North Korean Economy Watch

From NK Zone:
Michael Rank
10/15/2006

The Chinese businessman who is planning to develop the North Korean port of Rajin under a 50-year agreement with the border city of Hunchun says the deal remains on track despite NK’s nuclear test.

Fan Yingsheng, a property developer from Hunan province, said a road between the two cities should be completed within 15 months but gave few other details.

He told the Shanghai Evening Post [in Chinese] that U.N. sanctions “are something that we are expecting, and won’t have much effect on us.”

“After the nuclear test, North Korean colleagues did not tell my company about anything being different, I didn’t even receive any phone calls from them, which shows that it’s business as usual.

”So I am still planning to fly to Pyongyang to sign an agreement as planned, and haven’t thought of changing my schedule.“

Fan was speaking from Hunchun on October 12, shortly after meeting a group of North Korean officials, and was about to head across the border to Raseon where his company apparently has its main North Korean office. He said this visit had been scheduled a month ago.

The ceding of Rajin, an ice-free port with a handling capacity of three million tonnes a year, will give access to the sea to inland areas of northeast China which at present must send freight long distances by rail to the port of Dalian on the Bohai gulf.

The agreement also provides for the construction of a 5-10 square km industrial zone and a 67 km highway, and envisages that the Rajin area will become a processing zone for Chinese goods which will then be re-exported to southern China.

Fan is reported to have put up half the initial capital investment of 60 million euros ($70 million). The sum could not be denominated in dollars for political reasons.

Fan said in July that the Chinese side had approved the leasing of the port as had the city of Raseon, and “all we are waiting for is for the Korean central government to give its approval…”

From the Wall Street Journal:
Let Them Go: China should open its border to North Korean refugees
10/15/2006
Melanie Kilbatrick

If China is to assume what it considers to be its rightful place as a great power, now is the moment. The world is looking to Beijing as the only government with a measure of influence over its lunatic nuclear ward in the Hermit Kingdom. The question is, will it use it?

China says it favors “punitive” actions on Pyongyang for its apparent nuclear test last week, and there’s talk–so far desultory–of sanctions. But no one is speaking publicly about Beijing’s biggest source of influence: the 900-mile border it shares with North Korea. Opening the frontier to refugees would put pressure on Kim Jong Il to give up his nukes or watch his regime implode. As Mark Palmer, U.S. ambassador to Hungary in 1989, has noted, the East German refugees who passed through that country en route to West Germany sped the collapse of the Soviet Union.

The plight of North Korean refugees hiding in northeastern China is a humanitarian crisis that has received scant global notice. No one knows how many are in hiding or how many Beijing has deported back to North Korea in violation of its obligations under the Convention Relating to the Status of Refugees. China refuses to let the United Nations or other countries help the North Koreans.

Now, three official Chinese government documents–obtained privately and smuggled out of the country–show that the humanitarian crisis may be more dire than widely believed and the burden on China heavier. Two of the documents are from the Public Security Bureau–one from the Border Police and the other from a police station along the border. The third is from the Finance Bureau of the Yanbian Korean Autonomous Prefecture in Jilin Province, home to many ethnic Koreans.

The documents were obtained by a U.S.-South Korean group that helps North Korean refugees navigate the underground railroad to safety out of China. The group prefers to remain anonymous for fear that its work could be endangered. They have been vouched for to me by two other sources, one on Capitol Hill and another at an international human-rights organization.

The Border Police document, dated Jan. 10, 2005, begins blandly enough: “From the start of illegal border crossings in 1983,” it says, “the number of illegal immigrants from North Korea that have stayed in China has increased every year.” It adds, “Public Security and Armed Police departments have strengthened preventative and deportation efforts.”

The numbers it reports are newsworthy–and staggering: “To date, almost 400,000 North Korean illegal immigrants have entered China and large numbers continue to cross the border illegally.” And, “As of the end of December 2004, 133,009 North Korean illegal immigrants have been deported.” While Chinese authorities obviously know how many refugees they have deported, by definition they can’t know how many are in hiding. The estimate of 400,000 is sure to be low.

The Yanbian Finance Bureau document, dated Oct. 19, 2004, provides further evidence of the extent of the crisis. It is a letter to provincial authorities requesting more money to help with deportation efforts. “According to statistics from the Public Security, border police and civil administration, more than 93,000 refugees are still living in Yanbian Prefecture.” The letter goes on to say that although the Border Police Bureau has established “six new refugee-deportation and detention centers,” it does not have sufficient funds to do the job. Yanbian requests 30 million yuan ($3.8 million) a year “to solve this financial problem.”

It’s the third document, though, that puts this “financial problem” in human terms. It’s a report, dated Oct. 7, 2003, from a police station in Badaogou Precinct, near Baishan City, in Zhangbai Korean Autonomous County, also in Jilin Province.

“At 7 a.m. on Oct. 3, 2003,” Case Report No. 055 begins, “a report was received from the public of several corpses floating in the Yalu River. Officers from the Precinct immediately responded and organized personnel and by 10 a.m. 53 corpses had been recovered.

“At 5 a.m. on Oct. 4 an additional three corpses were recovered for a total of 56 corpses. There were 36 males and 20 females, including seven children (five male and two female). After examination of the personal effects it was determined that the dead were citizens of the DPRK [North Korea]. Autopsies confirmed that all 56 had been shot to death. It is estimated that the dead were shot by Korean border guards while attempting to cross into China.”

While Pyongyang bears ultimate responsibility for the abuse of its citizens, China is complicit. Its policy of tracking down and repatriating refugees amounts to a death sentence for many returnees. It’s a crime to leave the workers’ paradise, and North Koreans who are caught and deported are shipped off to internment camps or worse.

If Beijing wants to send a message to Pyongyang about its nuclear program, it could announce that, effective immediately, it is taking several steps: It will stop deporting North Koreans, allow the United Nations to set up refugee camps, and permit the resettlement of refugees in third countries, from which they could go to South Korea, whose constitution codifies its moral responsibility to accept its Northern cousins, or to other countries willing to take them in. The U.S., which so far has accepted a mere eight North Koreans, could step up to the plate here.

The Border Police document notes that since the early 1980s there have been six instances of mass migrations that have coincided with North Korea’s famines. Now, winter is coming, and there are already reports of food shortages. Allowing the world to help the North Korean refugees in China would help Beijing deal with a problem that is likely to get worse.

From NK Zone:

DPRK/PRC border controls have been eased at an iron mine which a Chinese company now runs. Xinhua news agency reported that the border post at Sanhe in Jilin province was now open 12 hours a day instead of eight and a “green channel” had been introduced to reduce customs delays.

Sanhe is opposite the Hoeryong iron mine which is run by a Heilongjiang company under a deal signed in June. The report dated Oct 1 gave no further details of the agreement.

Hoeryong is about 70 km northeast of Musan, said to be North Korea’s largest iron mine, with which Tonghua Steel is planning to sign a seven billion yuan ($880 million), 50-year exploration deal. Chinese officials said last year an agreement would be signed soon but there has been no word of a deal being signed.

Michael Rank story here and the Nautilus Institute last month released two reports on Chinese-NK economic ties. Report and Presentation 1.  Report 2.

Yonhap
9/20/2006

China has sent relief supplies to flood victims in North Korea, the North’s state media said Wednesday, amid reports that the two communist neighbors were trying to restore ties that were frayed following Pyongyang’s missile tests in July.

“The government of China provided the DPRK with aid materials including food and diesel fuel in connection with flood damage,” the North’s Korean Central News Agency said in a brief dispatch.

The one-sentence article did not provide details such as the size of relief goods, but they would be the first Chinese aid shipment to the impoverished North since the latter defiantly test-launched seven missiles on July 5, drawing strong international condemnation.

China voted for a U.N. resolution condemning the missile launches and imposing weapons-related sanctions on the North, undermining its traditionally strong ties with North Korea.

After the North’s missile launches, China sent top government officials such as Vice Premier Hui Liangyu and Vice Foreign Minister Wu Dawei to Pyongyang to discuss the issue, but they failed to meet leader Kim Jong-il. In the past, Kim has usually received courtesy calls by visiting Chinese delegates.

The two countries have recently shown signs of resolving their soured ties, however, as the North remains locked in a global standoff over its nuclear and missile programs.

On Sept. 11, North Korea’s No. 2 leader Kim Yong-nam said, “It’s a firm policy of the DPRK to make efforts to strengthen the traditional friendship with China,” while meeting China’s new ambassador Liu Xiaoming, according to China’s Xinhua news agency.

Three days later, Qin Gang, a spokesman at China’s Foreign Ministry, said Beijing will strengthen ties with Pyongyang, saying its goal of preserving friendly ties “has been consistent and remains unchanged.”

China is believed to have been the largest donor of aid to North Korea, which has resorted to outside handouts since 1995 when its state-controlled economy collapsed due to economic mismanagement and natural disasters.

North Korea was hit hard by torrential rains in mid-July. Its official media said hundreds of people were killed or went missing, while arable land capable of producing 100,000 tons of grains was wiped out.

China also hosted several rounds of six-nation talks on the North’s nuclear weapons program, each of which ended without much progress. The North has boycotted the disarmament talks since November, citing U.S.-imposed sanctions on it for alleged counterfeiting, money-laundering and other financial crimes.

A series of latest media reports speculated that North Korean leader Kim may visit China soon to promote the bilateral ties and discuss the nuclear and missile dispute.

From the Korea Times:
China’s Ambition Over Mt. Paektu Angers Koreans
Lee Jin-woo
9/15/2006

A single torch lit at the top of Mount Paektu – the Korean Peninsula’s highest mountain, erected near the North Korean-Chinese border – angered South Koreans earlier this month.

The torch was lit for the sixth Winter Asian Games to be held in Changchun, China from Jan. 28 to Feb. 4 next year. The host city’s mayor said the mountain was chosen as the torch flaming site on Sept. 6 because three rivers _ Tuman, Amrok and Songhua _ originate there. Tuman and Amrok rivers are also known as Tumen and Yalu in Chinese.

Not many South Koreans, however, see the move merely as part of the athletic event. Many see it as the Chinese government’s sly move to promote the mountain, which Koreans regard as a sacred place, as its very own.

Under an agreement struck in 1962, China and North Korea, two sovereign states and U.N. members, agreed to share the mountain. The North controls 54.5 percent of the mountain, and China occupies the remaining 45.5 percent.

On Sept. 5, another news report on China’s move to hold the 2018 Winter Olympic Games at Mount Paektu surprised South Koreans.

Based on a press conference by a Chinese official from Jilin Province in northeastern China, South Korea’s Yonhap News Agency reported that China unveiled its intention to hold the international winter sports festival at Mount Paektu or Changbai-shan as it is known by the Chinese.

The report enraged many South Koreans, who have already been upset by China’s moves to put the 2,744-meter mountain on the UNESCO’s “World Geopark” list and similar efforts by Beijing to register it with the U.N. agency as a “World Heritage” site.

Dubbed the “Mount Paektu project,” China’s actions are believed by many South Koreans to be part of the “Northeast Project,” a Chinese academic project to reexamine ancient history in the region. Many Koreans view the project as an attempt to distort ancient Korean history in the northeastern territory of what is now China, including the Koguryo Kingdom (37 B.C.-A.D. 668) and the Palhae Kingdom (698-926).

Unlike the angry South Korean public and news media, the government has remained calm over China’s recent provocations.

“We acknowledge that a provincial government official in China did express a tentative future plan for the 2018 Winter Olympic Games, but the central Chinese administration has not revealed any plan,” an official of the Ministry of Foreign Affairs and Trade told The Korea Times on condition of anonymity.

“There have been suspicions over the construction of a new international airport near the mountain, but it’s hard to link the project to the winter sports event,” he added.

Once the Fusong airport, located just a 10-minute drive from Mount Paektu, is completed by August 2008, some 540,000 passengers are expected to use it, reports said.

Another ranking government official also said most Chinese officials dismissed such allegations, saying, “Preparing for the 2008 Summer Olympics in China has made us too busy to push ahead with another massive project.”

On Sept. 8, Rep. Kim Gi-hyeon of the main opposition Grand National Party disclosed an internal document produced by South Korea’s Cultural Heritage Administration, which suggested that the Mount Paektu project is closely related to China’s plan to prepare for territorial disputes, which are expected after the possible unification of the Korean Peninsula.

The administration later said the document cannot be considered the government’s official stance over the dispute, but it has been collecting information on the matter.

Many South Korean academic and civic groups, as well as the press, have urged the government to join hands with the North to address the dispute.

The communist nation, however, has remained quiet.

Unlike in 2004, when China’s treatment of Korean history angered the two Koreas, the North has not issued a single statement denouncing its traditional ally.

The 2004 dispute seems to have subsided after Beijing promised to resolve the row through academic discussions and not allow it to develop into a political dispute.

Ryoo Kihl-jae, a professor at the University of North Korean Studies in Seoul, said North Korea seems to have understood China’s desperate situation to push ahead with the “Northeast Project” to control various ethnic groups and suppress their increasing calls for independence.

“The Chinese government is having a hard time handling a number of minority ethnic groups,” Ryoo said. “Unless China dispatches a large number of its military units to Mount Paektu, North Korea is not likely to find fault with the recent moves.”

The professor was also skeptical about the possibility that North Korea would cooperate with the South to block any further attempts by Beijing to distort history.

“It’s hard to expect North Korea to cooperate with the South to confront China,” he said. “I believe the ongoing historical disputes with China should be resolved by scholars and civic groups, not by government-level talks.”

From NewKerala.com
9/14/2006

China today scotched media reports that the ruling Communist Party may revise the 1961 defence treaty with North Korea, which is engaged in a diplomatic stand-off with the United States on the nuclear issue.

“We don’t plan to amend the treaty,” Chinese Foreign Ministry spokesman Qin Gang told reporters when asked to comment on media reports.

The ruling Communist Party of China, which will hold its annual meeting in October may discuss the possibility of revising the treaty with North Korea that commits Beijing to come to the aid of Pyongyang should it come under attack from foreign forces, a Hong Kong rights group had claimed yesterday.

The Information Centre for Human Rights and Democracy said in a statement that the revision to the mutual friendship and cooperation treaty will be discussed in a bid to prevent China from becoming involved in a possible war on the Korean Peninsula.

China is North Korea’s traditional ally and main aid provider to the reclusive nation.

Beijing is apparently unhappy with Pyongyang’s recent missile tests and refusal to return to the six-party talks on its nuclear programmes.

From the Daily NK:
NK, A Pitiable Medicine Peddler at aTrade Exhibition
9/4/2006
Kim Young Jin

The Second China Jilin Northeast Asia Investment and Trade Expo commenced on September 2nd in Changchun, Jilin province where North Korea dispatched 100 people from economic and trade groups to set up 36 booths promoting and consulting trade and goods.

North Korea elected Kim Dong Myeong director of Chosun International Exhibition Co. to coordinate the North Korean booths at the trade event, and director in second department of Ministry of Foreign Trade Jeon Hyeong Jeong, vice secretary of Chosun Chamber of Commerce Yoon Young Suk, Chosun Manyeon Health Co. Lee Yong as department representatives. About 100 people were allocated to various booths in addition to 30 Chinese university students who acted as translating helpers.

‘Wooden spatulas’ and ‘Dried ferns?’

The exhibition was divided into categories such as food, cars, electronic goods, petrochemicals, metal goods, construction materials and medical machinery of which North Korea exceeded technicalities and opened 32 booths related to ‘food.’

In the division of construction materials, the Chosun Chongjin Metal Corporation Company had not organized their booth even after people began to enter the exhibition hall much to the embarrassment of sponsors. Clients passed by confused as in the next booth, ‘Inpung Trade Company’ from the Trade Department in Jagang province had set up a display of wooden spatulas, chopsticks and dried ferns totally unrelated to construction.

North Korean booths categorized as ‘foods,’ health and medical products were the focus of retail sale. Each booth stationed 1~2 consultants wearing a dress shirt and pants, 1~2 sales assistants wearing the traditional Korean costume and a Chinese translator sponsored by the event.

Rather than directly advising clients on product queries, the male consultants seem to sit clustered at the back of the booth supervising the female sales assistants and translating helper. As the translating helpers were all Chinese university students and partly inexperienced in English or Korean, it was obvious that they were having difficulty trying to explain product information to foreign clients.

Abundant medical products, chili paste and sesame oil unverified

Excluding Chosun Mansudae Overseas Project Group of Companies of D.P.R.K. (MOP), Chosun Minye Corporation and Chosun Suyangsa Trade Company which sold North Korean paintings, porcelain and handicrafts, the majority of booths sold ‘food’ or ‘medical’ products.

A spokesperson for ‘Tosung Korea Medicine Export Department of Pyongyang Trading Public Corporation’ drew the attention of clients by stating “The ‘Tosung 1 injection’ developed by our company is the leading panacea of this generation. This injection is known to have outstanding effect on various illnesses such as cancer, leukemia, diabetes and tuberculosis.”

In reply to a reporter’s question “If 1,000 injections are ordered, how many days it will take for delivery?” the assistant answered “It is difficult for me to give you a definite answer. However, if equipment is offered for a large-scale order, delivery should be made possible within 3 months.”

Of the North Korean sales assistant met by the reporter, the majority of workers knew only of the cost of products on display and when questioned of large-scale orders, delivery, North Korea’s proof of inspection, ‘clinical effectiveness’ and ‘medical approval’ assistants could not give any definite answers.

However a common scene amongst North Korean booths were appeals to clients “Although economic conditions nor equipment do not yet support mass production, not only has a new medical product has been successfully created but we ensure that the world’s best ingredients, effectiveness and skills are used.”

North Korean assistants asserted by showing ‘An innovative wonder drug’ developed by ‘Chosun Dongbang Drugs Center’ as an impotent drug ‘neo-viagra-Y.R,’ the bird flu antidote ‘Kumdang-2 injection’ by ‘Chosun Pugang Pharmaceutics Company’ and longevity foods ‘Angungwoohwangan’ developed by Korea Myongsung Health Food Pharmaceutical Factory.

According to a speech by a sponsor, various Northeast Asian countries such as South Korea, China, Japan, Mongolia, North Korea and 46 other countries participated in The Second China-Jilin Northeast Asia Investment and Trade Expo. Of 500 corporations in the world, 71 corporations participated in the event and promoted products in 2,200 booths.

From Yonhap:
Byun Duk-kun

The increase in the first-half trade between North Korea and China fell to the smallest volume in five years, South Korea’s Unification Ministry said Monday.

Ministry officials said the slowdown did not appear to be linked to North Korea’s recent provocations, such as the test-firing of seven ballistic missiles in early July.

The amount of North Korea-China trade only increased 4.7 percent on-year to US$780 million in the January-June period, Kim Nam-sik, head of the ministry’s information and analysis bureau, told reporters.

This marked the smallest, as well as the first slowdown of, increase in trade between the close allies since 2002 when trade volume increased by 6.2 percent for the same period from a year before.

The year-on-year growth in the first-half Sino-North Korea trade reached 16.2 percent in 2003, 37 percent in 2004 and 43 percent last year, according to Kim.

The report comes amid reported signs that Beijing may have begun taking measures to reduce or limit its economic cooperation with Pyongyang as a way of expressing its dismay or anger at the North for its test-firing of seven ballistic missiles on July 5.

The ministry official, however, cautioned against interpreting the slowdown as signs of a possible disruption in relations between the communist allies, saying the reason for the slowdown appears to be economic rather than political.

“Many experts believe it (the slowdown) is more due to economic than political reasons,” Kim said.

The amount of North Korea’s exports to China for the first six months of the year decreased by more than 14 percent to some $200 million, also marking the first decline since 2000, according to a report by the information bureau.

Kim said this, too, was mainly because of economic reasons, such as the reduced price of North Korean exports to China “while the amount of exports remains the same” from that of last year.

Analysts here believe China may completely halt its economic and political relations with the North if Pyongyang decides to conduct a nuclear test.

The ministry official said there were no immediate signs of China taking such measures to punish North Korea.

From ABC News:
Burt Herman

China has reduced shipments of crude oil to North Korea, apparently in response to Pyongyang’s missile tests, a news report said Saturday.

China, the communist North’s closest ally and key provider of oil, also has agreed with South Korea to cooperate to prevent a possible North Korean nuclear test.

South Korea’s Chosun Ilbo newspaper said China has reduced “a significant amount” of its oil supplies to Pyongyang since the July 5 missile launches.

The report cited unnamed officials at an oil storage terminal near the Chinese border city of Dandong.

Officials could not be reached for comment Saturday.

There are growing concerns, bolstered by reports of suspicious activity, that Pyongyang may be planning to follow up its missile launches with a nuclear test. Pyongyang claims to have nuclear weapons but hasn’t performed any known test.

Song Min-soon, South Korea’s presidential security adviser, said Saturday that a North Korean nuclear test would be “a grave situation of a different level from missile launches and that South Korea and China have agreed to continue cooperation not to let that situation occur.”

Song, who returned from a two-day trip to Beijing on Friday, refused to elaborate how the two countries would cooperate.

South Korea, China, Japan, Russia and the United States have tried in six-party talks to convince the North to abandon its nuclear program.

South Korea’s seismic authorities said they detected a tremor in North Korea on Friday, but ruled out an underground nuclear test.

Talks on the North’s nuclear program have been stalled since November, when negotiators failed to make headway in implementing the North’s agreement to drop its nuclear program in exchange for aid and security guarantees.

Pyongyang has since refused to attend the six-party talks until Washington stops blacklisting a bank where the North’s regime held accounts, a restriction imposed over alleged counterfeiting and money laundering.

Daily NK
By Shin Joo Hyun
8/25/2006

“No changes to trade after the financial sanctions to North Korea” 

In response to North Korea’s illegal trade of currency, the U.S. passed the North Korea sanctions in which China agreed to participate. However, it has been confirmed that little changes have been made to North Korea-China trade.

On 28th July, I went to Dandong, China where North Korea-China trade is most active. It was here that I met a tradesman ‘K’ who said that there has been little change to the amount of goods going from Dandong to Shinuiju. He said that the restraints on trade outlined in the press after the missile launch, is in fact different to reality.

In order to see the amount of trade between North Korea and China for myself, I headed for Hualian warehouse. The size of this warehouse and parking lot is as big as a school playground and numerous cargo trucks were on stand-by to be loaded and shipped.

Goods that pass the route from Dandong to Shinuiju are all contained at this warehouse and then are shipped over the boarder in large cargo containers. It appears that it is a goods warehouse to promote North Korea exports. On the 25th at 3PM, I snuck into the warehouse by a small truck.

On entering the premises ‘K’ who accompanied me to the warehouse did not have to undergo thorough inspection as he was a regular tradesman with North Korea. This location is restricted for foreigners to enter, in particular South Koreans who are unquestionably prohibited from entering the grounds. Undoubtedly photography and collection of data is also prohibited.

While riding the truck we circled the warehouse once and I was able to witness goods busily loaded onto containers. The busiest part of the day is around 1-2PM. At present the height of the day has passed and rather containers sent to Shinuiju customs are visible.

The warehouse seems quiet, maybe because the busiest part of the day has passed. I can see everyday warehouse workers taking orders from drivers and loading goods onto trucks such as sugar, flour and confectionary. On one side are boxes of fans and beer going to North Korea. As always, the majority of goods transported to North Korea is food and clothes.

Amongst the goods, Chinese noodles and clothes with floral prints are most popular. Until recently, the most popular and expensive item was the VCD however it has now become a prohibited import. According to ‘K’ a large warning is written at the entrance of North Korea’s customs house saying ‘Import of VCD’s prohibited.’

‘K’ said “Lately, capitalist ideologies are entering North Korea, hence authorities are trying to destroy republicanism by prohibiting the import of VCD’s. This means we are to watch ‘Bocheonbo Band’ videos made in North Korea, however it’s easier said than done. We are lucky that they have not yet confiscated what we already have.”

To a passing North Korean trade director, ‘K’ asks whether or not a lot of goods were loaded onto containers today. The director replied “There are so many goods that the warehouse is overflowing” and added a snarl remark that “The workers (Chinese staff) are inefficient with their hands” and returned to his truck.

The director had an imposing built body rare for North Koreans. ‘K’ said that although the people of North Korea may be living a hard life, the North Korean people trading here live a relative abundant life. With the image of an imposing director in my mind, I left the warehouse.