transporting coal from the north to the south until then.

UPDATE 1 (2011-2-22): According to the China Daily:

A city in Northeast China is aiming to import coal from the Democratic People’s Republic of Korea (DPRK) as part of its effort to establish an international coal production base in the border area.

Hunchun, a city wedged between the DPRK and Russia, has coal reserves of 1.2 billion tons, and supplies the fuel to Jilin, Liaoning, Jiangsu and Shangdong provinces. It currently produces about 6 million tons of coal annually.

“We plan to raise our production to more than 10 million tons a year by importing and exploiting coal both from the DPRK and Russia,” said a senior Hunchun city official, who declined to be named.

In January, coal was shipped for the first time from Hunchun to Shanghai via the DPRK port of Rajin, following a deal made by a Chinese company to renovate that port.

The 20,000 tons of coal mined in Hunchun reached Shanghai in three days in the transportation trial. Normally, it takes more than 10 days to transport that amount of coal by train from Hunchun to Shanghai.

“We will try to deliver coal by this new shipping route in the future, because it saved a lot of money in transportation costs,” the government officer said.

The city government also intends to transmit the electricity power generated by its coal-fired power plant to the DPRK.

China has been striving to establish an international sea route through the two countries to boost bilateral trade.

Dalian-based Chuangli Group invested 30 million yuan ($4.6 million) in improvements to Rajin last year, according to officials.

The Dalian group expanded the port’s annual shipping capacity to 1 million tons last year, after reaching a deal to lease and reconstruct it in 2009.

Hunchun officials said the city’s foreign trade volume has quadrupled in the past three years, thanks to improved international shipping.

By taking advantage of cross-border energy production and transportation, Huchun expects its coal production to rise by 22 percent during the 12th Five-Year Plan (2011-2015).

The Seoul-based Yonhap News Agency reported earlier that the DPRK plans to cooperate with Chinese enterprises on exploiting mineral resources in Hamgyeongbuk-do in the DPRK, which has about 200 million tons in coal reserves.

ORIGINAL POST (2011-1-4): Rason is being used to transport coal from Hunchun to Shanghai. According to the Choson Ilbo:

In official confirmation that closer China-North Korea business ties have come to fruition, the state-run Xinhua news agency and local media in Jilin on Monday said China has transported 20,000 tons of coal from a mine in Jilin to Shanghai and Ningbo through North Korea’s Rajin-Sonbong Port since Dec. 7.

The coal produced in Hunchun was carried by some 570 35-ton trucks across the Duman (or Tumen) River and transported to the port along a 60 km unpaved road between Hunchun and Rajin-Sonbong.

A source in Hunchun said, “Since a month ago, dozens of trucks a day have been going to the North” through Quanhe Customs Office.

The abundant coal deposits in the northeastern China are mainly used for heating homes in southern China in winter, but with no access to the East Sea, China had to transport it overland to Yingkou Port in the Bohai Bay, some 800 km to the west, incurring logistical costs.

China has long tried to get the right to use Rajin-Sonbong and Chongjin ports in North Hamgyong Province in North Korea in a bid to secure an East Sea route.

In 2009, Chuangli Group, an environmental facilities manufacturer in Dalian, obtained the right to use a pier in the Rajin-Songbong port for 10 years in collaboration with a North Korean trading company. Another Chinese firm in Tumen is also reportedly seeking the right to use Chongjin Port.

Prof. Yoon Seung-hyun of Yanbian University said Chongjin Port, has better facilities than Rajin-Sonbong. “The North is more open and aggressive” because it is groaning under international sanctions and aid from South Korea has dried up, he added.

Recent posts on Rajin (Rason) can be found here.

Read the full story here:
Chinese Shipping Through N.Korean Port in Full Swing
Choson Ilbo
2011-1-4

Posted in China, Coal, Rason Economic and Trade Zone (Rajin-Sonbong), Sea shipping, Special Economic Zones (Established before 2013), Transportation | Comments Closed

DPRK trades steel for food

Tuesday, January 4th, 2011

According to the Daily NK:

North Korean trading companies operated by several organs have been selling steel to China in exchange for food.

One Chinese trader who does business with North Korea reported to The Daily NK on Monday, “China-based North Korean workers in charge of trading with China for Cheongusan Trading Company (under the Escort Command), say that this year Chosun is expanding the volume of its steel sales with China.”

The trader said, “In November last year, the analysis table of steel quality was delivered to us, and accordingly a contract has also already been signed.” He added, “In Chosun, the company is waiting for a permit to trade from an upper organ after having loaded materials on freight trains.”

He explained further, “For the price of the steel, Chosun has asked for rice, flour, noodles and also construction materials,” adding, “Food in bulk can enter Chosun.”

He explained that since North Korea is facing a serious lack of food, cement and other construction materials due to isolation from the international community, the country is trying to barter steel for food with China, from which the North is able to import.

Another trader in China verified the story, explaining, “Recently in Dandong, workers from Kangsung General Trading Company (under the General Staff) and other companies visited China for the purpose of selling steel.”

He added, “From now on, our company is going to do only steel trade with Chosun. We have decided not to do business in other things because our experiences have shown that there is no credit there.”

He went on, “North Korean trading units may have suffered from limitations put on items by Chinese companies,” going on, “If Chosun does not make a deal with us, they will starve to death this year. Even though they emphasize independent rehabilitation, when have they ever been rehabilitated?”

North Korea’s media frequently emphasizes the glorious production of “Juche” steel at Kim Chaek Steel Mill and Gangsun Steel Mill. Indeed, the Common Editorial issued on the first day of this year stated that, “By the power of the realization of the faith and model of Kim Steel (steel from Kim Chaek Steel Mill) and Juche steel, let’s have waves of victories.”

According to KOTRA, South Korea’s trade statistics agency, from January to October, 2010, North Korea exported steel to China worth $82 million.

One potentially positive aspect to this story is the recognition by the DPRK of the benefits of comparative advantage in trade. Rather than aiming to produce all of its own food, the DPRK can instead specialize in steel production and trade for Chinese produced food. Through trade, China and the DPRK could both consume more steel and food than if each country practiced autarchy. Unfortunately the DPRK’s recent history has demonstrated a callous disregard for comparative advantage and has instead focused on increasing domestic food production and aid while limiting international trade. Lets hope to see more rational policies prevail in the future.

Read the full story here:
North Korea Bartering Steel for Food
Daily NK
Im Jeong Jin
1/3/2011

Posted in Cheongusan Trading Company, China, Food, International trade, Manufacturing, Steel | Comments Closed

Rumored $3.5b Chinese investment deal

Thursday, December 30th, 2010

The Choson Ilbo begins this story with “Rumor has it”….

Rumor has it that China is getting directly involved in the development of North Korea’s Rajin-Sonbong Port, once the center of the UN Development Programme’s Duman (or Tumen) River project in 1991. A source in Beijing said Wednesday, “As far as I’m aware, North Korea and China’s Commerce Ministry recently signed a memorandum of understanding outlining Beijing’s investment of US$3.5 billion over five years beginning next year” in the special economic zone there. The source said China is investing in roads, ports and gas facilities in the region.

The Rajin-Sonbong area, at the mouth of the Duman River, is a strategic point of economic cooperation between the two countries, but neither bank is Chinese territory. One side is in North Korea and the other in Russia, so to get to the East Sea China had to borrow a port from either side. China did nothing about the UNDP initiative in the 1990s, but since the mid-2000s, it has set its eyes on the area.

North Korea for some reason rented out the best equipped dock there to Russia in 2008 but since last year it has been seeking investment from China to overcome dried-up aid from South Korea amid international sanctions. North Korean leader Kim Jong-il urged Chinese President Hu Jintao when he visited China in May this year to invest in the region.

But the rumor of direct investment from the Chinese government has not been confirmed. One diplomatic source in Beijing said, “I’ve heard nothing about the Chinese Commerce Ministry’s direct involvement in negotiations. It’s just one of many rumors since North Korea became active in developing the Rajin-Sonbong area.”

UPDATE from the Choson Ilbo:

Chinese officials with close ties with North Korea say the North has used to demand hard cash for business deals but is now taking a more flexible approach. The Global Times, a sister publication of the People’s Daily, published a series of reports Saturday about the Rajin-Sonbong special economic zone of North Korea.

It said street lights and neon signs powered by windmills have appeared in the region, which had earlier been pitch dark at night, while the previously ubiquitous soldiers have vanished.

North Korea allowed 4,000 Chinese residents in the area to rent commercial property and agreed to designate an area in the Rajin-Sonbong special economic zone to be jointly administered by the two countries.

North Korea had offered China to develop one or two islands in the estuary of the Apnok River on a 50-year lease, but when China demurred it apparently offered a 100-year lease and even allowed construction of golf courses and other recreational facilities.

…

Many private Chinese companies are reticent about investing in North Korea. Not only is there a lack of business laws to protect their investment, there are also too many political uncertainties. As a result, the Chinese government is not playing a very active role. In the case of the bridge across the Apnok River, North Korea apparently wanted Chinese state-run companies to take part in construction, but Beijing declined.

One source in Beijing said some Chinese companies are showing great interest in developing the Rajin-Sonbong area, but most are biding their time. “Chinese businesses still don’t seem to trust the sincerity of North Korea’s desire to open up its economy,” the source added.

Additional Information:
1. The Chinese and Russians currently lease docks at Rajin. You can see a satellite image of them here.

2. Here is more information on China’s 10-year lease of Rajin.

3. Here is information on the Yalu Islands China is reportedly leasing.

4. The Russians are also building Russian gauge railway line from the Russian border to the port in Rajin.

5. Here are all previous Rajin (Rason)posts

Read the full stories here:
Beijing ‘Pouring Money into N.Korea’s Special Economic Zone’
Choson Ilbo
12/30/2010

N.Korea’s Cross-Border Business with China Picking Up
Choson Ilbo
12/30/2010

Posted in Automobiles, China, Economic reform, Foreign direct investment, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Real estate, Russia, Sea shipping, Special Economic Zones (Established before 2013) | 1 Comment »

Statue of Mao’s son killed in Korean war unveiled on North Korean border

Tuesday, December 21st, 2010

By Michael Rank

A statue of Chairman Mao’s son Mao Anying 毛岸英, who was killed in the Korean war, has been unveiled in a town on the North Korean border where he served, a Chinese website reports.

The 2.7 metres high statue has been erected in Hekou 河口村 village in Changdian 长甸 county, in Liaoning province, which was on an important supply route and from where Mao Anying left for Korea. It is almost certainly the only monument in China to Mao Anying, who was killed in an American bombing raid on November 25, 1950, aged 28. He served in the war as a Russian-language interpreter.

A separate Chinese report shows the Mao Anying school in Changdian which was opened in 2003, replacing three previous schools. It describes in some detail how the area was affected during the Korean war, including how a nearby railway bridge was destroyed in the war and is known as the duan qiao or “broken bridge”, just like the better known bridge in Dandong, about 60 km away.

It quotes Mao Zedong as saying, “People always die in wars, the Chinese Volunteers People’s Army has already contributed many lives, their sacrifice is glorious. Anying was an ordinary soldier, so this should not be considered a big thing just because he was my son.”

Mao Anying is buried in North Korea, in Hoechang county in South Phyongan province about 100 km east of Pyongyang. It is a leading pilgrimage site for Chinese visitors, and Premier Wen Jiabao paid tribute there in 2009.

Additional Information:
1. Here is a satellite image of the destroyed bridge in Changdian.

2. Here is the location of Mao Anying’s official grave.

3. Here are the locations of three other Chinese People’s Volunteer (CPV) Cemeteries in the DPRK: Pyongyang, Kaesong, Namyang.

4. More information in the comments.

Posted in China, Military | 3 Comments »

Recent papers on DPRK topics

Friday, December 17th, 2010

Forgotten People: The Koreans of the Sakhalin Island in 1945-1991
Download here (PDF)
Andrei Lankov
December 2010

North Korea: Migration Patterns and Prospects
Download here (PDF)
Courtland Robinson, Center for Refugee and Disaster Response, Bloomberg School of Public Health, Johns Hopkins University
August, 2010

North Korea’s 2009 Nuclear Test: Containment, Monitoring, Implications
Download here (PDF)
Jonathan Medalia, Congressional Research Service
November 24, 2010

North Korea: US Relations, Nuclear Diplomacy, and Internal Situation
Download here (PDF)
Emma Chanlett-Avery, Congressional Research Service
Mi Ae-Taylor, Congressional Research Service
November 10, 2010

‘Mostly Propaganda in Nature:’ Kim Il Sung, the Juche Ideology, and the Second Korean War
Download here (PDF)
Wilson Center NKIDP
Mitchell Lerner

Drug Trafficking from North Korea: Implications for Chinese Policy
Read here at the Brookings Institution web page
Yong-an Zhang, Visiting Fellow, Foreign Policy, Center for Northeast Asian Policy Studies
December 3, 2010

Additional DPRK-focused CRS reports can be found here.

The Wilson Center’s previous NKIDP Working Papers found here.

I also have many papers and publications on my DPRK Economic Statistics Page.

Posted in Agriculture statistics, Arduous March, Black markets, China, Demographics, Drug smuggling, Emigration statistics, Finance, Fiscal & monetary policy, Food, Foreign aid statistics, Illicit activities, Military, Nuclear, Political economy, Statistics, Uncategorized | Comments Closed

Chinese trade undermining DPRK information blockade

Thursday, December 16th, 2010

According to the Korea Herald:

Although not so explicitly, the communist North Korea appears to be becoming more aware of capitalist cultures and trends, a change the Kim Jong-il regime has feared the most and tried to prevent for decades.

Not only the social upper crust, but the majority of the general public has seen popular South Korean TV series through copies that flow in from China and is aware of the financial gap between the two divided states, North Korean defectors said during a recent forum in Seoul.

According to the defectors ― among hundreds of others who attempt to abandon their impoverished state and escape to the wealthier South each year ― such changes are causing a headache for the North Korean leader trying to secure internal unity before handing over the regime to his youngest son.

“It is difficult to fend off South Korean products and TV shows from entering the country so as long as China remains to be its main trade partner and financial donor,” said Ju Seong-ha, a North Korean defector who graduated from the North’s top Kim Il-sung University.

“The recent phenomena may result in North Koreans choosing South Korea over their own country when the time comes for them to decide.”

North Korea, which is one of the world’s last remaining totalitarian states and also one of the most secretive nations, keeps its people largely isolated from outside news and strictly forbids them from possessing goods that are not distributed by the ruling Workers’ Party.

But the impoverished state’s heavy dependence on Beijing for food and other commodities is inevitably opening up its people to goods and cultures from capitalist nations, particularly South Korea.

China has emerged as the world’s second largest economy after abandoning Stalinist policies and is one of the largest markets for South Korean pop culture, also widely known as “hallyu.”

Most copies of popular South Korean TV series and news that flow into North Korea are produced in China, which is notorious for illegally making cheap, low-quality copies of copyrighted materials.

A 20-something North Korean who escaped to Seoul last year said he had been “shocked” at the sight of South Korea the first time he saw a soap opera starring the country’s top celebrities.

“We had been told South Korea was an underdeveloped country full of beggars,” the defector said, requesting not to be named for safety reasons. “What I saw were beautiful, trendy people living in a glamorous city.”

“I say 90 percent of North Koreans have seen a South Korean TV series at least once,” he said.

Even security and judiciary officials watch popular South Korean soap operas in secret, another unnamed defector told the Dec. 10 forum in Seoul.

“Because the DVD players are sold at a relatively cheap price in North Korea, many households possess them and share CDs among themselves,” the defector said. “Seeing for themselves how well-off and happy people in the South seem, many people build up admiration for the country.”

The apparent popularity of South Korean culture in North Korea coincides with President Lee Myung-bak’s recently made remarks during his trip to Malaysia.

“No one can possibly stop the changes brewing among the general North Korean public,” the South Korean president had said.

Read the full story here:
Changes brewing in ‘not so isolated’ North
The Korea Herald
Shin Hae-in
12/15/2010

Posted in Black markets, China, Civil society, Economic reform, General markets (FMR: Farmers Market), International trade | 1 Comment »

DPRK-PRC trade up 26.7 percent

Friday, December 3rd, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-12-3-2
12/3/2010

North Korean trade with China has jumped 26.7 percent during the first eight months of the year, with the bulk of its imports made up of crude oil, and its largest export being coal. Despite the increasingly severe food shortages in the North, food imports from China were actually down 7.5 percent, while on the other hand, fertilizer imports shot up by 162 percent.

The Korea Trade-Investment Promotion Agency (KOTRA) looked into the Chinese government’s import and export figures and determined that North Korean exports to China during the first eight months of the year were worth 650,000 USD, 20.6% more than during the same period last year, while DPRK imported 1.345 billion USD-worth of goods (30% increase), for trade worth a total of 1.995 billion USD, 26.7 percent more than 2009.

“Mineral fuel and mineral oil” topped the list of North Korean imports (321,000 USD), with crude oil (229,000 USD) and oil (63,000 USD) making up 90.7 percent of imported goods. However, while crude imports were 53 percent more expensive, the amount of oil imported only rose by 2.3 percent; the sharp increase in expenditure was due to climbing international oil prices. The second- and third-largest imports were listed as “nuclear reactor, boiler, and machinery” (127,000 USD) and “electromagnetic machinery, sound and video equipment” (106,000 USD). Other imports included cars and car parts, steel and steel goods, plastic and plastic goods, artificial filament, fertilizer, and grain. A KOTRA official stated that while “nuclear reactor” was listed among the goods imported by the North, there is no way to verify the Chinese statistics.

North Korea’s grain import expenditures increased by five percent, to 34,000 USD, but overall grain imports fell 7.5 percent, to 102,000 tons, due to increased costs. More specifically, rice import expenditures were up 8.4 percent to 16.6 million USD, but the amount of rice imported fell by six percent, to 38,400 tons. Corn expenditures dropped by one percent to 16.3 million USD while the amount imported fell by ten percent, to 62,000 tons. The cost of barley imports grew 190 percent, to 353,000 USD, with the amount of barley brought into the country up 89 percent to 1,011 tons. 277,000 tons of fertilizer were imported, 162 percent more than last year, at a cost of 40 million USD, 85 percent more than 2009. Almost all of the fertilizer was nitrogenous.

North Korea’s exports to China were made up largely of mining and fisheries. Coal topped the list (191,000 USD), although the amount sent across the border was 31 percent less than last year. Iron ore was second, and was not only down by 34 percent, it brought in 134 percent less than 2009, as it was worth only 111 million USD. Textiles and accessories worth 81 million USD, steel worth 64 million USD, and mollusks worth 32 million USD were also sent to China.

Posted in China, Coal, Energy, Food, Institute for Far Eastern Studies, International trade, Korea Trade-Investment Promotion Agency (KOTRA), Oil, Statistics, Trade Statistics | Comments Closed

Dandong-DPRK trade and growth

Thursday, December 2nd, 2010

As the focal point of DPRK-PRC trade, Dandong has seen phenomenal growth in the last 5 years.

Here is just one area in southern Dandong:

Here is a separate area in northern Dandong where Yalu River high-rise development is underway:

And here is another island in the Yalu River:

Dandong has been the focus of increasing media attention over the last 10 years because it has economically benefitted from increased trade (and expected future trade) between the PRC and DPRK.

Today it is probably the easiest place to collect “survey data” on the DPRK’s business environment. According to a recent article in the Associated Press (via San Francisco Examiner), the DPRK still has a long way to go before foreign investors will see a climate ripe for investment:

Just across the Yalu River from North Korea, this sleepy border town in China’s Rust Belt is booming.

Towering apartment blocks are going up on the city’s western edge near the new Friendship Road Bridge, which will soon be the second bridge connecting Dandong to the North Korean city of Sinuiju.

Offices for trade and export-import companies dot the main road along the riverfront. A new airport is being built. Shops sell North Korean liquor, blueberry wine, ginseng, stamps and music CDs. And North Korean restaurants offer popular Korean dishes such as stewed dog leg and spicy deep-fried dog.

Dandong – like other parts of northeastern China along the 870-mile border – aims to profit from China and North Korea’s growing cross-border trade, now close to $3 billion a year. At a time when the United States and its allies are looking to isolate the Pyongyang regime for its nuclear program and erratic behavior, including this week’s artillery attack on a South Korean island, this hardscrabble part of China is finding that being North Korea’s back door to the world can be a lucrative business.

China already provides an estimated 90 percent of North Korea’s energy needs and most of its food and weapons. And the most recent gauge of trade between the two countries, from 2008, showed an increase of more than 40 percent from the previous year, according to the Council on Foreign Relations.

But even as officials map out grand plans for more cooperation, merchants and small-scale traders say doing business with North Korea remains problematic at best.

The government is unpredictable, they say, and rules change without warning. They tell horror stories about Chinese traders who have lost millions of dollars in goods or equipment that is expropriated or stolen outright. Many now insist on cash-up-front transactions and mostly conduct business on the Chinese side of the border, where they say they have more protections.

Moreover, while North Korean leaders have visited this part of China and professed admiration for China’s economic boom, local Chinese traders and businessmen in close contact with North Koreans say they don’t expect the country to shift to a market economy anytime soon.

“I haven’t seen any sign the North Korean government wants to open up,” said Cui Weitao, 47, who has been trading fruit, clothing, plastic bowls and chopsticks to North Korea for the past decade. “If they really wanted, they could learn from China and Russia. If they wanted, they could let people go back and forth and trade freely. . . . If they opened the border, their whole country would benefit.”

His friend, Wang Tiansheng, 47, another small-scale trader, agreed. “The thought of economic reform has been there for years but never happens. Not while the father is alive,” he said, referring to the country’s leader, Kim Jong Il. “Maybe when the son takes office.”

China and North Korea have been close allies since Chinese troops crossed the Yalu River to help North Korea fight American and South Korean troops during the Korean War, which is referred to here as the “War to Resist U.S. Aggression and Aid Korea.”

Yet Chinese leaders themselves consider North Korea’s leader an often-troublesome ally because of his brinkmanship with the United States over his country’s nuclear capability and incidents such as this week’s artillery barrage of Yeonpyeong Island, which killed two South Korean marines and two civilians, and the sinking of a South Korean warship in March.

Chinese leaders are reported to be concerned about North Korea’s economic crisis, and they encouraged Kim to embrace market-based economic reforms when he visited China in May and August this year and met with Chinese President Hu Jintao, according to some Hong Kong and South Korean media reports of the visits.

In a bow to reforms, North Korea sent a dozen mayors and provincial chiefs to northeastern China in October to visit factories and chemical plants. Earlier this month, North Korean Premier Choe Yong Rim visited Harbin, in Heilongjiang province, to discuss joint economic projects.

North Korea agreed to lease two Yalu River islands to China to develop into “free trade zones.” Chinese high-tech companies were encouraged to signed agreements to hire North Korean computer experts. In September, after Kim’s second visit, China established a new 100,000-square-foot marketplace in Tumen – across from Namyang in North Korea – for North Koreans to come on one-day passes to sell or trade their goods.

But the Tumen market in many ways illustrates the difficulties of coaxing North Korea to open up. The vast market is now mostly empty because the North Korean government changed its mind about allowing its citizens to come to China to trade freely, Tumen residents said.

One of the few Chinese vendors in the market during a recent visit, who was selling North Korean crab, shrimp and frozen fish, said he lost a lot of money because his North Korean supplier increased prices without warning.

“It’s been really hard and risky to do business with North Korea, firstly because of the complicated procedures of going there,” the seafood vendor said, speaking on the condition of anonymity. He said Chinese traders need an invitation from a state-owned company and three stamps from three departments.

Once inside North Korea, he said, officials “are very greedy. They asked us for digital cameras or DVD players or even computers. We have to buy them dinner, and booze is a must for every time we meet.”

Even the new Friendship Road Bridge being constructed – to augment the existing single-lane bridge – has been difficult to negotiate. China agreed to foot the bill for building the bridge, more than $200 million. But then North Korea demanded China also build a five-star hotel and other infrastructure on the North Korean side, local businessmen said.

Economists said the experience of the local traders confirms their own research: that while North Korean officials publicly claim to want to pursue economic reform, and may speak of emulating China’s success, North Korea’s ruling elite remains deeply ambivalent about anything that might dilute its grip.

“The state has never been comfortable with the market,” said Marcus Noland, senior researcher with the Peterson Institute for International Economics in Washington, who surveyed 300 Chinese companies operating in North Korea. “They see the market potentially as an alternative path to wealth and prestige, and perhaps political power.”

While trying to “deepen their economic integration with China” at the official level, Noland said, North Korean leaders at the same time take steps “to eradicate this kind of normal trading activity at the border” by denying visas and constantly changing the regulations.

“The Chinese do not trust the North Koreans at all,” Noland said.

According to a recent story in the Wall Street Journal, the second DPRK-PRC bridge in Dandong is still tentative:

Construction of the new bridge was originally slated to start in August. Zhao Liansheng, Dandong’s mayor, said in March that building would start in October, and be finished within three years.

“The new bridge is still waiting for the approval of central government,” said an official from the Dandong Transportation Department. “As far as I know, this project is not definite yet.”

I am not sure of the exact location of the new bridge. If any readers are aware, please let me know.

Read the full stories here:
In Chinese Border Town, Trade With North Korea Can Be Lucrative but Problematic (Dandong, China).
Associated Press (via San Francisco Examiner)
Keith B. Richburg
11/26/2010

Border Bridge Reflects Dilemma
Wall Street Journal
Jeremy Page
11/28/2010

Posted in China, Foreign direct investment, Google Earth, International Governments, International trade, Statistics, Trade Statistics | Comments Closed

DPRK defectors in China

Thursday, November 18th, 2010

Andrei Lankov writes in the Korea Times:

Nowadays, there are between 20,000 and 30,000 North Koreans hiding in China, and roughly three quarters of them are women.

But what are they doing there? Of course, the major motivation behind their decision to flee was the disastrous economic situation in North Korea.

In the late 1990s, the refugees fled a very real threat of starving to death, while nowadays it is most likely that destitution and malnutrition drive them across the border. For men it is not so easy to move, since for them the stakes are higher. If caught, men are likely to face greater problems than women.

But there is another reason: large-scale trafficking of women (well, as will be explained later, the present author is somewhat wary about using the word “trafficking” to describe this phenomena).

Once a North Korean woman finds herself in China, she soon realizes that without ability to speak at least some Chinese, and with police constantly on alert against refugees, one of the best survival strategies available for her is to become a “live-in” partner of some local Chinese man.

The patterns differ greatly. In some cases, women are kidnapped or lured by false promises and then sold to Chinese husbands who might be very abusive and cruel. In some other cases, women make their own choice, often after spending years in China and acquiring a good command of the language as well as a good understanding of the situation.

The first is human trafficking, pure and simple. The second can hardly be described as anything but a normal marriage. But it seems that most cases lie somewhere between these two extremes.

When the border controls nearly collapsed in 1998-99, cross-border match-making services began to develop. The brides are in great demand in the poorer rural parts of northeast China. Similar problems are well-known in the South Korean countryside, too.

Single men cannot find wives since most girls go to cities and few of them would consider a farmer as a suitable husband anyway.

In the case of South Korea such a phenomenon recently produced an explosive growth in the number of the interracial marriages, with Korean farmers marrying Vietnamese and Chinese girls. In the case of China, the illegal migrants from the North are a substitute.

In some cases, a desperate bachelor pays mobsters or their intermediaries to get a wife whom he might eventually keep under house arrest, for fear that the kidnapped woman might escape.

However, more frequently families use the intricate network of inter-border connections to arrange a bride. Often the prospective wife is located on the other side of the border, but it is not a major obstacle as long as people have some cash to pay North Korean border guards.

Thus, many young Korean women enter the game willingly, even if their expectations about their future might be overly optimistic as they are often misled.

Frankly, I have serious problems with describing this particular type of arrangement as “human trafficking.” Our modern sensitivities might indeed be offended by an idea of a woman marrying somebody whom she has never seen, purely on assumption this is the surest way to guarantee her livelihood.

However, this is how nearly all marriages were concluded a century ago. The idea of romantic love union based on the mutual attraction is a novelty, invented in the 19th century Europe and still unusual in poorer parts of the world.

After all, many women get what they want: a stable life, free from hunger. They would never have such a life “under the fatherly care of the Dear Leader.”

However, these women are illegal immigrants and they have no way to protect themselves if the relationship turns abusive. If they escape, they are very likely to be caught by mobsters and sold again, or caught by police and extradited back to their home country (god knows what is worse).

However, it is also important and telling that a large number of such women, if they are indeed deported to the North to spend some time in jail there, use the first opportunity to come back to China in order to reunite with their husbands again.

Still, the North Korean authorities make sure that all women who are caught pregnant have abortions: perhaps, on the grounds of habitual racism, so common in the Kim Jong-il’s kingdom.

Many Chinese husbands try hard to do something about their Korean wives’ official standing. If the husbands are willing to contribute enough resources, sooner or later, the women acquire Chinese Resident Identity Card where they are registered as China-born ethnic Koreans.

Such an ID costs a lot in bribes to officials, but once it is secured the former hapless refugee becomes a proud citizen of the People’s Republic of China.

It is also important that children born out of such unions usually get the Chinese Resident Identity Card as well. This means that they will go to the Chinese schools and receive a standard education in Korean and/or Chinese.

However, apart from this cross-border movement of brides there is trafficking pure and simple. The Chinese sex industry is controlled and restricted, but exists, and North Korean girls form a large part of the sex workers in the cities of northeast China.

They are even more hapless than Chinese prostitutes, since they are probably more afraid of deportation than of their captors. But their sorry fate should probably become a topic of another story …

Read the full story here:
North Korean defectors
Korea Times
Andrei Lankov
11/18/2010

Posted in China, Emigration | Comments Closed

North Korean Economy Watch