North Korean Economy Watch

Hankyoreh
4/6/2007

At first reclusive, North’s workers are smiling, eating together with Southern counterparts

Two years after the Gaeseong (Kaesong) Industrial Complex began operations, the attitude of North Korean workers toward their South Korean employers has significantly changed for the better, according to heads of South Korean plants located in the joint Korean industrial park.

Ra Sang-jin, 66, the plant chief of Daehwa Fuel Pump, which started operations at Gaeseong in June 2005, said North Korean workers’ attitude toward their South Korean employers has changed. When Ra came to Gaeseong, North Koreans disliked South Korean employees coming to restaurants for the Northern workers, for at Gaeseong, the restaurants are divided along the lines of ’North’ and ’South,’ as the North Korean workers were at first reluctant to dine with Southerners. Currently, however, Ra frequently visits North Korean restaurants and is asked by North Korean workers to join in a a meal.

“It seemed to take seven to eight months to remove the wall,” Ra said. North Korean workers are also adapting to the lifestyle at Gaeseong at a faster pace than before. “Recently, some North Korean workers are smiling after only three or four months,” Ra said.

North Korean workers’ reclusive habits – having not met any South Koreans before – have changed, as well. Hwang U-seung, 46, the plant chief of Shinwon, said, “When I meet a North Korean worker on the street and ask which company she is working for, she answers me. That was impossible in the early days [of the Gaeseong complex],” Hwang said. Baek Yeong-ho, 59, the plant chief of Pyeonghwa Shoes, “In early days, the North Korean workers didn’t go to the bathroom alone,” like some sort of old-fashioned social habit. “But they do now. They also don’t step aside when South Koreans are passing.”

Some Korean cowerkers are picking and choosing from the language of the other country, as the language in the North and South has been rendered different after more than 50 years of separation. For example, some South Korean workers call a toilet ‘wisaengsil,’ the North Korean term, and Some North Korean workers call the toilet ‘hwajangsil,’ the South Korean term.

Meanwhile, at first only North Koreans used their common phrase, “Ileopseupnida,” which to them means “no problem” but has a slightly rude meaning in South Korea, akin to “I don’t care.” Now, Northerners and Southerners alike use the phrase. A South Korean who has been working alongside North Koreans at Gaeseong said that “my family in South Korea sometimes tells me my accent has become a little strange.”

Yonhap
4/5/2007

Commercial trade between South and North Korea rose 40 percent to US$187.08 million year-on-year in the first quarter, a top unification official said Thursday.

The increase was mainly attributed to an influx of zinc bullion, sand, fishery items, shoes, clothing and watches into a joint industrial complex in the North Korean border city of Kaesong.

“But noncommercial trade between the two sides rose a mere 6.7 percent to $278.11 million in the first quarter because of the halt in government and civic aid to the North,” Vice Unification Minister Shin Un-sang said in a press briefing.

Last week, South Korea sent the first batch of its promised 300,000 tons of fertilizer aid as well as flood relief supplies to the North.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid along with its emergency aid to the impoverished North. In retaliation, the communist nation suspended inter-Korean talks, family reunions and the construction of a family reunion center.

In March, the two Koreas agreed to resume humanitarian aid and family reunion events just days after North Korea promised to take steps to shut down its main nuclear reactor and eventually disable it in return for energy aid from South Korea, the United States, China, Russia and Japan.

Yonhap
4/4/2007

South and North Korea will open their first joint college later this year in a show of warming ties between the two sides, officials said Wednesday.

The Pyongyang Science and Technology College is scheduled to open in the North’s capital on Sept. 10 and will initially house 150 graduate students for such courses as master of business administration (MBA).

“We had originally planned to open it in April but strained inter-Korean ties delayed the project. The favorable environment will make the project go smoothly this time,” said Lim Wan-geun, a boarding member of the Northeast Asia Foundation for Education and Culture.

Kim Jin-kyong, dean of Yanbian Science and Technology College, will be the first dean of the inter-Korean college, the official said. The college will consist of a five-story building for lectures, a four-story building for a library, dining facilities and research and five dormitory buildings.

Inter-Korean relations have warmed considerably since the 2000 summit of their leaders, but tension persists since the rival states are still technically in a state of war, as no peace treaty was signed at the end of the Korean War.

South Korea suspended its food and fertilizer aid to North Korea after it conducted missile tests in July. A possible resumption of the aid was blocked due to the North’s nuclear bomb test in October.

But the relationship was revived after North Korea promised to end its nuclear weapons program in return for energy aid, and the two sides held the first ministerial talks in seven months in March.

Koreas to open first joint university
Korea Herald
Cho Ji-hyun
3/15/2007

The first joint university between South and North Korea will open in Pyongyang in September, a senior member of the founding committee told The Korea Herald.

South Koreans including Park Chan-mo, president of POSTECH in Pohang, visited Pyongyang yesterday to discuss the establishment and operation of Pyongyang University of Science and Technology, or PUST.

Early last year, the Northeast Asia Foundation for Education and Culture, a Seoul-based nonprofit organization, agreed with the North’s education authorities to open PUST as early as last October.

The schedule has been delayed due to the lack of progress in their talks amid tensions caused by North Korea’s missile and nuclear tests last year.

Their contacts have recently resumed as the ties between the two Koreas improved following the six-party agreement on the North’s nuclear programs in Beijing.

In an interview with The Korea Herald, Park, a member of the founding committee, said the school will open in September and that further discussions will take place before the opening.

The visiting delegation includes Kim Chin-kyung, president of Yanbian University of Science and Technology, who assumes the post of founding president of the Pyongyang university.

Choi Kwang-chul, professor of Seoul’s Korea Advanced Institute of Science and Technology, also joined the trip.

For the four-day trip, they are to inspect the progress of construction work, and discuss the cross-border passage of faculty and internet connections for the school.

“We will raise two demands – constructing a land route between the two Koreas to allow professors to travel across the borders and providing internet connection,” Park said.

A Seoul government official also confirmed that the school will open in September.

The project was first initiated in 2001. The Northeast Asia Foundation for Education and Culture plans to expand the school into a university with 240 professors and more than 2,000 students from both countries.

However, the university plans to open with 50 professors and 200 students participating in master’s and doctoral programs in its first year, university officials wrote on their school website.

The university project is led by Park, Lee and Malcolm Gillis, former university president of Rice University in Texas.

In a separate effort, POSTECH has worked on a joint project with the Pyongyang Informatics Center, or PIC, since April 2001, according to Park.

Using PIC’s three dimensional computer aided design program, POSTECH has completed the development of a software called “Construction,” which offers a virtual walk through the construction site to detect errors, he said.

Yonhap
4/3/2007

Incoming Prime Minister Han Duck-soo said Tuesday that goods produced in a joint industrial complex in North Korea will benefit from a free trade pact agreed upon with the United States the previous day.

Denying reports that the free trade agreement put aside the country-of-origin issue for future negotiations, Han said that the two countries cleared the way for treating goods produced in the Kaesong Industrial Complex as made in South Korea.

“The media reports that the Kaesong Industrial Complex was put on as a ‘built-in’ agenda are not true,” Han, who took office early in the day, told reporters in his inaugural press conference at the government building.

A “built-in” agenda refers to a negotiating scheme for sensitive issues in which the countries involved agree to put them on hold and discuss them in the future. Local reports have called the Kaesong issue “built-in,” as Seoul has been pushing for its inclusion in the trade deal despite Washington’s objection.

Under the deal, the two sides agreed to establish a “committee on outward processing zones on the Korean Peninsula” to discuss the Kaesong issue as part of their trade liberalization. But they also stipulated that such a step will be made under specific circumstances, such as the progress in denuclearizing North Korea, according to a statement by the Ministry of Foreign Affairs and Trade.

Han said the agreement is in line with South Korea’s constitution that its territory is the entire Korean Peninsula, and it does not recognize North Korea as a state.

Han also said the government will make public all of the contents of the agreement in mid-May when it is expected to be completed, and all the documents related to the agreement will be released three years later.

The Kaesong complex, just north of the inter-Korean border, is one of two flagship projects the South operates in the spirit of reconciliation with the North following the historic inter-Korean summit in 2000. Over 11,000 North Korean workers are employed by dozens of South Korean companies there, where they produce garments, utensils and other labor-intensive goods. Another reconciliation project is the operation of tours to the North’s scenic Mount Geumgang.

South Korean companies operating in Kaesong say the inclusion of the goods in the FTA is crucial, as this will allow them to export goods to the world’s largest market, as well as provide a template for future trade deals with other countries. 

U.S. Accepts Kaesung Industrial Complex as an “Outward Processing Zones”
Daily NK
Kim Song
4/3/2007

A press conference was held following the conclusion of the Korea-U.S. Free Trade Agreement (FTA) on the 2nd where Korea’s Trade Minister Kim Hyun Chong announced, “The U.S. agreed to recognize the Kaesung Industrial Complex as a remote location.” By this he meant that goods manufactured in Kaesung complex would be accepted as goods made in Korea.

As annexes to the agreement, Committee on Outward Processing Zones on the Korean Peninsula must be established. Undeniably, the article also states that the contents would have to be approved by the U.S.

It seems that both sides agreed that this approach would be the U.S.’s minimal request and compromise on the Kaesung issue and a built-in tactic to keep the negotiating flame burning rather than a deal-breaker.

Previously, the U.S. made concessions regarding Outward Processing Zones with Singapore and Israel’s FTA. As for Korea, these preferential tariffs, not only acknowledges goods manufactured from Kaesung by the FTA, but sets a standard to other sectors in the world such as the European Free Trade Association and ASEAN.

It appears that the recognition of Kaesung as an Outward Processing Zone was based on an agreement that the Korean Peninsula would advance towards denuclearization.

The denuclearization of the Korean Peninsula will eventually lead to the removal of laws that will further eliminate hostile diplomacy and trade between the U.S. and North Korea. It is possible that denuclearization will establish the normalization of U.S.-North Korea relations and solve the issue of Kaesung naturally, in due time.

However, the denuclearization of the Korean Peninsula is not something to be solved within a short time. As a U.S. official once revealed, amity between the U.S.-North Korea can only be possible when North Korea decides to comply with the rules of the international community. In the bigger picture of the Korean Peninsula and economic conglomerate, Kaesung in relation to denuclearization is only a long-term sketch.

Furthermore, there is one minor glitch. Kaesung complex does not match the international standards accepted by the U.S. in relation to labor requirements and such. At any opportunity given, Jay Lefkowitz, U.S. Special Envoy on Human Rights in North Korea, has continuously targeted wage issues at Kaesung complex. Additionally, there have been many criticisms on pay issues regarding North Korean laborers working even within the nation, as well as violations to contracts of employment.

Throughout the FTA, President Roh Moo Hyun has been striving to protect rice while trying to negotiate the Kaesung Industrial Complex. Though President Roh argues that political calculations were omitted from the negotiations, these two issues contradict his words.

Some argue that the future will depend on South Korea’s attitude to the U.S. It is even possible that this is a political attempt by the U.S. to lure North Korea into denuclearization.

Urgent: How to Topple Kim Jong Il
Foreign Policy Magazine
March/April 2007, P.70-74
Andrei Lankov

From: Andrei Lankov
To: Condoleezza Rice
RE: Bringing Freedom to North Korea

When North Korea tested a nuclear weapon late last year, one thing became clear: The United States’ strategy for dealing with North Korea is failing. Your current policy is based on the assumption that pressuring the small and isolated state will force itto change course. That has not happened—and perhaps never will.

North Korea’s Kim Jong Il and his senior leaders understand that political or economic reforms will probably lead to the collapse of their regime. They face a challenge that their peers in China and Vietnam never did—a prosperous and free “other half” of the same nation. North Korea’s rulers believe that if they introduce reforms, their people will do what the East Germans did more than 15 years ago. So, from the perspective of North Korea’s elite, there are compelling reasons to resist all outside pressure. if anything, foreign pressure (particularly from Americans) fits very well into what Pyongyang wants to propagate— the image of a brave nation standing up to a hostile world dominated by the United States.

Yet, sadly, the burden of encouraging change in North Korea remains the United States’ alone. China and Russia, though not happy about a nuclear North Korea, are primarily concerned with reducing U.S. influence in East Asia. China is sending considerable aid to Pyongyang. You already know that South Korea, supposedly a U.S. ally, is even less willing to join your efforts. Seoul’s major worry is not a North Korean nuclear arsenal but the possibility of sudden regime collapse. A democratic revolution in the North, followed by a German-style unification, would deal a heavy blow to the South Korean economy. That’s why Seoul works to ensure that the regime in Pyongyang remains stable, while it enjoys newfound affluence and North Koreans quietly suffer.

Do not allow this status quo to persist. Lead the fight for change in North Korea. Here are some ideas to make it happen:

Realize a Quiet Revolution Is Already Under Way: For decades, the Hermit Kingdom was as close to an Orwellian nightmare as the world has ever come. But that’s simply not the case anymore. A dramatic transformation has taken place in North Korea in recent years that is chronically underestimated, particularly in Washington. This transformation has made Kim Jong Ii increasingly vulnerable to internal pressures. Yes, North Korea is still a brutal dictatorship. But compared to the 1970s or 1980s, its government has far less control over the daily lives of its people.

With the state-run economy in shambles, the government no longer has the resources to reward “correct” behavior or pay the hordes of lackeys who enforce the will of the Stalinist regime. Corruption runs rampant, and officials are always on the lookout for a bribe. Old regulations still remain on the books, but they are seldom enforced. North Koreans nowadays can travel outside their county of residence without getting permission from the authorities. Private markets, once prohibited, are flourishing. People can easily skip an indoctrination session or two, and minor ideological deviations often go unpunished. It’s a far cry from a free society, but these changes do constitute a considerable relaxation from the old days.

Deliver Information Inside: North Korea has maintained a self-imposed information blockade that is without parallel. Owning radios with free tuning is still technically illegal— a prohibition without precedent anywhere. This news blackout is supposed to keep North Koreans believing that their country is an earthly paradise. But, today, it is crumbling.

North Korea’s 880-mile border with China is notoriously porous. Smuggling and human trafficking across this remote landscape is rampant. Today, 50,000 to 100,000 North Koreans reside illegally inside China, working for a couple of dollars a day (a fortune, by North Korean standards). In the past 10 years, the number of North Koreans who have been to China and then returned home may be as large as 500,000. These people bring with them news about the outside world. They also bring back short-wave radios, which, though illegal, are easy to conceal. It is also becoming common to modify state-produced radios that have fixed tuning to the state’s propaganda channels. With a little rejiggering, North Koreans can listen to foreign news broadcasts.

But there are few broadcasts that North Koreans can hope to intercept. It was once assumed that South Korea would do the best job broadcasting news to its northern neighbor. And that was true until the late 1990s, when, as part of its “sunshine policy,” South Korea deliberately made these broadcasts “non-provocative.” There are only three other stations that target North Korea. But their airtime is short, largely due to a shortage of funds. Radio Free Asia and Voice of America each broadcast for roughly four hours per day, and Free North Korea (FNK), a small, South Korea-based station staffed by North Korean defectors, broadcasts for just one hour per day.

Being a former Soviet citizen, I know that shortwave radios could be the most important tool for loosening Pyongyang’s grip. That was the case in the Soviet Union. In the mid-1980s, some 25 percent of Russia’s adult population listened to foreign radio broadcasts at least once a week because they were one of the only reliable sources of news about the world and, more importantly, our own society A dramatic increase in funding for broadcasts by Voice Of America is necessary.  It is also important to support the defectors’ groups that do similar broadcasting themselves. These groups are regularly silenced by South Korean authorities, and they have to do everything on a shoestring. A journalist at the FNK gets paid the equivalent of a janitor’s salary in Seoul.  Even a small amount of money- less than U.S. military forces in Seoul spend on coffee-could expand their airtime greatly. With an annual budget of just $1 million, a refugee-staffed station could be on air for four hours a day, 365 days a year.

Leverage the Refugee Community in the South: There are some 10,000 North Korean defectors living in the South, and their numbers are growing fast. Unlike in earlier times, these defectors stay in touch with their families back home using smugglers’ networks and mobile phones. However, the defectors are not a prominent lobby in South Korea. In communist-dominated Eastern Europe, large and vibrant exile communities played a major role in promoting changes back home and, after the collapse of communism, helped ensure the transformation to democracy and a market economy. That is why the United States must help increase the influence of this community by making sure that a cadre of educated and gifted defectors emerges from their ranks.

Today, younger North Korean defectors are being admitted to South Korean colleges through simplified examinations (they have no chance of passing the standard tests), but a bachelor’s degree means little in modern South Korea. Defectors cannot afford the tuition for a postgraduate degree, which is the only path to a professional career. Thus, postgraduate scholarships and internship programs will be critical to their success. Without outside help, it is unlikely that a vocal and influential group of defectors will emerge. Seoul won’t fund these programs, so it will be up to foreign governments and non-governmental organizations to do so. Fortunately, these kinds of initiatives are cheap, easy to enact, and perfectly compatible with the views of almost every U.S. politician, from right to left.

Fund, Plan, and Carry out Cultural Exchanges: The Cold War was won not by mindless pressure alone, but by a combination of pressure and engagement. The same will be true with North Korea The United States must support, both officially and unofficially, all policies that promote North Korea’s Contacts with the outside world. These policies are likely to be relatively expensive, compared to the measures above, but cheap in comparison to a military showdown with a nuclear power.

It makes sense for the U.S. government to bring North Korean students to study overseas (paid for with U.S. tax dollars), to bring their dancers or singers to perform in the West, and to invite their officials to take “study tours.” Without question, North Korean officials are wary of these kinds of exchanges with the United States. However, they will be less unwilling to allow exchanges with countries seen as neutral, such as Australia and New Zealand. In the past, Pyongyang would never have allowed such exchanges to happen. But nowadays, because most of these programs will benefit elite, well- connected North Korean families, the temptation will be too great to resist. in-other words, a official in Pyongyang might understand perfectly well that sending his son to study market economics at the Australian National University is bad for the communist system, but as long as his son will benefit, he will probably support the project.

Convince Fellow Republicans That Subtle Measures Can Work: Some Republicans, particularly in the U.S. Congress, might object to any cultural exchanges that will benefit already-privileged North Koreans. And, for many, funding Voice of America isn’t as attractive as pounding a fist in Kim’s face. But these criticisms are probably shortsighted. As a student of Soviet history, you know that mild exposure to the world outside the Soviet Union had a great impact on many Soviet party officials. And information almost always filters downstream. A similar effect can be expected in North Korea. During the Cold War, official exchange programs nurtured three trends that eventually brought down the Soviet system: disappointment among the masses, discontent among the intellectuals, and a longing for reforms among bureaucrats. Money invested in subtle measures is not another way to feed the North Korean elite indirectly; it is an investment in the gradual disintegration of a dangerous and brutal regime.

North Korea has changed, and its changes should be boldly exploited. The communist countries of the 20th century were not conquered. Their collapse came from within, as their citizens finally realized the failures of the system that had been foisted on them. The simple steps outlined here will help many North Koreans arrive at the same conclusion. It may be the only realistic way to solve the North Korean problem, while also paving the way for the eventual transformation of the country into a free society. This fight will take time, but there is no reason to wait any longer.

United Press International
Marc S. Ellenbogen
4/2/2007

The most effective way to influence the future of North Korea is through economic development and incentives. The 500 million euro North Korea Investment Fund exists to economically engage the Democratic People’s Republic of Korea. While the six-party talks continue — which they should and must — Global Panel and the Prague Society will continue to grow this fund.

At the 4th Session of the North Korea Initiative in Bratislava just weeks ago, there was a consensus that growing the NKIF is a good strategy for engaging the DPRK. The NKIF will be used for entrepreneurial ventures, to provide micro loans, for knowledge transfer, healthcare and for building, energy and infrastructural projects.

The biggest task facing Pyongyang is converting one of the worlds most centrally planned and isolated economies into something remotely resembling a free market. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts. Industrial and power output has declined as well. The development of former East Germany cost 1.2 trillion euros. It is calculated that the redevelopment of the DPRK will cost 5 trillion euros. Pyongyang will only allow development if it can simultaneously protect its power position.

In the 1980s companies failed to predict the collapse of the centralized Soviet system. They were wholly unprepared and certainly had few dedicated funds in place (George Soros was an exception) when the changes in Central Europe came about. The NKIF seeks to remedy this mistake by having funds in place that can be used to aid a changing North Korea at the point change takes place. The NKIF targets investors who know a return of investment is years in the future but recognize the need for such a fund.

A prerequisite for the fund’s future success is confidence-building measures. General Dieter Stockmann, the former NATO deputy commander, made comparisons to China. As the head of the bilateral German-China security talks, he noted that “we need access to human resources.” He was quick to point out that the DPRK military will play an indispensable role in the DPRK’s economic future.

Paul Beijer, Sweden’s special representative on Korean peninsula issues, noted that the Australians have experience with micro-loan projects. Others observed that Sweden, Switzerland and the European Union have separately held conferences in Pyongyang focused on economic reform. There have been both government and private — through international foundations — conferences in the DPRK.

Poverty is out of control in the DPRK. The World Food Program and the Carter Center have calculated some 50 percent of the population lives below the poverty line. Even the nascent micro-markets have virtually collapsed. The gap between the wealthiest and poorest is staggering — amongst the most dramatic on earth.

Previously, there had been a period when small and middle-sized entrepreneurs had done fairly well in North Korea. Tapping into these existing entrepreneurs must be a key goal of the NKIF. The NKIF must provide educational training for this entrepreneurial class and help it grow. Training, also of those doing the training, will be a specific area to add value.

The selection process will be difficult, and nearly impossible without a physical presence in the DPRK. North Korea is a huge market for the development of a financial infrastructure and financial services. Companies interested in participating in the future can aid in these trainings and seminars, which would give them a chance to get their foot in the door.

One expert commented that the DPRK government is highly compartmentalized and that it is extremely difficult to get the different agencies to sit together. It was suggested that a conference in Pyongyang focusing on a narrow topic — modern accounting, microfinance — might be of value. Eduard Kukan, until recently the long-serving Slovak foreign minister, cautioned that Pyongyang remains very weary of outsiders and that even good intentions could very likely be seen as interference.

Any investment must be linked to certain performance benchmarks. It must be linked to practical steps and an action plan. A critical component must be systems in place to monitor outcomes. At the moment, this is virtually impossible with the DPRK. Many who criticize the concept of engagement believe monitoring to be the weakest link. They argue one cannot make sure investments are being used solely for intended civilian economic and industrial purposes.

It is difficult to engage a country that is essentially disinterested in being engaged or only interested in doing so under very strict conditions.

Even the government in Pyongyang cannot ignore basic facts. It recognizes the problems that exist but fears losing its power base. Any solution must convince the current elite that the future is good for it. This, on the other hand, is a very difficult sell to many who wish to punish the current DPRK government.

Regardless, before the NKIF is put to use, a monitoring process should be in place. And this allows time for the fund to grow and to find its niche.

Yonhap
4/2/2007

North Korea has welcomed the just-signed free trade agreement between the South and the United States on Monday, seeing its possible role of promoting an inter-Korean industrial complex in its territory, Pyongyang’s management body of the complex said.

In the trade pact, the two sides agreed to hold further negotiations on goods produced in the Kaesong industrial complex, which Seoul wants to be treated as made in South Korea.

Pyongyang sounded upbeat that the pact has left room for the inclusion of Kaesong goods in the trade deal.

“We welcome sincerely (the fact) that the South Korea-U.S. FTA agreement has prepared the foundation for the goods from the Kaesong industrial complex to be treated as made in South Korea,” the Kaesong Industrial District Management Committee, which oversees the joint project between South and North Korea.

The Kaesong complex, just a few kilometers north of the inter-Korean border, is one of two flagship projects the South operates in the spirit of reconciliation with the North following their historic summit in 2000. Over 11,000 North Korean workers are employed by dozens of South Korean companies producing garments, utensils and other labor-intensive goods. Another reconciliation project is the operation of tours to the North’s scenic Mount Geumgang.

South Korean companies operating in Kaesong say the inclusion of the goods in the FTA is crucial, as this will open the doors for their exports to the world’s largest market and will also provide a template for future trade deals with other countries.

Daily NK
Han Young Jin
4/2/2007

“100,000 won (approx. US$32.2) doesn’t cut it.” This is a sigh-ridden comment of a North Korean citizen, who states that even if he has 100,000 won, it is not much to spend.

The recent currency depreciation of the North Korean won has been exacerbating the North Korean citizens’ burdens of their costs of living.

Such a situation has been ongoing since the July 1st Economic Measure in 2002, but with the concentration of money in the privileged class, the grim realities of life of vulnerable persons have been becoming more difficult.

Hoiryeong citizen Park Hyun Sik (pseudonym), in a phone conversation with Daily NK on the 30th, stated that “a decent Chinese jumper costs 30,000 ~50,000 (approx. US$ 9.7~16) won for one, 3,000 won for 1kg of meat, and 2,700 won per a bottle of oil. After eagerly awaiting a month, I go to the market with 100,000 won (approx. US$ 32.2), but end up with nothing even though I did not buy much.”

Mr. Park, who conducts the wholesale business of relaying goods received from overseas Chinese emigrants to the provinces, receives a monthly income of 300,000 won. This puts him in a good class in North Korea. Mr. Park’s family, which consists of his wife and son, plans to secure food with this money.

Evidently, a family of four needs 50kg (50,000 won) of rice, which costs 1,000 won per kg, and 20 kg (7,000 won) of corn, which costs 350 won per kg, to survive. Additionally, the cost of buying a bottle of bean oil at 2,700 won as well as pepper powder, vinegar, garlic, onions and other vegetables is almost equal in value to the cost of buying rice.

On top of this, the family says they eat pork meat about once a month, which costs 3,000 won per kg. The rest of the money goes to the three family members’ clothing and cigarettes and drinks for Mr. Park, all of which cost about 300,000 won. Even then, Mr. Park tends to be on the well-fed side.

Working Citizens Cannot Eat Meat Even Once A Month

Kim Jung Ok (Alias), who sustains her living through a noodle business in the Hyeryung South Gate jang (market), has a monthly living expense of approximately 60,000 won. Ms. Kim is a housewife, who has taken on the responsibility of her three-member family.

Even if she sells noodles all day, she only makes 2,000~3,000 won. She merely earns around 60,000 won per month, all of which goes to food. Making a profit from her business is a mere dream, she expresses. She cannot even think about rice; after buying 70 kg of corn (23,000 won), bean oil, beans (950 won per kg) and other vegetables, she has nothing left.

The monthly income of her husband, who works at a machine shop in Hoiryeong, is 4,000 won. That is enough to buy 4kg of rice. Fearing starvation if she solely depended on her husband, she opened her noodle shop 10 years ago. “Even if we are both working like this, it is barely enough for corn meals. It is difficult to buy a kg of meat in a month. It has been a long time since I fed meat to my child,” she confessed.

Currently, with the exception of storekeepers who trade with Chinese emigrants, foreign currency traders, and those who have relatives in China, a majority of residents in Hoiryeong live daily as Mr. Park.

Recently, the Ministry of People’s Safety Agency issued the order that “Rations will be distributed in April. So, stop engaging in illegal trade.” Due to this decree, the control of the jangmadang (market) has been tightened. Discontent among residents who sell Chinese industrial products has climaxed, “How can we live if they feign ignorance while not providing the rations?”

The regulation of jangmadang (market) by ministry officials has only raised the price of Chinese industrial products. Before that, there would be joint bargains, but now, purchasers are visiting the merchants and so the costs of products are going up.

On one hand, the influence of the dollar’s recent bearish turn in the international market is fully reflected in the North Korean black market. The exchange rate of 800 won to a dollar between the Chinese Yuan and the dollar remains unchanging, but the North Korean currency following suit to the dollar and the Yuan changes day to day. Ultimately, North Korea is not “a region with a fixed exchange rate” due to the fact that exchange merchants occasionally apply the exchange information received from China.

Due to the dollar’s slump, the ratio of the North Korean won to the dollar and to the Yuan has been on the decline for several months. Mr. Park said, “In January, the North Korean currency went up to 42,000 won per 100 won RMB, but has drastically gone down to 36,500 won per 100 won.”

Japan Focus
Outi Luova
1/1/2006

China’s coastal regions have received impressive financial and organizational resources through overseas Chinese networks and international capital generally. China’s land borders are also linked to transnational communities, thanks to the networks of ethnic minorities who live there. This article introduces the mobilization of the Korean minority’s transnational ethnicities in the service of local economic development. China’s well-established structure for the utilization of overseas Chinese resources serves as a frame of reference. The analysis focuses on foreign investment, donations, and remittances—resources that are widely regarded as the most important development input provided by the overseas Chinese. The regional focus is on Yanbian, a Korean autonomous prefecture in Jilin Province in Northeast China, which has enjoyed a measure of success in attracting Korean investment in step with burgeoning China-South Korea economic and political ties. But it has also faced significant challenges.

The Yanbian Koreans and the Transnational Korean Community in Northeast Asia

The current Korean population in China is of rather recent origin. A wave of migration from the Korean Peninsula began in the 17th century. However, most of the migrants arrived during the tumultuous decades between the middle of the 19th century and the end of the Second World War. Northeast China was first a refuge for poor peasants and later a base for Korean nationalists, who fought against the Japanese colonial rulers in the period 1910–45. After Japan annexed Northeast China in 1931, hundreds of thousands of Koreans migrated to the new Japanese-dominated state of Manzhouguo, including many forcibly sent to work in factories and mines. However, the vast majority of migrants from Korea came allured by the promise of land.

When Japan was defeated in 1945, there were 1.7 million Koreans in Northeast China. When the People’s Republic of China was established in 1949, some 600,000 Koreans returned to the Korean Peninsula, while 1.1 million remained in China. China’s ethnic Korean minority presently totals roughly two million people. Most live in Northeast China, with a dense Korean population in Yanbian on the North Korean border. The number of ethnic Koreans in Yanbian is about 200,000, 38 percent of the prefecture’s population. An estimated 80 percent of the Yanbian Koreans have their roots in contemporary North Korea, and 20 percent have their roots in South Korea.

While the current Korean-Chinese population mainly originated in these recent waves of migration, both Chinese and Korean kingdoms earlier ruled and fought over the area that is now Yanbian. The historical dispute over the area continues even today among historians and politicians: Both South Korea and China claim historical antecedence with respect to the Kingdoms of Gaoguli (Chinese)/Goguryeo (Korean) and Bohai (Chinese)/Balhae (Korean), which ruled over the area from 37 BCE to 926 CE. Another historical dispute concerns the region of Jiandao (Chinese)/Gando (Korean), which is roughly congruent with contemporary Yanbian. Some Korean nationalists continue to demand that Jiandao, which they regard as a part of Korea, be restored to Korea. [1]

Yanbian has two pools of Korean resources abroad: Koreans, and Korean-Chinese who possess Chinese citizenship. The Koreans include, from a Chinese point of view, Koreans living on the Korean Peninsula and the some 3.7 million people of Korean origins residing throughout the world, mainly in Japan, the United States, and the former Soviet Union. There are three overlapping categories of overseas Koreans who maintain relations with Yanbian: The first group comprises Koreans (including people of Korean origins) with relatives and acquaintances presently living in Yanbian. A second group is comprised of Koreans whose life history is linked to Yanbian; these Koreans, or their parents, were born or lived part of their lives in Northeast China. Many who left China in 1945 have ties to the region where they, or their parents, lived; however, compared with the overseas Chinese, their linkages are more tenuous, since their ancestral homeland is on the Korean Peninsula, and Yanbian can be seen to have constituted only a temporary home. Finally, the third and broadest category of overseas Koreans who maintain ties to Yanbian consists of all overseas Koreans whose sympathy and interest in Yanbian is rooted in blood ties, ethnicity, and culture. Overall, Overseas Koreans remain critical to Yanbian attempts to mobilize transnational Korean resources.

As for overseas Korean-Chinese, there are currently over 150,000 living in various parts of the world. Besides Yanbian, Korean-Chinese from other parts of Northeastern China have migrated to South Korea. Han Chinese migrant workers in South Korea in 2001 included more professionals than did Korean-Chinese (638 versus 268) but fewer trainees (8,629 vs 13,243) and undocumented migrants (38,000 vs 57,000). [2] An estimated 50,000 Yanbian Koreans live in South Korea, including professionals, workers, trainees, students, and wives of South Korean men.

The Opening Up of Yanbian

Direct trade between China’s coastal provinces and South Korea flourished starting in the late 1980s, despite the lack of official relations between the two countries. Indirect trade began around the time of the Asian Games, which took place in Seoul in 1986; China’s participation in the games signalled a changed attitude towards South Korea. South Korean investments were soon directed toward southern China, the region then most open to foreign investment. Following the Seoul Olympics in 1988, direct trade between the two countries began, and South Korea investments moved northward, mainly to Shandong and Liaoning provinces, which are closest to South Korea.

Jilin’s border and barter trade with North Korea were restored in 1982, having been frozen since 1970 in the aftermath of the radical period of the Cultural Revolution. The first direct South Korean investment in Northeast China was made in Heilongjiang as recently as 1989 and in Jilin in 1990, and direct trade with South Korea was restricted to these provinces until 1990. Hence, despite the presence of an ethnic Korean population, Yanbian did not receive much South Korean investment in the 1980s. A partial explanation lies in particular features of the economy and history of China’s northeast. Conservative party officials had sought to limit foreign economic penetration there, in part to protect inefficient state-run industries. Economic cooperation was also restricted for political reasons. In particular, Japanese and South Korean investments evoked concern; Japanese investments revived memories of colonial domination of an earlier area, and South Korean investments were a sore point for China’s ally North Korea. Thus, while allowing trade to expand elsewhere in China, the central government prevented the northeastern provinces from drawing closer to South Korea. For Yanbian, with its close political and ethnic relationship with North Korea, it became particularly important to keep its distance from South Korea. Beijing used Yanbian as a political card to assure North Korea of China’s support.

In the latter part of the 1980s, the Yanbian elite was divided into two camps, one opposing contacts with South Korea and the other favouring opening up to South Korea and other capitalist countries. The pro-South Korea camp lobbied the central government to grant Northeast China preferential trade rights. Both groups included Han Chinese as well as Korean-Chinese. Thus, not only national-level policies but also divisions among local factions hampered the opening up of Yanbian.

Although small-scale trade associated with tourism was lively by the late 1980s, official trade contacts between Yanbian and South Korea were few before 1991. Yanbian Koreans first developed transnational bonds with North Koreans and Korean-Soviets. Yanbian Koreans frequently visited relatives in North Korea and the USSR and created close ties with kin and friends there. The local authorities supported these visits partly because of the profitable small-scale trade conducted during the visits. In particular, the shuttle trade with North Korea was profitable: In the early 1990s, the annual value of this unofficial trade was estimated to exceed RMB 100 million.

In 1991, Yanbian emerged as a center of international cooperation as the UNDP-backed Tumen River development program was inaugurated. The bold initial plan of this program was to turn the Sino-Russian-North Korean border area around the mouth of the Tumen River into a new international commercial hub with intercourse extending to South Korea, Mongolia and Japan. After the establishment of China-South Korean official relations in 1992, Yanbian was fully integrated into a regional, transnational Korean ethnic community, and state-supported transnational activities expanded especially to South Korea.

Organizing Activities for the Promotion of Ties

Since the mid-1980s, Yanbian’s contacts with South Korea and other countries have gradually expanded through unofficial channels drawing on ethnic and family ties. The first business contacts were created by associations, individual scholars, artists, and athletes. The first to “break the isolation” was a Yanbian University professor who visited West Germany and Sweden in 1982. Unofficial cultural exchange with South Korea began in 1989, when a famous Yanbian Korean poet visited several South Korean universities and a song and dance troupe from Yanbian performed in South Korea. In the mid-1980s, the Party-affiliated Yanbian Overseas Union hosted members of the Sino-Canadian Association for Economic and Cultural Exchange of the Korean People and the Friendship Association of Korean People in China and the United States. In 1988, the Yanbian Overseas Union paid a return visit to Canada and the United States, paving the way for economic cooperation. Members of this same association had also visited South Korea even before the establishment of Sino-South Korean diplomatic relations. In 1990, the Yanbian Department of Foreign Trade and Economic Cooperation set up a Chamber of International Commerce to build unofficial ties with South Korea.

Once official Sino-South Korean relations were established in 1992, the local government launched a full-fledged mobilization of Korean linkages. It openly encouraged Yanbian Koreans to visit South Korea and contact Koreans living abroad. In addition to associations, businessmen, and officials, ordinary people were also encouraged to link up with South Koreans and visit the country. Yet, the foreign trade administration of Yanbian was ill-prepared for large-scale international economic cooperation. In this situation, unofficial channels inevitably took the lead.

Different types of associations helped widen business contacts and act as middlemen. The Yanbian Overseas Union played a decisive role in attracting five foreign investments, and the Association of International Public Relations drew two factories to the area. Ethnic Korean members of these two associations also supported foreign trade officials when business negotiations encountered difficulties. For example, when negotiations between officials and investors deadlocked, the associations sometimes persuaded investors to start businesses in Yanbian. In the 1990s, the role of ethnic Korean middlemen became crucial for the additional reason that the state-owned companies were staffed mainly by Han Chinese, who lacked appropriate cultural and social capital.

The role of the above associations and other ethnic Korean middlemen in business promotion subsequently diminished. Following the early 1990s, when the foreign trade administration struggled in the face of insufficient resources, contacts, and experience, the administration expanded and gained strength. The administration and local companies established wide and stable international contacts, as well as additional resources to facilitate international cooperation. Now, the associations were mobilized in campaigns that focused on student exchange, labour export, and charity work, to mention a few.

In order to reinforce the emerging cooperation, leaders of the prefecture as well as lower-level units invited South Korean businessmen to discuss cooperation and celebrate the Spring Festival, the New Year, and China’s National Day in Yanbian. South Korean foreign students, politicians and artists were also invited to participate. At these events, important South Korean partners were granted honorary citizenships and other honours. Local governments were also active in establishing ties with cities, prefectures and counties elsewhere. By 1999, the Yanbian capital Yanji had created friendly relations with 11 cities and districts in five countries. Of these locations, five were in South Korea. In addition, Yanji had friendship cities in Australia and Russia.

One form of official business promotion activity was the arrangement of international Korean cultural events. Some of these events had a purely commercial character, while others sought to bring the Korean-Chinese community to the knowledge of Koreans abroad and portray them as potentially valuable partners. Important occasions included international trade fairs and the anniversaries of the autonomous prefecture, which were celebrated grandiosely every fifth year. These celebrations were organized by the prefectural government. The First Korean Cultural Festival, which Yanbian Prefecture organized in August 1992 to celebrate the prefecture’s 40th anniversary, provides a good example of these cultural-trade events. The organizers of the First Korean Cultural Festival invited ethnic Korean guests from 10 countries, among them over 500 businessmen with a Korean background. During the festival, representatives of Yanbian companies negotiated with the business guests and agreed on participation in over 40 projects.

In addition to holding festivals with an ethnic Korean character, Yanbian also tried to attract overseas Koreans’ attention by building up a permanent exhibition on Korean-Chinese folk customs, and by reconstructing several traditional villages. Cultural activities of this kind echoed the practices of China’s minority policy. China has emphasized the cultivation of minorities’ folk customs, such as traditional festivals, the performing arts and clothing, often adapted to Chinese sensibilities. Koreans in China have managed to maintain their folklore rather well, and they enjoy a high level of education, mainly in the fields of literature, history and the performing arts. This background has provided a solid basis for the arrangement of ethnic cultural events and exhibitions.

The above attempts to elevate the Koreanness of Yanbian can be interpreted as a way to strengthen “diffuse solidarity” in the transnational community. This type of solidarity creates affinity within larger entities such as territorial and symbolic communities, in which participants largely lack face-to-face contact. [3] Yanbian tried to deepen the interest and affection of foreign Koreans toward Yanbian by highlighting its cultural Koreanness. At the same time, it aimed to control politically sensitive claims on commonality. For example, the officials suppressed all statements of Yanbian being a part of Korea historically or in terms of nationhood.

Building Ties

The first joint venture in Yanbian was established in 1986 between an American subsidiary of a South Korean company and the prefecture of Yanbian. Before the establishment of Sino-South Korean official relations, most foreign investments came from Korean-Americans or American affiliates of South Korean companies. By the end of 1992, a total of 131 of the 212 wholly or partly foreign-owned companies in Yanbian, sanzi qiye, were run by ethnic Korean capital. The greatest part, consisting of 72 companies, had absorbed South Korean capital, and 10 had taken up North Korean capital. In all, 49 companies were partly or wholly financed by ethnic Koreans from other countries such as the United States, Japan and Canada. At least in these 49 cases, it could be reasonable to argue that ethnic and family ties had played an important role in the investment decision. In 1996, an official in the foreign trade administration informed me, foreign investors from countries other than South and North Korea were mainly ethnic Koreans.

The year 1996 can be seen as a turning point in Yanbian’s foreign economic cooperation. The number of enterprises receiving South Korean investments rose to 393, including large-scale investments. Between 1996 and 1997 the total volume of implemented foreign investment more than doubled. The financial crisis which hit the South Korean economy in the latter years did, however, precipitate a nosedive in South Korean foreign direct investments. South Korea recovered quickly from the crisis, but the number and value of the absorbed FDI would not quickly return to 1996 and 1997 levels. Still, by 2002, total South Korean direct investment projects had risen to 515, which was 74 per cent of all FDI in Yanbian. Their average value (US$790,000) was rather small compared with the average value of FDI from Hong Kong (US$2.7 million), Taiwan (US$1.02 million) and Japan (US$1.01 million). A report compiled by a leading cadre of the Tumen Programme Office, however, revealed disappointment with the type of investments Yanbian had received. Although the number of investments was relatively high compared with other parts of Jilin Province, and South Korean investment accounted for more than two thirds of international investment in Yanbian by 2002,the level of technology, scale, efficiency and compatibility was said to be low. Moreover, the companies experienced huge losses and failed to invigorate the local economy. [4]

Compared with South Korean investment in other parts of China, interest in Yanbian was limited. Shanghai, Tianjin and the coastal provinces Shandong, Liaoning, Jiangsu, and Zhejiang ranked highest in South Korean investment. Investment decisions were guided principally by profitability, not by emotions. By comparison to leading coastal provinces, Yanbian’s infrastructure was meagre, hence South Korean interest in investment low. In addition, South Korean companies could readily recruit Korean-speaking workers from Northeast China to their factories situated in the coastal regions.

The amount of FDI in Yanbian rose gradually in the early 1990s, but foreign trade did not. Yanbian’s foreign trade declined between 1993 and 1996. In the early 1990s Yanbian’s main trade partner was North Korea, which faced mounting economic difficulties leading to a sharp drop in trade in 1993. The other reason for the crash was the establishment of Sino-South Korean official relations. North Korea responded by cutting back on trade. The low quality and narrow selection of Yanbian’s main export products in the early 1990s—cereals, coal, tobacco, sugar—also hindered development of trade with the emerging new trade partners, Japan and South Korea. Yanbian’s foreign trade plummeted from a peak value of US$467 million in 1993 to US$155 million in 1995.

Yanbian responded by launching, in cooperation with South Korean investors, new export products: textiles, yarn, timber, and wooden products. One third of the South Korean-invested companies were engaged in textile manufacturing. Yanbian also imported timber from Russia and North Korea in order to manufacture wooden products for South Korean markets.

In 2003, the value of Yanbian’s trade with North Korea was nearly equal to its trade with South Korea: US$117 million versus US$116 million. Yet two years later, trade with North Korea had expanded to double the value of trade with South Korea. The economic reforms initiated in North Korea in 2002 were presumably one of the main reasons for this increase. In addition, the visit by China’s leader Jiang Zemin to North Korea the same year probably boosted trade relations. However, compared with other regions in China, Yanbian’s trade with neighbouring countries remains small. By comparison, the border city of Dandong in Liaoning Province handles over two-thirds of China’s trade with North Korea.

In reality, Yanbian’s trade with North and South Korea and Russia, like its trade across other land borders, has been much more extensive than official numbers show. Many of the companies involved in foreign trade with North Korea were not registered. Thus, their trade remains outside of the statistics. Similarly, the vibrant shuttle trade with the bordering countries, South Korea included, is not visible in the statistics.

Trade and investment flows between China and the two Koreas have been most intensive in China’s Bohai region, which stretches from Liaoning to Shandong; Yanbian, due to its remote location and less developed infrastructure, has remained a backwater by comparison. Nevertheless, although the Korean investments in Yanbian are relatively few, and registered trade with the two Koreas low, the role of overseas Korean ties in the development of the Yanbian economy has been crucial. China’s central government has provided Yanbian with several preferential polices [5], but it has provided only limited funds to create a solid economic foundation. Supported by preferential policies, Yanbian’s development has largely been financed by South Korea. Today, as Yanbian’s economic structure has become consolidated, domestic companies are showing increasing interest in Yanbian, further supported by the state-sponsored campaign to rejuvenate the economy of Northeast China. This new development could reinforce Yanbian’s position in the Northeast Asian circle of ethnic Korean capital flows.

The patterns of ethnic Korean investments in Yanbian show similarities with overseas Chinese investments in China’s coastal regions. The investments have been small and have not involved high technology. Rather, they have concentrated in the service sector. Cooperation with South Korean companies has provided an important learning process for inexperienced Yanbian Korean companies, helping them to adapt to international cooperation. In southern China, overseas Chinese investments have paved the way for other foreign investors; in Yanbian, overseas Korean investments have created conditions which facilitate the flow of both foreign and domestic Chinese investments into the area. In this way, the foreign investments have in fact supported Yanbian’s integration into China’s domestic economy.

Compared with overseas Chinese community investments in China, the Korean transnational community has been less inclined to invest in South Korea. To a great extent this is the product of South Korea’s restrictive policy on foreign direct investments. South Korea made the first attempts to mobilize its Korean diaspora for economic purposes only in 1997, when the Overseas Koreans Foundation was established. Since 2002, the Foundation has convened annual “World Korean Business Conventions,” which aim at building a global Korean business network in support of the South Korean economy. As South Korea has liberalized foreign investment rules, ethnic Korean investment has started to increase. Yanbian has been ahead of South Korea itself in its organized attempts to mobilize the transnational ethnic Korean community.

Attracting donations and remittances has been a central part of building ties between China and overseas Chinese. By comparison with overseas Chinese donations in Guangdong, overseas Korean donations in Yanbian and elsewhere have been few.

There have, however, been donations directed to schools, institutes and universities, as is the case with Chinese contributions to their hometowns in Guangdong. Some foreign Koreans who lived in Yanbian in their childhood have donated to their alma maters. Donations have included technical equipment, books, periodicals and grants. During fieldwork in Yanbian in 2004, I met with a South Korean businessman who had recently made a donation to a technical institute in Yanbian. Although he was investing in other parts of China, he had chosen Yanbian for his donation because his father and mother were born there.

During the 1990s, Yanbian received institutional donations worth US$10 million. High taxes imposed on donations, as well as corruption, were mentioned as reasons for limiting donations. Remittances to relatives tended to flow out from Yanbian rather than in, as local Koreans helped their relatives in North Korea; indeed, my local contacts emphasized that the main flow of economic support was from Yanbian to North Korea, not from South Korea to Yanbian. Rather than sending money, many South Korean relatives preferred to give generous gifts when they met with their Yanbian relatives. By contrast, significant flows of Korean capital were directed from Yanbian to North Korea. Yanbian Koreans supported relatives and friends in North Korea both financially and by providing clothes and food. Yanbian also served as a channel for South Korean remittances to North Korea. Both South Koreans and North Koreans who lived outside their home country used Yanbian Korean brokers to deliver money to their relatives in North Korea.

Finally, the remittances sent by Yanbian Korean labour migrants from abroad to Yanbian were significant. In 2003, migrant remittances are said to have reached US$650 million. This sum was double the local budget, and fifteen times higher than the value of realized foreign investments in 2003.

Korean Ethnic and Family Ties in the Service of Economic Development

Without a doubt, Korean ethnic ties have given impetus to Korean investors to start businesses in Yanbian. Firstly, ethnic affinity led some investors to invest in Yanbian. Some South Korean researchers of China-South Korean trade have mentioned the Korean population of Yanbian as being advantageous for South Korean investors; for example, the South Korean economist Si Joong Kim assumes that cultural proximity has attracted South Korean small- and medium-sized firms to China’s Korean areas. [6] Yanbian has also attracted Korean interest in its capacity as a link with North Korea. As Yanbian Koreans can easily enter North Korea, information from and about North Korea is readily available there. Local companies can also act as middlemen with North Korean companies. Thus, some investors see Yanbian as a springboard for future investments in North Korea.

The Complexity of Transnational Ethnic Ties as an Economic Resource

Overseas Korean networks have not, however, provided comparable resources to Yanbian as the overseas Chinese networks have provided to Southern China. China’s coastal region possesses a long tradition of entrepreneurship, and the overseas Chinese community is highly business-oriented, factors which have contributed to the rapid economic growth on China’s southern coast. Yanbian, by contrast, was predominantly agrarian, and due to its remote position adjacent to North Korea, its economy has been less developed. The high level of education of the Korean-Chinese has not led directly to economic cooperation with foreign countries, as the highly educated Korean-Chinese have mainly pursued studies in history, literature and the arts. Moreover, they have tended to be oriented toward careers in government, in the performing arts and literature, or in the media. Hence, compared with the overseas Chinese, the Korean transnational community has been less well positioned to invest in Yanbian.

A closer look at certain elements of Koreanness that Yanbian wished to rely on reflects the complexity of ethnic ties as a resource for promoting economic cooperation. Ethnic background or family ties do not automatically generate business. When the Yanbian Koreans won the opportunity to visit South Korea, they were surprised at not receiving a warmer welcome there. Indeed, South Koreans tended to look down on them. For political and cultural reasons, North Koreans were held in even lower esteem in South Korea. As Korean-Chinese were often mistaken for North Koreans when visiting South Korea, due to similar dialect and appearance, they often met rather harsh treatment.

As contacts between Korean-Chinese and South Koreans intensified, the differences in their habits and values also became quite clear. Korean-Chinese and South Koreans had drifted apart during forty years of separation. The resulting differences led to conflicts over values and other misunderstandings between the two groups. According to sociologist Hyun Ok Park, the Korean-Chinese had turned from “long-lost relatives of blood-kin” to a cheap labour force which faced discrimination, arrests, crackdowns and deportations. [7]

Family networks did not provide wide access to business, because the majority of the Yanbian Koreans had their relatives in North Korea. Close ties between the Yanbian Koreans and North Korea constituted a hindrance to trade with South Korea in the mid-1990s. According to one Yanbian Korean contact, those who wished to maintain trade relations with North Korean companies were often unable to seek business partners in South Korea, for fear that the North Korean side would break off the relationship. Although trade with North Korea had become less and less profitable by the mid-1990s, many Yanbian Korean businessmen avoided business contacts with South Korea in order to maintain their partnerships with North Korean companies. Some Yanbian Koreans also feared that cooperation with South Korea would put their relatives in North Korea in a difficult situation.

Loyalty to China

Some Chinese government officials also wanted to avoid the problems which contacts with South Koreans might create. This, especially, seems to have hindered cadres of Korean origin. Due to the strong South Korean connection with Yanbian, and the pan-nationalistic activities aimed at creating a united Great Korea, including Yanbian, Yanbian was classified as one of the four sensitive regions in China where the Central Government fears separatism. [8] The fear is that pan-nationalistic South Koreans might infiltrate Yanbian in the guise of economic cooperation. Some officials, who wished to render their career secure by avoiding all trouble, chose to block cooperation with South Koreans and other foreigners.

The activities of the associations that were pursuing people’s diplomacy with overseas Koreans were closely monitored. One article in the journal of the local Party School stated that strengthening party guidance was essential for people’s diplomacy, and urged close cooperation between associations and the Party. The article even called for Party cells in associations in order to assure that they follow the Party line. [9] In this environment, the prerequisite for an internationally oriented association to be active seemed to be a chairperson who was a trusted Party member.

Similar views were presented in articles prepared by the national-level Ethnic Affairs Commission, Minwei. [10] Korean-Chinese were generally regarded as a patriotic group, having participated in the Civil War on the side of the Communists, and later in the Korean War in the ranks of the Chinese People’s Liberation Army. The starting point in these articles was that the Korean masses should be trusted; leaders should have faith in the Koreans and trust that their political consciousness is strong enough to resist the influence of foreign infiltrators. The second point was that international economic cooperation is essential for Yanbian, so ties with foreigners should be developed. Still, social stability, national unity and border security remained priorities.

There was also concern for the eventual reactions to strong condemnation of Yanbian Koreans as unpatriotic or unreliable. The labelling of Yanbian as a sensitive area (mingan diqu) would convey a lack of trust to local Koreans. It was feared that this would create opposition and disappointment, which could push the Korean-Chinese to the side of infiltrators. There was a clear need to find an appropriate balance between flexibility and control, in order not to obstruct positive economic transfers from the Korean transnational community to Yanbian.

At the same time as concern for the loyalty of Yanbian Koreans arose, exclusivist tendencies in South Korean society produced a counter-force in favour of China. Many Yanbian Koreans became disillusioned because of the discrimination they encountered in South Korea. This strengthened their bonds with China. In addition, in China, they could anticipate rising living standards and could feel pride in belonging to the Korean-Chinese community. Thus, the question of the loyalty of Yanbian Koreans involved multiple contradictory factors.

The Role of Religion

In addition to political ideas, religious activities spread through transnational ties. Christianity was not only perceived by the Chinese leadership as a threat to the “Chineseness” of the Yanbian Korean culture, but Christian congregations were considered to be a disguise for political infiltrators who aimed to disintegrate the country through peaceful means. South Korean missionaries worked not only among Korean-Chinese but also among North Korean migrants and refugees. While in South Korea, many Korean-Chinese encountered Christianity. Until the 1980s, the role of religion had been limited among Korean-Chinese, while in South Korea, one-third of the population were Christians. One contact assumed that the Korean-Chinese migrants were initially attracted to Christianity when they got support from South Korean believers while working under adverse social and economic conditions: Christian organisations provided practical help, like free medical treatment, as well as social and political support. Christian organisations also won support by backing Korean-Chinese demands that South Korean authorities guarantee humane treatment.

Korean churches worked among Korean-Chinese actively not only in South Korea but also in China. They sent both money and personnel to local churches and ran welfare projects. Some churches had established congregations in Yanbian and other areas of China. Many returning migrants joined a local Christian congregation. By the year 1996, the Christian community in Yanbian had grown to include nearly 10 percent of the ethnic Korean population. In addition to return migrants, these congregations also appealed to locals who looked for support in the midst of deteriorating socio-economic conditions.

In order to counteract foreign political and religious infiltrators, three measures were taken in Yanbian in the late 1990s. Firstly, education emphasizing patriotism, socialism and religious policy was intensified. Secondly, leadership was strengthened. Thirdly, control of foreign religious activities was intensified.

Government-Imposed Limitations to Transnational Activities

Yet, various issues remained salient. A report on the new tasks of nationality work from 2001 stated that unequal and slow economic development worked against the cohesion and “centripetality” of minority nationalities. Furthermore, certain international factors and religious activities posed a latent threat to the ethnic unity and social stability in some areas. Yet, this particular document did not provide any policy proposals beyond the routine phrases of training ethnic minority cadres in the spirit of the “three representatives” (sange daibiao). [11] This dilemma will persist as long as the Sino-Korean border exists.

Overall, at the grassroots level, unorganized transnational activities have been allowed to operate freely, but organized activities have only been approved if under the guidance of the Party. At a higher level of institutionalization, whether controlled by individuals, government units, or companies, transnational activities have been required to proceed only according to a strict code of operation. Hence, central tenets of Yanbian’s approved transnational policies can be summarized into two key concepts, viz: trustworthy relations with the centre, and ethno-politically disciplined organizations.

Conclusion

In the course of the 1980s and early 1990s, Yanbian Koreans were gradually linked to the Korean transnational community. Their relationship to this community has since evolved from a fervent Korea-fever to disillusionment. Bernard Vincent Olivier has drawn interesting parallels between the interaction of Yanbian Koreans and North Koreans in the 1960s and the interaction of Yanbian Koreans and South Koreans in the 1990s. In both cases, close interaction initially generated euphoria but later resulted in strengthening the Chineseness of Yanbian Koreans. [12] This tendency was also evident in the early 21st century. Contrary to the fears of China’s leaders, transnational ethnic relations do not necessarily undermine the loyalty of cross-border ethnic groups. Indeed, deeper contacts with ethnic kin abroad may even strengthen minority groups’ ties to the home country.

Although trade and investment flows between China and the two Koreas have been most intensive in China’s Bohai region, the role of overseas Korean ties in the development of the Yanbian economy has been crucial to the locality. As Yanbian’s economic structure consolidates, its position in the Northeast Asian circle of ethnic Korean capital flows might become more significant.

Drawing on traditions of overseas Chinese work, the Yanbian administration was able to mobilize ethnic Korean resources for prefectural development. The mobilization of the Korean transnational community by Yanbian officials was similar to that in overseas Chinese-connected areas such as coastal Guangdong and Fujian, but on a smaller scale. The administration of transnational relations of the ethnic minorities is, however, politically more sensitive in Yanbian than in coastal China since transnational ethnic relations raise questions about border security and separatism. Nevertheless, transnational ethnic relations have been allowed to expand and deepen in relatively unrestricted ways, compared, for example, with those involving the Uyghurs of Xinjiang. This suggests the possibilities of ethnicity-based cross-border economic activities in China.

The mobilization of transnational linkages has provided China with substantial resources that have contributed to China’s rise. While this has been widely recognized with respect to the Chinese diaspora, far less attention has been paid to linkages with Koreans abroad. Yet China has clearly embarked on major efforts, both at the center and in localities, to draw in overseas resources to support China’s rise.

Editors’ note: This article refers to Chinese persons of Korean descent as Korean-Chinese (Korean-Chinese in Yanbian are frequently termed Yanbian Koreans). Other English-language literature, including the author’s PhD thesis, refers to Korean-Chinese as Chinese-Koreans. Chinese usage is closer to “the Korean nationality” or “the Korean minority nationality.”

Outi Luova is a senior researcher at the Centre for East Asian Studies, University of Turku, Finland. Her PhD thesis dealt with the attempts of the Yanbian government to utilize transnational Korean ethnic capital for the economic development of Yanbian. She can be contacted at outi.luova@utu.fi. This article is a revised version of an article that appeared in China Information 2006:1. Many thanks to Mark Selden for comments on earlier drafts of this article.

On Gaoguli/Goguryeo (or Koguryo), see “Competing Nationalisms: The Mobilisation of History and Archaeology in the Korea-China Wars over Koguryo/Gaogouli,” “The Legacy of Long-Gone States: China, Korea and the Koguryo Wars,” and other Japan Focus articles searchable using the keyword “Koguryo.” On border politics and cultural politics, see “Dance or Else: The Politics of Ethnic Culture on China’s Southwest Borders.”

Notes

[1] Ahn, Yonson (2006). “Competing Nationalisms: The Mobilisation of History and Archaeology in the Korea-China Wars over Koguryo/Gaogouli.” Japan Focus, February 9.

[2] Dong-Hoon Seol and John D. Skrentny (2005). “South Korea: Importing Undocumented Workers.” In Cornelius W. et al., eds., Controlling Immigration: A Global Perspective. Stanford, California: Stanford University Press, 489.

[3] Faist, Thomas (2000). The Volume and Dynamics of International Migration and Transnational Social Spaces. Oxford: Clarendon Press, 106, 109.

[4] Sun Xingbiao ( 2001). Guanyu Yanbian duiwai kaifang wenti de sikao. A report by the deputy director of the Tumen Programme Office (no date available). In Zhu Hongqi, ed., Zhongguo dangdai juece wenku. Yanbian Chaoxianzu zizhizhou lingdao ganbu diaocha lunwen ji. Shang juan. Beijing: Xueyuan chubanshe, 274.

[5] These policies include preferential policies for ethnic minority regions: the Tumen River Development, the Development of the West, and the Development of the Old Industrial Basis of the Northeast.

[6] Si Joong Kim (1994). “Korean Direct Investment in China: Perspectives of Korean Investors.” In Sumner J. La Croix, Michael Plummer, and Keun Lee, eds., Emerging Patterns of East Asian Investment in China: From Korea, Taiwan, and Hong Kong. Armonk, New York: M. E. Sharpe, 205.

[7] Park, Hyun Ok (1996). “Segyehwa: Globalization and Nationalism in Korea.” In The Journal of the International Institute 4:1. www.umich.edu/~iinet/journal/vol4no1/segyeh.html.

[8] The other sensitive regions are Inner Mongolia, Xinjiang, and Tibet.

[9] Jin Yongwan (1999). Shilun shehui zhuyi xiandaihua jianshe he minjian waijiao. Yanbian dangxiao xuebao 1. CNKI Database.

[10] Yanbianzhou Minwei (1997). Duiwai kaifang duinei gaohua zhashi gongzuo cujin bianjiang de wending he fanrong. Speech given by a cadre in a responsible position in the Yanbian Minwei at a national meeting on Minwei’s work in border areas. Minzu gongzuo 5; Wang Tiezhi & Li Hongjie 1997. Duiwai kaifang yu zhongguo de chaoxianzu. Minzu Yanjiu 6

[11] Han Changzhen (2001). Dangqian wozhou minzu gongzuo minlin de yixiang xin renwu. Report by deputy head of the Standing Committee of the People’s Government in the Yanbian Prefecture (no date available). In Zhu Hongqi, ed., Zhongguo dangdai juece wenku. Yanbian Chaoxianzu zizhizhou lingdao ganbu diaocha lunwen ji. Shang juan. Beijing: Xueyuan chubanshe, 286.

[12] Olivier, Bernard (2001). “Ethnicity as political instrument among the Koreans of Northeast China, pre-1945 to the present.” Korean and Korean-American Studies Bulletin 12:1.

Daily NK
Han Young Jin
3/29/2007

North Korean inside source informed that authorities had been asserting control over illegal selling and use of mobile phones at the markets near the border regions. National Security Agents have also been conducting in-depth investigations on illegal acts such as drug smuggling and slave trade.

In a telephone conversation with a reporter on the 28th, Park Jong Run (pseudonym) of Musan, North Hamkyung said, “Authorities came to the People’s Units and said furtively, ‘Rations will be distributed in April. In future, you will live a good life. So, stop engaging in illegal trade.’ Why would we listen to them when they tell us to stop selling especially since they aren’t going to give us distributions anyway?”

Park relayed, “They said, don’t sell our confidential information about our country through the mobile phone. People already in possession of mobile phones will be forgiven if they self-confess at the National Security Agency.” Since last year, North Korean authorities have been keeping a close watch on mobile phone use particularly in the border regions.

He said, “They threaten us with a declaration, so that we will report cases of illegality or corruption such as slave trade and drug trade.” For example, large amounts of drugs were found in the home of a Chairwoman for the Women’s Union of Hoiryeong City, late February.

According to Park, authorities will directly carry out the procedures at Jangmadang (markets) themselves, with assistance from Hoiryeong Security Agency and various police departments. Some goods found to be linked to illegal trade are in part taken away by the sudden wave of control. In particular, these authorities have a keen eye for goods made overseas such as Chinese items.

National Security Agents and the police confiscate the items arguing that, “now we have a gap between the rich and poor, as well as the richer getting richer and vice versa, because you, tradesmen have tasted some money. Now, socialism has been infected by capitalism.” However, even the security agents are acting tactful by removing only some of the goods as a mere example of punishment.

Goods confiscated are locked up at the security agency and kept in provision. The endless lines in the waiting rooms of the security agency make up the people ready to pay a fine and recollect their items, says Park. Nonetheless, security agents are reluctant to return the goods back to the traders and so bribes must be ready at hand also.

“I barely got my goods back after bribing them with 10 packets of cigarettes, but there was only half the goods left remaining in the bundle” Park criticized and said that the security agents sarcastically remarked, ‘Hey, let us eat and live a little.”

Following the nuclear experiment, authorities have been trying to gather regime support and elevate the nation’s pride arguing the nation had become a strong militaristic country. They proclaim, “The world is cooperating with us and is throwing their goods at us. In future, you will live well.” It will be difficult for North Korean authorities to prohibit trade, especially with the people’s strong will power to make money.