Archive for the ‘China’ Category

N. Korea-China Ties Shaky: Expert

Wednesday, December 6th, 2006

Donga
12/6/2006

“The relationship between North Korea and China can be compared to a river that seems calm on the surface but has a great number of uncertainties surging underwater.”

Kurt Campbell, the senior vice president at Center for Strategic and International Studies (CSIS) and a think- tank in the U.S., had an interview with this newspaper on December 04. Senior vice president Campbell, renowned as an authority in international securities especially regarding China, said, “The official stance of China is to protect North Korea, but the nation is upset internally at the attitude of North Korea that belittles China and the global society. Without a noticeable change in the attitude of North Korea, China might take steps to reappraise its policies toward North Korea it has maintained over the years.”

―You analyzed in a seminar last month that North Korea will come into possession of nuclear capability targeting China.

“North Korea is feeling threats from many sides. What I meant was that while the major military is aimed at the U.S. across the truce line and Japan, North Korea should be aspiring underneath the surface to have suppressive force against China out of concerns regarding their relationship with China.”

At this point, senior vice president Campbell diagnosed that “North Korea seems determined to become a nuclear nation and will not give up on it” and went on to give his view that “even in case North Korea returns to the six-party round table, it will not show fundamental improvements.”

―How do you view the South Korea-U.S relationship in the present and in the future?

“The relationship between South Korea and the U.S is quite stable at the lower level. The greatest risk to the relationship between South Korea and the U.S. presently is not in the relationship itself but in the domestic politics of South Korea. Uncertainties are being aggravated by questions over where President Roh will take the problems (of the Korean Peninsula).”

―You said the South Korea-U.S relationship is stable at a low level.

“The nuclear testing by North Korea helped compose the relationship between South Korea and the U.S. The replacement of U.S. Defense Secretary Donald Rumsfeld will also help. He was not a factor conducive to the South Korea-U.S. relationship. I think he looked at South Korea not as a profitable strategic partner but as a pain in the ass. In this aspect it was incidental and ironic that the aim of Secretary Rumsfeld and President Roh, regarding matters such as the transfer of right to control strategies in war, converged at the same point. Of course their motivations diverged greatly. On the other hand the future U.S. Defense Secretary Robert Gates seems to be a person who shares the opinion that having a closer relationship with South Korea is important.”

―How would you grade the response by related nations toward North Korean nuclear testing?

“I hope to see South Korea, the U.S., and China sending North Korea a concurring message. But what I’m concerned about is whether the government of South Korea did not send a message that “even though the nuclear testing was depressing, it was not unforgivable, and a certain level of business can go on.”

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Why N Korea’s neighbors soft-pedal sanctions

Thursday, November 30th, 2006

Asia Times
(abridged)
11/30/2006

United Nations Security Council Resolution 1718 has had no impact on the economic activity in the remote northeastern corner of North Korea where Russians and Chinese are building transportation infrastructure for future industrial-development projects. As was planned before the nuclear test, the Russians began repairing a dilapidated railway line, while the Chinese continued with their highway-construction project.

There were no delays in the normal operations of the Kumgang (also transliterated Geumgang) project, a joint tourist venture on the border between two Koreas. Every day many hundreds of South Korean tourists travel about 20 kilometers into the North to visit the picturesque mountains and spend a few days there, leaving their currency in the accounts of the North Korean government. The project has always been a major money-earner for the cash-hungry North. The Americans tried to stop Kumgang operations, but the South Koreans refused, and business continued as usual.

It was reported this month that a number of the North Korean workers employed by South Korean companies in Gaesong industrial park exceeded the 10,000 mark. Gaesong industrial park is the largest cooperative venture between two Koreas. It is the place where South Korean capital and technology use cheap North Korean labor to produce internationally competitive stuff – or at least this is what is supposed to be going on there.

In spite of optimistic talk, so far the project has been a money-losing enterprise for the Southerners, and most companies stay in Gaesong only because their government is willing to back them financially.  Still, Seoul, even when it talked tough, did not do anything to slow down the project. On the contrary, the Gaesong project is growing fast, and so, one might suspect, are revenues it provides to the Pyongyang regime.

By now it has become patently clear. No international sanction regime against North Korea worthy of its name is in place, and there is no chance that such regime will emerge in future. China, Russia and, above all, South Korea do not want to punish North Korea for going nuclear.

China is not happy about a nuclear North Korea, but probably sees it a lesser evil than a unified Korea that is likely to be under US influence and will perhaps even have US military bases. Beijing does not want this. It also does not want a collapse of another state under communist rule – this might be a bad news for domestic propagandists.

And last but not least, in recent years Chinese companies have moved into North Korea, taking over mining and infrastructure, so such gains need be protected as well. At the same time, the North Korean nukes are not seen by Chinese strategists as an immediate problem: the Chinese assume (correctly, perhaps) that these weapons will never target China and will not be transferred to China’s enemies. So for China, keeping North Korea afloat is a strategic imperative.

Russia is not a major player in the Korean game nowadays, but it has some leverage as a potential “blockade breaker”. Without sincere cooperation from Russia, no efficient sanctions regime will be possible, and such cooperation seems unlikely. Moscow does not want the North Korean regime to collapse. The country’s leader Kim Jong-il is potentially useful for numerous diplomatic combinations, and also as a deterrent against the Americans, who are increasingly seen by President Vladimir Putin’s Moscow as dangerous global bullies.

However, it is South Korea whose policy is decisive in these issues. Indeed, in recent years North Korea was kept afloat by generous Southern aid, with some 500,000 tons of grain and a large amount of other supplies being sent north every year. This aid saved countless lives in the North, but it also contributed to keeping the regime in control.

It has been clear for a decade that South Korea, in spite of all the rhetoric, does not want unification to happen too fast or too soon. The German experience demonstrated how vastly expensive unification might become, and Koreans have good reasons to believe that their situation is much worse than that of Germany. After all, the per capita gross national product in East Germany was roughly half of the West German level, while in the case of North Korea, per capita GNP is less than one-tenth of the South Korean level.

Judging by the experience of the 1990s when the North Korean regime was more isolated than now, economic pressures alone will not necessarily lead to its collapse. During the great famine of the late 1990s, between a half-million and a million people starved to death without causing any inconvenience to the regime. There are no reasons to believe that sanctions would achieve much either, apart from producing another famine and many more deaths.

In contrast, the ongoing exchanges bring to North Korea information about the outside world, and this information is subversive by definition, making more and more people wonder whether something should be done about their country’s political and economic system, so clearly inefficient and anachronistic. Thus the current situation surrounding the so-called “sanctions” might be a rare case when the hypocrisy and duplicity of so-called “collective diplomacy” is doing more good than harm.

Early this month a market riot happened in the remote North Korean city of Hoeryong. Perhaps for the first time since 1945, a large group of North Koreans openly and vocally protested an unpopular decision of the local administration. This was a minor incident, but in the long run it might be more significant than all the meaningless invectives delivered by the well-dressed people in the UN Assembly Hall.

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China says oil still goes to the North

Friday, November 17th, 2006

Joong Ang Daily
11/17/2006

China has not cut off oil supplies to North Korea, nor will it stop oil and food assistance to its ally as a means of exerting political pressure, Chinese officials were quoted as telling a group of U.S. scholars.

The Americans in the group also said Wednesday that Chinese officials seemed to have a different understanding from the North Koreans about how U.S. financial sanctions would be dealt with at the next round of six-nation talks.

The Chinese reportedly said they were “surprised” that Pyongyang had told the group it expected those sanctions to be lifted.

Siegfried Hecker, a visiting professor at Stanford University, said he asked Chinese foreign ministry officials if Beijing had cut off heavy fuel oil to North Korea as reported.

“The answer was that China did not cut off heavy fuel oil to North Korea. That’s the direct answer that we received,” he said at a news conference.

Mr. Hecker was part of a four-member delegation that was in Pyongyang Oct. 31-Nov. 4. He is a former director of the Los Alamos National Laboratory, a U.S. nuclear weapons center, and has visited North Korea three times.

The other members of the team were Jack Pritchard, former U.S. point man on North Korea policy and now head of the Korea Economic Institute in Washington, D.C.; Robert Carlin, a former North Korea analyst now at the Korean Peninsula Energy Development Organization; and John Lewis, a Stanford University professor.

There was speculation that Beijing had ended the fuel aid to the North in September, when Pyongyang showed signs of preparing for its first nuclear test. The aid suspension was believed to be China’s way of pressing its ally to forgo the test.

Mr. Hecker said Chinese officials were clear that Beijing did not and would not stop fuel and food donations, arguing that North Korea would only “grow stronger” if pressured.

The team arrived in North Korea on the day the communist regime, after a year’s boycott, agreed to return to the six-nation nuclear talks that also involve South Korea, the United States, China, Russia and Japan.

Pyongyang left the table to protest punitive measures taken by the U.S. Treasury against Macao’s Banco Delta Asia for allegedly laundering money for the North.

North Korean officials told the American visitors that they expected discussions and a conclusion of the sanctions issue at the next six-party talks, according to Mr. Pritchard.

But Chinese officials, when told of Pyongyang’s position, “expressed some surprise,” Mr. Hecker said.

“They indicated, obviously, differences of opinion as to what was agreed on,” he said.

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The Political Economy of Chinese Investment in North Korea

Wednesday, November 1st, 2006

Asian Survey
November/December 2006, Vol. 46, No. 6, Pages 898-916
Jae Cheol Kim
Professor of International Studies at the Catholic University of Korea, Seoul.

PDF here: chinainDPRK.pdf

Conclusion:
China’s investment efforts suggest that it has begun to engage North Korea economically. By investing, the Chinese leadership has attempted to push the North to embrace economic reforms, which in turn could improve the North Korean economy and reduce the country’s potential for political instability. In order to lead the North to embark on reform policies, Beijing has tried to provide it with seed money and technology by encouraging Chinese companies to invest. This suggests that despite expectations and allegations from the West that China might abandon its long-time ally, China is committed to supporting North Korea.

The Chinese investment, however, has increasingly been influenced by commercial considerations. Officials in Beijing have stressed that economic exchanges with the North must be mutually beneficial. Chinese companies, which have become responsible for the majority of the investment, have paid increasing attention to market share and natural resources. That China has increasingly tried to gain economic advantage in the North suggests that Sino-North Korean relations are being transformed from being ideology-motivated to interestmotivated.

Despite a stiff increase over the past couple of years, it is hard to say that Chinese investment is either full-fledged or irreversible. Because the instability of North Korea prevents Chinese entrepreneurs from fully embracing the country, Chinese investment must be seen as a pilot project, with Chinese companies and entrepreneurs testing the water. Looking to the future, Chinese investment in North Korea is likely to increase. Despite problems, the Chinese leadership will probably continue to encourage further investment in an effort to exploit developmental opportunities while simultaneously curtailing the flow of direct aid to the North. In addition, China’s dynamic economic growth will propel its overseas investment. As China’s capital account is gradually liberalized, cash-rich Chinese companies will look for markets and resources abroad to fuel their development. The potential appreciation of the yuan will further force firms to relocate factories producing low-end products to countries where the labor cost is lower. Seen from this perspective, North Korea is a good candidate for future Chinese investment—if there is no major turbulence in bilateral relations.

Highlights:
North Korea has been reluctant to follow China’s path of reform and opening because it worried that the policy may create political problems. In an apparent response to China’s recommendation in the late 1990s for reform, for instance, Kim asked Beijing to respect “Korean-style socialism.” But China’s support for reform is not unconditional. Although Chinese leaders have repeatedly urged the DPRK to embrace market-driven reforms (even taking Kim Jong Il is on tours to see the results of China’s economic reforms), when North Korea decided to set up a special economic zone in Sinuiju, apparently without prior consultation with Beijing, China aborted the project by arresting Yang Bin, whom North Korea had designated head of the zone, in October 2002.

China, however, does not want to see turbulence on the Korean Peninsula, which could not only lead to the economic and political collapse of a socialist regime on China’s border but could also threaten regional stability. China thus has tried to sustain the Pyongyang regime by providing economic assistance–believing that reform and opening would not only revive the North Korean economy but also reduce the need for regular aid to prop up the regime, Chinese Premier Wen Jiabao said that the Chinese government would encourage more of its companies to invest and establish their businesses in North Korea.

For Chinese firms, the prime minister’s statement amounted to a government directive, with some entrepreneurs understanding that Wen’s statement was a signal for Chinese companies to invest.  Organizations were formed to smooth such investment, including the Shenyang Municipal Association of Entrepreneurs (Shenyangshi Qiyejia Xiehui), Dandong Municipal Economic Consultation Center for the Korean Peninsula (Dandongshi Chaoxianbandao Jingji Zixun Zhongxin), and Beijing Sino-Korea Economic & Cultural Exchange Company (Beijing Chaohua Youlian). They organized explanatory meetings on investment, drawing numerous applicants.

Beijing attempted to boost investors’ confidence by signing an “Investment Encouragement and Protection Agreement” with Pyongyang in March 2005 when Premier Park Bongju visited Beijing. The framework for economic and technological cooperation was made clearer through the signing of an “Agreement on Economic and Technological Cooperation” that October. Chinese officials have given financial incentives and guarantees to firms that invest in North Korea. China’s state-run banks have not only provided companies with investment capital but also have underwritten Chinese investment for joint ventures. Beijing granted preferential treatment to products processed in the North, allowing them better access to the Chinese market. Products that were processed in the Rajin area with Chinese materials and then imported to China, for instance, were labeled domestic trade and were thus exempted from customs inspection.

The deputy CEO of Beijing Sino-Korea Economic & Cultural Exchange Company, a Beijing company that helps Chinese companies invest in the North, has been quoted as saying that whether a company is able to invest in North Korea depended not on the company’s will but on whether the North would accept it or not. Foreign investors, he added, needed to meet the criterion of “political reliability.” In practice, concerns about political contamination limit North Korea’s economic cooperation with South Korea, whose government has eagerly pushed economic integration with the North. North Korea’s opening therefore means an opening toward China, and this in turn gives Chinese companies very rare advantages.

Labor costs in the DPRK are low [compared to China], running only 70–80 yuan (about US$10) per month.  Building a factory is very cheap, up to one million yuan (about $120,000).  Chinese entrepreneurs see that what North Korea needs is largely light industrial products. Because brand consciousness there is weak, these investors believe that many Chinese companies, even small- and medium-sized ones, can compete in the North Korean market.  The scope for making profits is bigger in North Korea than in China because manufacturers can charge more for similar products in the North. For example, the price of a cigarette lighter is three to five yuan ($0.36 to $0.60) in Pyongyang but only 0.5 yuan ($0.06) in Wenzhou, China.

Although big state-owned companies account for the majority of Chinese outward investments, they rarely invest in North Korea, leaving this to small- to medium-sized companies. In the past, most Chinese investors were Korean-Chinese merchants from two areas in China: Liaoning Province and the Yanbian Korean Autonomous Prefecture. They do not expect that they can make profits in the North Korean market right away; rather, they plan to be ready for when the North opens to the world, by moving into the market early.

Chinese investment projects in North Korea are not only small in number but also weak in scale. There are no detailed data available on their average size, but they likely are no exception to the fact that China’s outward investment is generally characterized by its small scale and low level of technology.

Although North Korea wants capital in such sectors as home appliances, construction materials, electronic communications products, and machine building, Chinese investment is heavily concentrated in the sectors where China’s needs lie, such as resource extraction, or where its companies can make a profit, such as service sectors. The official Chinese guideline for outbound investment, noted above, recommended investment only in such manufacturing sectors as textiles, clothing, and food products, leaving aside other sectors for which North Korea wants investment.

The North lacks basic frameworks needed for drawing in foreign investment. Policies, laws, and regulations about tax, for instance, are not in place. There is no well established market mechanism for running the economy. The government is still heavily involved in economic management; therefore, potential investors need to have personal networks to open doors, a point that worries potential Chinese investors.  North Korea lacks a sound political environment for enticing foreign investment. The country’s economic policies, especially those related to reform, shift continuously, raising questions about the official commitment to reform.

Pyongyang Department Store No. 1
Zeng Changbiao, chief executive officer (CEO) of the Zhongxu Group, in a much publicized deal in 2004, signed a contract to run Pyongyang’s Department Store No.1 for 10 years. He said his main motive for investing was to take over the North Korean market. He wants to be dominant in the North Korean retail business by securing and expanding market share. But it is not clear whether the contract was put into practice.  An article in a journal published by the National Development and Reform Commission, a ministry-level organization of the Chinese government, suggested that little had changed at the department store by the middle of 2005. South Korean officials also say that the store is still run by North Korea. Zhongxu Group’s Zeng received the lowest tax rate—5% income and 5% import—in the North Korean tax system.

This is one of three big department stores that were being run either by the Chinese alone or jointly.  Shenyang Municipal Association for Trade Promotion opened Daesong Market in Pyongyang, the first wholly foreign-owned company in a non-science sector.

Musan
China has shown an interest in joint resources development projects. The best known case is the project to develop the Musan iron mines. It is not easy to draw an exact picture of Chinese investment in the mines because many press reports suggest different stories. According to a Korean report, a Chinese company from Jilin Province planned to invest about $500 million in the mines. Ta Kung Pao, a Hong Kong newspaper, reported that three companies from Jilin—Tonghua Iron & Steel Group (Tonggang), Yanbian Tianchi Company, and Sinosteel Corporation (Zhonggang)—contracted rights to exploit the Musan iron mines for 50 years. According to the report, the Chinese companies were going to invest 7 billion yuan (about $865 million) and planned to produce 10 million tons of iron ore each year.  In the case of the Musan mines, 2 billion yuan (about $240 million) out of the 7 billion China committed to invest was allocated to building roads and railways from Musan to Tonghua in China. Sizable investment levels might help Jilin secure access to seaports in North Korea.

Similarly, the Chinese press has reported that the Musan iron mines development project was canceled by officials in North Korea, embarrassed by publicity over the deal because it highlighted the degree of foreign investment, a subject that Pyongyang would prefer to handle quietly.

Raijin
Rason International Logistics Joint Company-Rason International secured the exclusive rights to run the No. 3 and No. 4 piers of Rajin port for 50 years. In order to secure the rights, China committed to investing 30 million euros ($36 million) to build an industrial park, tourism facilities, and a road from the trade district of Rason city to Rajin Port. North Korea in turn committed to providing China with 5 to 10 square kilometers of land to build the industrial park.

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How are new sanctions afftecting DPRK/PRC trade?

Thursday, October 26th, 2006

Daily NK
10/26/2006
Yang Jung A

Since the passing of the U.N. North Korea Resolution 1718, there has been an urgent focus on China’s measures on North Korea. Although China did not elucidate that it would adopt the sanctions, in reality, acquaintances of North Korea-China trade are saying that the sanctions are having effects on certain locations.

Even until now, the Chinese government has not revealed any measures to implement North Korea sanctions

Liu Jianchao spokesperson for China’s Ministry of Foreign Affairs said, “Although we may act compliantly to the Security Council’s resolution, China’s aim is not for sanctions. Countries related must not take this issue upon their own discretion and escalate this situation to make it worse.”

Tradesman ‘A’ met on the 25th in Liaoning, Dandong China said that little had changed in trade operations around the North Korean border. However, inspection at customs has tightened drastically, and whether or not new investments into North Korea has rapidly decreased or that banks are experiencing turmoil, warning signals are on the rise. The biggest threat amongst tradesmen is the increased feeling of insecurity.

‘A’ said, “The (Chinese) government has advised that investments in North Korea should not exceed $300,000,” and that “Conditions in North Korea are risky, so investments should be made with this in mind. Isn’t this basically saying, don’t make investments?”

He said, “There are rumors spreading in North Korea that the Chinese government will dismantle the customs house in 40 days. Although there are not many people who believe this rumor, we only hear these rumors because people are feeling insecure.”

Tradesman ‘B’ said, “Though remittances to North Korea can be made much the same as before, it has become very strict and difficult to create new accounts. Rather than being a directive from the government, it seems that banks are independently taking measures for their own protection.”

In the past, when a Chinese bank made transactions with North Korea, they would have to work in collaboration with the North Korean Gwang Sung Bank. A Chinese businessman would deposit funds into the Chinese bank and the North Korean businessman would collect the money through North Korea Gwang Sung Bank. This system has not been completely stopped. In ‘B’s’ opinion, transaction details and procedures have merely become more strict.

As deposit transactions between North Korea and China become inconvenient, more and more tradesmen are turning to cash transactions. Various media have reported that 4 banks in Dandong have begun to make restrictions on foreign transactions with people or corporations of North Korean origin.

Though China’s North Korea sanction is rough on independent private-sectors, this is an indication that the Chinese government is taking action in response. to the Security Council’s resolution.

 

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Sanctions Don’t Dent N. Korea-China Trade

Wednesday, October 25th, 2006

From the New York Times:
Jim Yardley
10/25/2006

[edited]Sanhe, China–Truckers carrying goods into North Korea across the sludge-colored Tumen River say inspections are unchanged on the Chinese side. Customs agents rarely open boxes here or at two other border crossings in this mountainous region, truckers and private transport companies say.

Nor are any fences visible, like the barrier under construction near China’s busiest border crossing at the city of Dandong. There were early reports that inspectors in Dandong were at least opening trucks for a look, but so far statistics and anecdotal reports in the Chinese news media indicate that, essentially, everything remains the same.

What is visible here, though, is the growing and, in some ways, surprisingly complicated trade relationship between China and North Korea. China remains North Korea’s most important aid donor and oil supplier, but, conversely, China is now importing growing amounts of coal and electricity from North Korea. Chinese entrepreneurs, meanwhile, are starting to buy shares in North Korean mining operations and, in one case, trying to gain access to the Sea of Japan by leasing a North Korean port as a potential shipping hub.

The upswing in Chinese economic activity — which is already raising questions about whether the intent is more strategic than commercial — is one of the reasons that China has sent mixed signals about how aggressive it will be in inspecting border trade to meet the United Nations sanctions. For now, at least, some truckers in this region say the only change in border inspections has come on the North Korean side, where customs agents are checking loads more carefully for items deemed contraband by Kim Jong-il’s government.

“We used to sit with North Koreans that we know and have a chat,” said Jiang Zhuchun, a trucker waiting to cross into North Korea on Tuesday afternoon. “But after the nuclear test, we are only allowed to sit alone in our trucks.”

The United States has praised China for approving the sanctions against North Korea, and Secretary of State Condoleezza Rice used her visit to Beijing last week to emphasize the common desire to restart diplomatic talks on North Korea’s nuclear program. China’s leaders are said to be deeply angered over the nuclear test and have signaled they may take a harder line against their longtime ally. Last week, some banks in Dandong froze certain accounts and financial transactions with North Korea.

But the question of inspections along the 866-mile border between China and North Korea is a different matter. The sanctions authorized countries to inspect cargo entering and leaving North Korea and barred the sale or transfer of material that can be used to make nuclear weapons. Yet the sanctions are still less than two weeks old, and some details have still not been worked out. For example, the sanctions ban luxury goods without defining them.

The United States wants tightened border inspections by China as a tool for squeezing the North Korean economy and ensuring that North Korea cannot buy or sell nuclear materials. China is worried that destabilizing North Korea could begin an exodus of refugees and has resisted changing inspections. This week, with rumors swirling about a possible border crackdown, the Foreign Ministry spokesman, Liu Jianchao, said China intended to comply fully with the sanctions, but also said inspections along the border would remain “normal.”

The Yanbian Korean Autonomous Region, the name of the sprawling district that includes the Sanhe border checkpoint, is not the primary trade route between China and North Korea; Dandong, with its more direct route to Pyongyang, the North’s capital, is by far the busiest. But the Yanbian area is wedged into a geopolitical hotspot where China, North Korea and Russia all come together.

In interviews and visits to three crossings from Yanbian into North Korea, truckers, transportation company agents, investors and others confirmed without exception that trade is continuing across the border much as it always has. Customs agents examine bills of lading but usually open shipments only when they are tipped in advance to someone trying to smuggle goods like beer or liquor without paying customs duties, several people said.

“No matter who you talk to, they will tell you there is not much difference,” said Jin Lanzhu, whose trading company is one of the largest in the region.

On Wednesday morning inside the Chinese customs yard in the border city of Tumen, small groups of North Koreans, each wearing their mandatory pins with images of either North Korean leader Kim Jong-il or his father, Kim Il-sung, waited to cross the bridge. They had nylon sacks stuffed with shoes and clothes, television sets, a refrigerator. Some carried bags of rice.

“How many bags do you have?” asked a female Chinese customs agent in a blue uniform. She looked them over and walked away without opening any. She did forbid the North Koreans to take several boxes of fruit because of a problem with worms. Then, the men began loading the sacks onto a flatbed truck operated by the customs office to carry smaller loads to the North Korean side. Two North Korean women complained to a local taxi driver that they had to pay 400 yuan, or about $50, for the service.

“They don’t really check over here,” one North Korean woman said of Chinese customs. “They do on the North Korean side.”

A similar scene unfolded later in the day at a smaller crossing in the dingy town of Kaishan, where the customs port is so small that trucks take a dirt road to a crumbling checkpoint. On Wednesday, a young soldier watched laborers load about 150 used televisions and boxes of medicine into a North Korean truck that had crossed the river to collect the shipment.

“I’m here for security,” the soldier said.

Trade between China and North Korea has grown rapidly in recent years — as has North Korea’s trade deficit with China, in part, because China no longer appears to be selling oil at a subsidized rate. China now accounts for almost 40 percent of North Korea’s total foreign trade; bilateral trade has more than doubled to $1.1 billion in 2005 from $490 million in 1995. In Yanbian alone, trade with North Korea jumped 82 percent in 2004 and another 20 percent in 2005, according to a local newspaper account.

Divining what the increased traffic says about the state of North Korea’s economy is a subject of debate. New research and interviews in the Yanbian region suggest that North Korea, a country that regularly suffers blackouts, is now exporting growing amounts of coal, minerals and even electricity to China, which is hungry for energy and raw materials. In exchange, North Korea is no longer importing as much raw material and machinery as it had in the past.

Instead, North Korea is importing food, clothes, daily sundries, outdated televisions and appliances and, of course, oil. The trend could suggest that North Korea’s recent experiments with private markets may be expanding, some analysts said.

A recent study by the Nautilus Institute, a San Francisco-based research group, used customs statistics to describe the trend, but also concluded that it might indicate that North Korea’s nonmilitary manufacturing industries were in sharp decline. One Chinese investor in a North Korean coal mine agreed. “They seemed to have stopped the factories,” said the investor, who asked not to be identified. He said doing business with North Korea was very risky and cautioned that numerous Chinese businessmen had lost money. “There are zero guarantees and protections.”

Even so, Chinese entrepreneurs and companies, both private and state-owned, are starting to buy interests in North Korean mines to export raw materials. The amount of investment is not clearly defined, but different Chinese proposals call for building truck routes between inland trade centers in northeast China to the North Korean coast, according to Chinese media accounts.

A Chinese property developer, Fan Yingsheng, told the Chinese news media that despite the nuclear test, he was still pursuing plans to develop the North Korean port of Rajin into a shipping center for goods from China. He said he would soon fly to Pyongyang to sign a final agreement.

The flurry of Chinese activity has not gone unnoticed by South Korea and others in the region, analysts say. Like China, South Korea has resisted harsh economic sanctions and refused to shut down its own trade deals with North Korea in part because of concerns about a swift collapse of the North Korean government. But South Korea is also positioning itself, to some degree against China, to be the dominant player in the future of North Korea.

China, meanwhile, has said the activity is not strategic positioning but natural economic outgrowth for a booming, entrepreneurial economy in need of resources. Li Dunqiu, a North Korea specialist with a research institute under China’s State Council, or cabinet, recently wrote that “laws of the market economy” were the driving force in Chinese investment in North Korea.

Along the border, it is easy to see how the daily traffic from China is a lifeline for North Korea. One woman from Yanbian said her family had recently come across to buy rice and other essentials. But Mr. Jin, the owner of the trading company, said charity was not at the essence of China’s trade with North Korea.

“The business interest is the most important thing,” he said. “Helping them comes after that.” Then, pausing to reflect on the potential and perils of trading with North Korea, he added: “North Korea is just like China in the past. It is a blank sheet of paper. You can draw wherever you want to. The question is whether the paper is going to be there at all times for you to draw on.”

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North Koreans hoarding rice

Monday, October 23rd, 2006

From the Daily NK:
10/23/2006
Kang Jae Hyok

According to a North Korean source, while international community has been worried that North Korea will undergo “the second march of tribulation”, recently the number of North Korean people who lay in rice has been increasing.

Kim Jong Hee(pseudonym, 39), Chungjin resident said on the phone interview with the DailyNK that, “In spite of Fall, the price of rice is not decreasing”, and “These days the number of people who buy rice is sharply increasing”.

Kim added that from last June the price of rice is 1,000~1,200 won (0.30 US$~0.36 US$) per 1kg and in August it increased up to 1,300 won, yet even in October(now) the price is not decreasing. The price of corn wet up to 300 or 400 won.

It is natural that in fall the price of rice goes down and in spring goes up. So people lay in rice in fall. However, given that the price of rice does not go down until now, in the next spring it will be expected to go up more. Because of it, it seams that people lay in more rice in advance.

The exchange rate of yuan in black market is 360won of North Korea per 1 yuan. In 1990, the exchange rate was 1:25 and in 2002 after the 7.1. Economic Management Improvement Measure it was 1: 300. Recently it goes up to 1: 360. In addition, 1 dollar is 3,300 won of North Korea.
“Only interested in survival, never in nuclear test”

Responding to a question “do you know North Korea did nuclear test?”, Kim said that, “I do not care about whether the North Korean government did the test or not. I am busy supporting our family so I have time to think about that”. According to him, because there have been electronic lights there, people cannot know about what happened in the world.

Kim who is a vendor selling Chinese goods in Sunam market, Chungjin said that for a few days Chinese vendors have not come in Chungjin and now are around Haeryung. In the past the Chinese vendors came in once a week, yet now it is letting up at the same time the price of goods are increasing.

Regarding this trend, some people explained that because of the tension in Korean peninsular caused by the nuclear test the Chinese vendors have visited less and less and because of the censoring in goods introduced in North Korea, the amount of goods coming in North Korea has decreased.

Kim said that now Chinese goods in North Korean markets amount for more than 80%. If the sanction of China against North Korea is taken, the North Korean Jangmadangs will be negatively influenced.

Kim also said that, “Unless the Chinese goods are not introduced, we cannot survive”, and now it is the time to lay in rice for the next spring. This is what is most important to us now”.

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China closes three customs offices along Sino-N. Korean border: newspaper

Thursday, October 19th, 2006

Yonhap:
10/19/2006

China has closed three customs offices in northeastern China that handle trade with North Korea following Pyongyang’s nuclear test on Oct. 9, a report by the Communist Party-owned Global Times said Thursday.

The daily said the closures involved border offices in Donggang and Shanghekou, both in Liaoning Province, and one in the city of Tumen, in Jilin Province. Before the actions were taken, Beijing formally operated a total of four customs points with its neighbor.

It said at present only the customs point of Dandong, facing the North’s border city of Shinuiju across the Amnok River, was open to handle bilateral trade.

The paper also said that as of Tuesday, the number of vehicles coming over to Dandong stood at under three, compared to between 20 and 30 in the past.

The Global Times did not say if the closure or lack of vehicle traffic is due to the tensions surrounding North Korea’s nuclear weapons test. It added that Chinese merchants have started to ask for money in advance before shipping goods to North Korea, which is different from past practices when the delivery was sometimes made in advance of payment.

China, which is one of the five permanent members of the U.N. Security Council, signed off on a resolution last week authorizing economic sanctions to be imposed on North Korea. Pyongyang had disregarded warnings by Beijing not to test its nuclear device, which has raised speculation that the close ties that existed between them may have become frayed.

Related to the strained business ties, another Chinese weekly magazine claimed that a Chinese bank that provides funds to construction firms has stopped transactions with North Korea’s trade bank starting this year. The United States had been urging financial institutions around the world not to make transactions with North Korea that could help that country’s illicit trade and alleged money-laundering practices.

Another Chinese newspaper claimed that authorities have tightened their inspection of all cargo leaving North Korea since last week.

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With Cash, Defectors Find North Korea’s Cracks

Thursday, October 19th, 2006

New York Times:
10/19/2006
Norimitsu Onishi
Su-hyun Lee

Last March, Lee Chun-hak, a 19-year-old North Korean, went to the Chinese border to meet with a North Korean money trafficker. Using the trafficker’s Chinese cellphone, Mr. Lee talked to his mother, who had defected to South Korea in 2003. She told him she was going to get him out.

Mr. Lee missed his mother and his sister and brother, and he had a persistent, if half-formed, desire. “I wanted to go to a country that is more developed,” he said, “even more developed than South Korea.”

In June, a young North Korean man appeared suddenly at his home with a message: “Mother is looking for you.” The man then took him by bicycle and foot to the border and handed him over to a North Korean soldier. At the soldier’s direction, Mr. Lee was ordered to leave his identification card and his Kim Il-sung badge, which is worn by all North Koreans to honor the nation’s founder.

The soldier then escorted Mr. Lee across the Tumen River, where on the other side two Chinese men in plainclothes handed the soldier his bribe. Mr. Lee was free to go.

The increasing ease with which people are able to buy their way out of North Korea suggests that, beneath the images of goose-stepping soldiers in Pyongyang, the capital, the government’s still considerable ability to control its citizens is diminishing, according to North Korean defectors, brokers, South Korean Christian missionaries and other experts on the subject. Defectors with relatives outside the country are tapping into a sophisticated, underground network of human smugglers operating inside North and South Korea, China and Southeast Asia.

Learning anything about such a secretive and unpredictable country as North Korea, which isolated itself further by carrying out a nuclear test on Oct. 9, is difficult. Scraps of information provided by defectors often prove unreliable, influenced as they can be by the organizations that shelter and support them while also championing political or religious causes.

But snapshots of life inside the North, and a picture of this smuggling network, emerged from interviews with 20 North Koreans in Bangkok, as well as with brokers, Christian missionaries, government officials and people working in private organizations, in both Thailand and South Korea. The North Koreans in Bangkok were interviewed independently and had all recently arrived in Thailand.

Pieced together, the accounts provide glimpses of a government that, while still a repressive police state, is progressively losing the paramount role it used to enjoy in society, before it found itself incapable of feeding its own people in the famine of the 1990’s. The power of ideology appears to be waning in this nation of about 22.7 million as people have been left to scrounge for themselves, and as information has begun to seep in from the outside world.

The effects of money and corruption appear to have grown sharply in recent years, as market liberalization has allowed ordinary people to run small businesses and has enabled people with connections to prosper in the booming trade with China.

In a country whose borders were sealed until a decade ago, defectors once risked not only their own lives but those of the family members they left behind, who were often thrown into harsh prison camps as retribution. Today, state security is no longer the main obstacle to fleeing, according to defectors, North Korean brokers, South Korean Christian missionaries and other experts. Now, it is cash.

“Money now trumps ideology for an increasing number of North Koreans, and that has allowed this underground railroad to flourish,” said Peter M. Beck, the Northeast Asia project director in Seoul, South Korea, of the International Crisis Group, which has extensively researched the subject in several Asian countries and is publishing a report. “The biggest barrier to leaving North Korea is just money. If you have enough money, you can get out quite easily. It speaks to the marketization of North Korea, especially since economic reforms were implemented in 2002. Anything can be bought in the North now.”

“The state’s control is weakening at the periphery,” Mr. Beck said, explaining that most refugees came out of the North’s rural areas but few from around Pyongyang, where the state’s grip remained strong.

During the North’s great famine in the mid- to late 1990’s, a tide of 100,000 to 300,000 North Koreans is believed to have simply washed into China, and tens of thousands are still believed to be living there illegally, according to human rights organizations. These days, the number of refugees is believed to be much smaller, though there are few reliable figures.

According to the South Korean government, of the 8,740 North Koreans who are known to have fled to the South since the end of the Korean War in 1953, nearly 7,000 arrived in the last four years alone.

But the cost of getting out is significant, according to experts, defectors, brokers and missionaries. There are bribes for the soldiers stationed at the heavily guarded border, a regular cut to their supervisors, money handed to a chain of officials. And that is just on the North Korean side.

At the high end, $10,400 will buy a package deal to get someone out of North Korea and, armed with a fake South Korean passport, on a plane or boat to South Korea within days, according to brokers and a 40-year-old North Korean woman now in South Korea who recently extracted her 14-year-old son. But most North Koreans in South Korea pay on average about $3,000 to get relatives out through China and then Southeast Asia or Mongolia.

Some exits are short-term. One 37-year-old North Korean in Seoul, an employee at a large auto parts maker, said he went to China in April to meet a friend, a journalist in North Korea whom he had not seen in 10 years. For a few hundred dollars, smugglers took the journalist to Yanji, a bustling Chinese town on the border with North Korea, where the two spent the weekend drinking and catching up, the man said in an interview in Seoul.

Like many interviewed for this article, he asked that his name be withheld, for fear of reprisals against friends and relatives still in North Korea. He carried stacks of a South Korean newspaper, The Chosun Ilbo, for the journalist, who had no interest in reading the political stories. Instead, he devoured the business pages, though he puzzled over words like “online,” and marveled at how far the South had outpaced the North economically.

At the end of the weekend, the defector returned to Seoul and his journalist friend to North Korea.

“Doing this would have been unimaginable a few years ago,” he said. “This kind of corruption didn’t exist back then. Now, everything revolves around money.”

Escaping a Shaky Economy

After the end of the cold war, North Korea’s economy collapsed and its leaders adopted a strategy of trying to secure its energy and other essentials by threatening to become a nuclear power. They have adhered to this strategy even as they put into effect economic reforms in 2002, adopting market prices, allowing citizens to run small businesses and joining with South Korea in economic projects.

Though still shaky, the North’s economy has improved thanks to trade with China and South Korea. It grew by 2.2 percent in 2004, the sixth consecutive year of expansion, according to the Bank of Korea, South Korea’s central bank. Defectors and brokers said North Koreans were fleeing their country to rejoin relatives in the South or to look for economic opportunities — not because they were starving, as they were in the 1990’s. The threat of political persecution remains, of course.

In Seoul, Do Sung-hak, 39, a North Korean who came to the South in 2002, said his older brother was sent to prison three years ago after someone reported the brother’s private comments that North Korea was not opening its economy fast enough.

A few months after his release early this year, the brother fled the North with Mr. Do’s help. He is now in Thailand.

Mr. Do, who works as a security guard, said he had arranged to get about 20 people out of the North, using ethnic Korean-Chinese contacts he had made while living for six years in northeast China.

After receiving a request, Mr. Do said he would call a Korean-Chinese intermediary, who would then call a North Korean with a Chinese cellphone that works inside North Korea near the border. The North Korean or a partner would then travel to the relative’s hometown — the price of the service varying according to the distance — and take that person back to the border, where he or she would then talk to the relative in South Korea on a cellphone and make arrangements.

“It doesn’t matter if the person lives in the middle of the country — of course, it takes longer, maybe 10 days,” Mr. Do said. “It’s only a question of money.”

North Koreans living in the South also send money to their relatives back home through the same method, with the brokers taking at least a 20 percent fee, brokers and North Korean defectors said.

A 49-year-old broker in Seoul — nine of whose clients have arrived in Thailand recently — said she operated the same way, adding that those involved in the business in North Korea were Communist Party members.

“You can do that kind of work — being able to travel freely inside North Korea — only if you’re a party member,” said the woman, who added that she earned $2,500 to $3,000 a month.

The demand for this smuggling service has risen along with the increasing number of North Koreans living in South Korea. The North Koreans in the South pay to get their relatives out by working to pay for the fees, borrowing money or using resettlement money awarded to them by South Korea.

One River, Many Hardships

The case of Lee Chun-hak, the 19-year-old who fled the North on June 28, is a typical one. For the past two months, he has been in the Immigration Detention Center in Bangkok, where his mother, Kim Myung-shim, 46, visited him from Seoul the other day.

Mrs. Kim fled to South Korea in 2003, remarried and began working to arrange the defection of Mr. Lee and her two other children, who lived with her former husband in a province bordering China.

The three children were set to leave in late 2005. But before crossing the Tumen River into China, Mr. Lee balked — he did not want to leave his father and grandmother. His older sister and younger brother went ahead and, thanks to the $5,200 paid to brokers, were smuggled into Mongolia and arrived in South Korea last February.

Mr. Lee returned to his everyday life, going to school and, like many others, earning a little money by working at a nearby gold mine. People farmed corn and beans in the area where the surrounding mountains have been stripped bare for firewood.

The economy had improved in recent years, as the authorities allowed people to moonlight at places like the gold mine and to start small businesses. Local residents ate regularly, Mr. Lee said, though the portions were small. Still, he saw perhaps only two or three cars a day, and most people walked or rode bicycles.

After a few months, his sister in Seoul persuaded him to leave. Mr. Lee was now an adult and would find it hard to keep living with his father, who had remarried, Mrs. Kim said.

So on June 27, after his sister had made arrangements with a broker, the North Korean man picked Mr. Lee up in his hometown and took him by bicycle to a spot near the border, where he spent the night, he said. The next afternoon, they rode the bicycle and then walked to the Tumen River. Mr. Lee waded across, accompanied by the soldier.

“As long as you pay the soldiers, you can cross,” Mrs. Kim said, adding that she had paid $3,600 to the brokers for her son’s escape — $1,000 for the North Korea leg and $2,600 for China.

He found his way through China and Laos to Thailand where, following the advice of the brokers, he gave himself up to the authorities. Thailand does not repatriate North Korean refugees, incarcerating them instead while their cases are processed through the Office of the United Nations High Commissioner for Refugees in Bangkok. The process takes about three to four months, after which the North Koreans are sent to South Korea, though the United States recently accepted nine North Korea refugees.

Having learned that news in Bangkok, Mr. Lee said he no longer wanted to go to South Korea. “I want to go to the United States to study and become a scientist.”

Doubts About an Ideology

Many of the North Koreans interviewed in Thailand said they wanted to go to the United States, even though they were reared in a country that has demonized America for decades. In school in the North, one defector said, she had had been taught that Americans were “inhuman, promiscuous and dictatorial.”

“Even today, I still sometimes refer to the United States as ‘Imperialist America,’ ” she said, laughing.

But as a fourth grader, the woman said, she began to have doubts about that image of America, after she happened upon a photograph in a magazine. As she recalled, it showed a tightrope walker balanced on a wire between high-rise buildings in Washington. The implicit message was that the United States was such an inhumane country that it forced people to perform such jobs, she said.

“But what I remembered about that photo was the tall buildings,” she said. “There was also a beautiful park and clean, wide streets. It was fascinating. There was nothing like that where I grew up.”

North Korea still unleashes daily attacks against the United States through its official media, but the desire of many of the defectors interviewed to go to the United States suggests that the power of ideology is waning.

“After spending a few months in China, they change their minds about the United States,” said a South Korean missionary who regularly visits the North Koreans at the detention center. “In China, they have access to so much information. They look at Web sites and exchange instant messages with people in South Korea.”

Lee Chan, 36, who fled North Korea one year ago and entered Thailand in June, agreed that anti-American ideology was not as strong as it was in the past.

“People’s perceptions of the United States have changed inside North Korea,” he said. “I’ll give you one example. If you’re caught watching an American movie, the authorities will just swear at you — nothing else.”

In Bangkok, where South Korean Christian missionaries care for the defectors while trying to convert them, Lee Chun-hak’s mother, Mrs. Kim, was worried that her son had become too friendly with Mr. Lee, the defector who had emerged as a leader of the detainees. She was angry that her son had started smoking under Mr. Lee’s influence.

“Please look after Chun-hak,” the mother said to Mr. Lee, adding that her son had birthmarks on his head and face that foretold a great future. “That’s why I’m sending him to America.”

“Please guide my son,” she said, “even though he’s doing well alone.”

Mr. Lee, showing her a pack of Marlboros, said, “He’s doing well — he doesn’t smoke expensive cigarettes like I do.”

“Stop smoking!” the mother said.

A missionary began praying for Lee Chun-hak.

“Pray to God to send you to America,” the mother exhorted her son.
 

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Is DPRK preparing for another ‘Arduous March’?

Tuesday, October 17th, 2006

From the Daily NK:
If a Second Tribulation March Arrives?
10/17/2006
Han Young Jin

On the 14th, the Rodong Shinmun, a N. Korean state newspaper, urged “We must take a strong conviction in regards to socialism and go out to fight with faith and optimism.” On the 13th, the Minju Chosun (Democratic Korea), the government organ, claimed “Even if we have to face the second and third ‘Tribulation March,’ you need not worry. Rather we must fight with overt confidence and audacity.”

Ever since the nuke experiments government channels have been using this propaganda This suggests that North Korean authorities were already prepared for sanctions by the international community.

People’s mentality “If you trust the nation, you will die of starvation”

During the first “Tribulation March” in the mid-90’s, about 300,000 people died over a period of 3 years from starvation. What would happen if the second tribulation march was to occur as a result of the U.N. North Korea resolution? How would it differ from the first?

The reason that 300,000 people died from starvation lies in the fundamental man-made disaster, where Kim Jong Il’s political ideology of “government teachings” and development of reform were abandoned after his death to “revival of one’s own strength.”

Beginning with munitions workers, about 50,000 people who trusted and were loyal to the government, including many intellectuals such as scientists and technicians died of starvation.

When comparing the past to the present, the people of the 90’s trusted only in their government as they did not have any other knowledge. Thus they were hit with a sudden blow, however this time it is different, as the North Korean people are already filled with “immunity.”

Above all, North Korean people are now aware of their own existence and are saying “If you trust the nation, you will die from starvation.” At the time, people tacitly in trade knew that they would not die of hunger. Today, high officials have changed their mentality and have abandoned the ideology of being the “People’s emissary” to ‘I must devise a plan to live, while I have the power.’

Since 2000, irrespective of whether or not the nation distributed rations in the fall, people have begun to devise their own ways to live. While city dwellers are living off their trade, villagers are providing their own rations through cultivation and farming off mountains.

After the 7.1 economic measures, capitalism was steadily introduced and the people’s spontaneity increased. Hence, this time it seems that the mass starvation of the mid-90’s may be escaped.

However, as a result of long term malnutrition, it is possible that many deaths will occur from disease and infectious epidemics.

A complete breakdown in industry and infrastructure

According to data from the World Food Program (WFP) and Food and Agriculture Organization (FAO), North Korea’s output of grain in 95~96 was 4,070,000 tons and 2,874,000 tons in 96~97. This is a significantly low figure compared to the necessary amount of 6,400,000 tons.

Even today, little has changed. Last year, the typhoon caused an output of 4,800,000 tons of crop. Hence, the insufficient rations of the 90’s ‘Tribulation March’ period, is similar to this time.

During the first tribulation march, there was no electricity so factories ceased operations and workers began to sell equipment taken from their workplace in trade of rations. What happened was a collapse in the main infrastructure of factories.

The worker’s riot in 1996 that arose from suppression of operations at the Yellow Sea Iron Works, also originated from workers taking factory materials to trade for food. A defector from ‘September Iron Works’ in Pyongan said “During the tribulation march, everyone took materials from work to trade. If it occurs again, people will most probably dig up the main support.”

The infrastructure collapse of the 90’s was near to impossible to rebuild by North Korea alone. Since 1998, the economy has somewhat stabilized, however full reconstruction has never been acheived and rather only parts of the country has recovered.

The key point will be when China participates in the North Korea sanctions

If the second tribulation march was to occur, the main point will be commerce with China. Last March, Professor Xuwenji of Northeast Asia Research and Development Institute, Jilian University visited North Korea. He said “About 70% of North Korean markets are made up of Chinese products, 20% of products are made in North Korea and the remaining 10% is either Japanese or Russian products.”

Currently, daily necessary products such as toothbrushes, toothpaste, and soap, welding rods and even tires at North Korean markets are all made in China. In the case that the trade of daily necessities is disconnected, this will undoubtedly affect North Korea dramatically. In the end, the key point is to what extent China will compliantly follow the North Korea resolution.

The number of Chinese enterprises trying to evade North Korean investments is also variable. After North Korea’s nuclear experiment, rumors spread that Chinese banks beginning from Dandong had ceased remitting funds to North Korea and that many Chinese businesses had begun to suspend or terminate North Korean investments.

If commerce is suspended between North Korea and China, North Korea will not be able to satisfy all of its necessary daily products by relying on illicit trade.

There are also rumors that barbed wire will be placed bordering the region of the Yalu River, which will further affect smuggling of goods. As official trade between the two countries becomes illegal and daily necessities cannot be supplied from China through smuggling, the North Korean people will experience yet another fatal blow to their lives.

Furthermore, if North Korea does proclaim its second tribulation march and returns to the times of the mid-90’s, the Kim Jong Il regime could be greatly affected.

Above all, as the mentality of the people has changed, no longer will they listen submissively to the government. Rather, they will be more inclined to find ways to sustain their own life existence and make all attempts to defect to China. Amongst these circumstances, there may even be bloodshed between soldiers and the people.

Also, if high ranking military officials and soldiers decide that they cannot possibly live amongst these circumstances, it is possible that they will abandon their barracks. One thing is certain they will not simply sit around and wait to die from starvation. If high ranking military officials and soldiers did withdraw from their barracks on the mass, it is possible that the Kim Jong Il regime will face a threat to destruction.

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