North Korean Economy Watch

Daily NK
Kim Min Se
3/18/2007

In socialism, the laborer and the peasant dominate the nation and society. However, since the late `60’s, the role of the laborer and peasant has decreased with the bureaucracy taking power, to the extent that a country can no longer remain in traditional socialism.

Currently, North Korea’s leader Kim Jong Il with a minority of the central class surround this core power. In North Korea, the laborers and peasants are rather subject to extortion.

Amidst a North Korean market economy, a middle class is being established. The middle class comprises of people who have assets that the average citizen cannot afford and own medium-sized businesses or engage in wholesale trade.

Undoubtedly, this group of people are dominating the middle class as well as playing a vital role in the lifeline of North Korean citizens and market, a fact that could not have been fathomable in North Korea’s past.

Until the 80’s, North Korea’s economy was a planned economy. Supply and demand of goods was distributed according to the national plan. However, in the late-80’s, small holes began to emerge in the socialist planned economic system and with a lack of daily necessities, people began to rely on the black market.

Arising from the major cities, goods were secretively traded in the black market and eventually the majority of North Koreans acquired their needed goods through this system. This system operated evading the control and regulation of North Korean authorities, but when caught, a person was condemned to severe punishment and the goods confiscated.

However, the mass food crisis of the mid-90’s completely collapsed the remnants of a socialist planned economy that had subsided unto the time. What had happened was the end of the national food distribution system.

In particular, the collapse of the food distribution meant the death sentence. Tens and hundreds of thousands of North Koreans began to die of starvation and as a means to live, people became active in the market and trade began to emerge in different regions of North Korea.

Mass starvation which created expert tradesmen

The immobilization of a socialist planned economy activated Jangmadang (North Korea’s integrated markets) which then led to the formation of a new class within North Korea’s own expert tradesmen. North Korean authorities who had no other countermeasures had little choice but to comply as the lives of the citizens were now left to the hands of trade.

In the mid-90’s, North Korean authorities approved personal trade to occur between North Korea and China and then permitted markets to exist along the border districts. Simply put, the mass food crisis created a new class which actually gave North Koreans an opportunity to trade.

At first, people would sell goods that they already had such as household appliances, television, recorder and bicycle. Furthermore, any type of stock accessible, particularly clothing, candy and other foods coming from China such as rice, flour and corn were also traded.

As people gained more experience and came to know the basics of marketing, tradesmen became more specialized. People who sold rice, only sold rice, whereas people who traded fabric only sold fabric.

North Koreans began to realize that specializing in a particular field was the way to make money and the people who were unable to assimilate to this culture broke away penniless.

Accordingly, the market gradually became a center for specialized tradesmen to provide goods and daily necessities. The goods sold by these tradesmen eventually became the mark for the middle class merchant. During this time, stabilized distributors began to dominate the market and more individualized entrepreneurs surfaced.

People skilled at cooking, baked decorative and delicious bread in their homes and then sell them at the markets. In addition, candy distributors have made a mark at the markets with candy making having become an advanced skill. People who once made candy in their homes now brag that they have been able to produce a small-scale sugar factory. In particular, clothes making and candy making has become enterprises leading to great money.

Today, 50% of candy, home-made clothing and 30% of uniforms, sold at North Korean markets are products made from home. Through goods such as these, Chinese merchants, tradesmen and the middle class are earning money through North Korea’s markets supplying the customers, the majority of the lower class.

Daily NK
Park Choel Yong
3/18/2007

Rigorous Military Training is Killing North Korean Students
Buying food from outside the camps is, however, the privilege only for the wealthy students. Students who came from privileged families often are excluded from the military trainings for one or two months. The training is notorious for hardness, and hence students from the high authorities offer bribes with money or goods to military officers in return for taking rests at home.

For instance, if one ton of coals were offered to a training camp, a student can rest for a month; a box of cigarette, the “Cat” which costs 1,500 won (approx. US$4.8), is worth a day’s break.

With wealthy students out of training, the rest of students suffer from more than double the hardness. Often, poor students end up patrolling for 8 to 10 hours during national holidays and New Year’s Day.

Girl students in the training have their hair cut shortly and cannot keep private things; even cosmetics are not allowed. Therefore, wealthy girl students take their time at home with bribery.

Even during the training period, the students must take lectures. The basic subjects taught during the training are “The Unification History of the Fatherland” and “History of the Invasion of Japanese Imperialism,” and also includes a few majors.

The lectures, however, are often cut off to make room for the farm supporting activity and national performances.

According to the educational schedules, the college lasts four years, not including the training period; however, the time for lectures generally take only two of those years.

In spring and fall, students take part in the farm supporting activity to transplant rice for 40 days in spring and to harvest for 30 to 40 days during fall. Additionally, students from nationally renowned universities are often brought to various national performances. For six to eight months, students do not take lectures in order to practice military parades for Kim Jong Il’s birthday on the 16th of February and Kim Il Sung’s birthday on the 15th of April.

For torchlight processions, students take practices for two to three months. The torchlight processions are held usually in the Foundation Day of the State and the North Korean Workers’ Party, with more than ten thousand university students participating in the event. Students also practice dancing for another two to three months for students’ dancing party at the Kim Il Sung Plaza, which is held during the Chinese New Years’ Day.

That is not all, however. Working in the subsidiary farms that belong to the universities takes students a few months. Students who make the survey on the revolutionary historic spots and the Korean War landmarks are also exempt from the lectures for a few months.

In the end of a semester, reducing the day for lectures is not a special thing. The students do take lectures more intensively and even on Sundays to remedy this as necessary.

Daily NK
Kim Min Se
3/14/2007

It is a well known fact that goods made in China are sweeping across North Korea with Chinese merchants taking the role of distributor.

However, Chinese merchants are not only exporting goods into North Korea but are also importing goods made in North Korea such as seafood, medicinal herbs, coal and minerals back to China.

Particularly, dried shellfish sells very well in China. As more and more Chinese merchants buy dried shellfish from North Korean markets, they play a critical role in the lives of North Korean citizens as sellers who are then able to raise the price due to demand. Every year, from April~Sept, people from the North-South Pyongan, Haean collect shellfish along the shore. 10kg of rice can be bought with 1kg of shellfish meat. Consequently, citizens of other regions also come to the beaches to collect shellfish.

If Chinese merchants did not import any goods and North Korea’s finest goods were not exported to China, the cost of goods at Jangmadang would increase exponentially. This is how close the relationship between the lives of North Korean citizens and Chinese merchants have become interconnected.

Significance of information runners

Though Chinese merchants are currently contributing to market stability, it does not necessarily mean that their existence will continue to be positive to North Korean authorities.

The people first to inform news of the Yongchun explosion in April 2004 to the outside world were Chinese merchants.

At the time, after confirming the lives their family members in North Korea, Chinese merchants who heard the explosion in Dandong gathered information about the explosion details from relatives in Shinuiju and Yongchun over mobile phones. Undoubtedly, news spread instinctively. The economic development zone, Dandong, which is at the mouth of the Yalu River is merely 10km from Yongchun.

Due to this incident, Kim Jong Il banned the use of mobile phones in North Korea. Chinese merchants have played a great role in the outflow of inside North Korean issues, a problem feared by North Korean authorities that contributes to the inflow of foreign information.

Recently, Chinese merchants have been charging a 20% fee involved in remitting dollars to defectors wanting to send money to family in North Korea. For example, if a defector wishes to send $1,000 to family in North Korea, a merchant will extract $200 and transfer the remaining $800 to the family.

As long as Chinese merchants have a specific identification card, they are free to travel between the North Korean-Chinese border and hence many defectors prefer to use Chinese merchants as the intermediary. Thanks to these merchants, many people can convey money and letters to family within North Korea.

In these respects, Chinese merchants are not only selling goods but are acting as information runners transporting news of the outside world into North Korean society.

As more and more North Koreans rely on markets as a means of living and trade between China and North Korea, the North Korean market will only continue to expand. We will have to wait and see whether or not Chinese merchants will have a healing or poisonous affect on the Kim Jong Il regime from here on in.

Asia Times
3/13/2007

Chinese auto maker Brilliance Auto recently signed an agreement with PMC of South Korea on jointly launching an assembly plant in North Korea.

The North Korean facility will be Brilliance Auto’s third after its operations in Egypt and Vietnam.

Brilliance Auto is neither the first nor the most active of the Chinese auto makers making direct investments abroad. Quite a few have already done or are doing so. Among them are Chery, Geely, Jianghuai, Chang’an, Great Wall, and BYD Auto, which have launched greenfield auto plants abroad, and Shanghai Automotive and Nanjing Automotive, which have invested abroad through merger and acquisition.

Chery is a leader in this regard, making great efforts on building CKD (complete knockdown) factories abroad in recent years. Aside from the existing assembly plants in Iran and Russia, it is looking for such opportunities in Egypt, Romania, Turkey, Indonesia, Italy and Argentina. Its Argentina joint-venture project with the local Socma group, involving investment of US$100 million, will be controlled by Chery. If it goes ahead, it will be the first China-invested auto venture in South America. Chery plans to own 12 assembly plants worldwide within a short time.

Geely also has been active in going global. It has invested in Malaysia and is preparing for another new factory in Russia.

Jianghuai, meanwhile, has established light-truck assembly plants in Vietnam, Malaysia and Indonesia.

Industry analysts hold that excessive capacity in the domestic market after rapid expansion in recent years is prompting Chinese auto makers to look for overseas markets. However, they are often hit with tariff barriers from the importing nations. For instance, Russia levies about a 25% tariff on complete vehicle imports, but only about 3% on knockdowns.

Direct investment overseas is regarded as a solution to such barriers.

So far, the overseas investments of Chinese auto makers have been concentrated in emerging markets such as the Middle East, Southeast Asia and Africa.

Daily NK
Kim Song A
3/12/2007

Inter-Korean Economic Cooperation “Motive on driving a stable complex”

A claim has been made suggesting that North Korea will reallocate 3,000 workers from Pyongyang to Kaesung Industrial Complex.

Representative Kim Kyu Chul of the Citizen’s Solidarity for Inter-Korean Economic Cooperation revealed on the 11th, “North Korea’s Guidance Bureau for Developing Central Special Economic Zone informed the plan to the South Korean government and enterprisers who are moving in the zone and asked them to provide employees with accommodation.”

Representative Kim informed “In the past, the North has employed workers from other regions to maintain stable human resources… For the first time, workers from Pyongyang will be employed at Kaesung Industrial Complex. These people will be amongst the 18,000 skilled workers already working at Kaesung.”

Furthermore, Representative Kim disclosed his opinion, “The motive behind the North’s recent plan is its determination to establish a more stable Kaesung Industrial Complex and to minimize insecure business aspects related to human resources.”

In response, a South Korean governmental official said “The issue of worker’s accommodation has been a case continuously faced by the North” and added “We cannot know the North’s specific intentional plan for human resources but we will keep in contact to discuss these practical affairs.”

Presently, 11,740 North Korean and 689 South Korean full-time employees are working at Kaesung Industrial Complex. In the case a 3,305km square of factories site on the first phrase is completed as scheduled for this year, then 300 or so companies will be able to lease the area. Consequently, the number of North Korean workers needed at Kaesung Complex will exceed 80,000.

In addition to this, the Korea Industrial Complex Corporation announced that apartments approx. 22.5km square would be on the market until the 14th, for 40 or so companies interested in the factory complex. The Korea Land Corporation will also begin inspections next month in order to find a location for a 1,752km square factory site.

The Chosun Development & Investment Fund is a privately structured Limited Partnership Fund incorporated in the United Kingdom and based in London.

Specifically designed for investment in the Democratic People’s Republic of Korea (“DPRK”) or (“North Korea”). Chosun Fund is now beginning to seek subscriptions from qualifying investors. This follows the authorisation of Chosun Fund’s Fund Manager, Anglo-Sino Capital Partners Limited on 19th May 2006 by the UK Financial Services Authority.

Chosun Fund will concentrate entirely on the DPRK and will channel external investment into the economic development of that country.

The exclusive Investment Advisor to Chosun Fund Fund manager is Hong Kong based Koryo Asia Limited (“Koryo Asia”) whose team of principals has over 25 years experience of commercial & financial dealings with the DPRK and in Asia generally.

The principals working with Chosun Fund will initially be concentrating on those areas of the DPRK economy with which they are familiar and which they believe can be developed quickly and efficiently to generate foreign exchange cash flow for the DPRK.

As a completely private initiative it is intended that Chosun Fund is a fully transparent financial vehicle that will assist the DPRK develop its legitimate economic activities along internationally accepted lines and also provide an attractive return to investors.

This first-to-market fund has the capability to deliver a significant return on investment in the near term and considerably enhanced returns after the expected resolution of the current nuclear issue and other problems. This should result in a substantial expansion in the economy of North-East Asia’s last emerging economy.

About the Fund

The idea of an investment fund specifically for The Democratic People’s Republic of Korea (DPRK or North Korea) began at a conference in July 2000 held by the Asia-Pacific Center for Security Studies in Honolulu, and entitled “Engagement and Development in the DPRK” , to which Colin McAskill (McAskill), the originator of this project, was invited because of his experience in dealing with the DPRK.   The conference was also attended by Mr. James Kelly, prior to him joining the US State Department as Assistant Secretary of State for East Asian and Pacific Affairs in the first George W. Bush administration.   Following the conference McAskill was called to the US State Department by a special adviser in the Bureau of East Asian and Pacific Affairs (in the administration of President Clinton), who wished to talk to him about realistic prospects for business in the DPRK – an issue of concern at the time since the “Perry process” held out foreign investment and business as one of the benefits of the DPRK’s engagement with the outside world.

McAskill said that he had come to the conclusion that a private initiative to set up an investment fund, which could initiate or participate in repeated dealings in the DPRK, and thus be seen by the ruling hierarchy as too important to alienate through non-performance, could avoid many of the pitfalls of investing in, or dealing with, the DPRK.   The State Department Official agreed with his analysis and encouraged McAskill to set up such a fund.

Partners were gathered and engaged to set up such a fund. Aware that although this was completely a private business initiative it engendered a certain political sensitivity, McAskill met with US Assistant Secretary Kelly in September of 2001 to brief him on progress.   Kelly had no objection to such a fund as long as it kept within the parameters of US law and asked to be kept informed. By the autumn of 2002 a fund based in the US was ready to be launched but, with the serious deterioration in political relations between the US and the DPRK in October 2002, several partners in the US asked if they could postpone their active participation.

As a result of this, the planning of the fund was reconstituted with the emphasis deliberately shifted to North East Asia, with new partners in Hong Kong and China as well as with experienced fund managers in London.

McAskill has kept the US government informed of the Fund’s progress. Similar to the close contact kept with the US State Department, McAskill has also kept both the UK Foreign Office and the Republic of Korea (ROK or South Korea) government fully informed, the latter through contact with the South Korean Ambassador in London as well as the Deputy Minister for Foreign Affairs and Trade and the Ministry of Unification in Seoul. McAskill’s partners in China have similarly informed the government of the People’s Republic of China (PRC or China).

While the organisers and participants in the Fund fully understand the decision to keep relevant governments informed as a matter of courtesy, and to comply with any laws or regulations by those governments that affect the Fund, it should be emphasised that the Fund is a purely private business initiative. Its establishment in London, and the authorisation and regulation of its Fund Manager by the UK Financial Services Authority will ensure complete transparency.

McAskill has been involved in business dealings with the DPRK since 1978 (his first visit to the DPRK was in 1979/1980), primarily in coordinating the emergence of parts of the DPRK’s business community into western markets. This included the certification and sale of DPRK bullion and other minerals in the London market, and also in assisting other significant DPRK state entities in their dealings with western institutions, especially European banks, over their defaulted debts. Dealings with the DPRK became somewhat moribund in the 1990s due to internal political developments there, coupled with the natural disasters that overran the country causing widespread damage and a general contraction of the DPRK economy. During this period McAskill continued to maintain contact with senior associates in both business and banking institutions in Pyongyang.

The DPRK leadership has officially declared that it will pursue a controlled opening to commerce and is seeking foreign capital. In 2002 it introduced internal reforms that allowed the economy to become more market orientated. The reforms are now entrenched and gradually expanding to a point where most outside experts on the DPRK believe they have become irreversible.

The management, partners, and directors of the Fund understand the risk inherent in dealing with the DPRK, but also believe that the Fund can achieve returns commensurate with that risk. The Fund will seek initially to deal with and invest in key areas of the DPRK economy that have been known to operate successfully in the past, concentrating on transactions in sectors that were proven hard currency exporters into Western markets, mainly minerals, but have been subject to recent performance constraints.  Later dealings will take advantage of a wide variety of opportunities that are expected to become available as the DPRK economy opens and develops.

The DPRK government is aware of these developments, at first via senior DPRK officials engaged in the six-party talks in Beijing whom McAskill met with in July 2005. This was followed by meetings in Beijing in December 2005 and again in Asia in April 2006 with a special envoy sent from Pyongyang to establish direct contact. And, as a result of the earlier meeting, McAskill’s partner and management team member in China was invited to meet the DPRK Ambassador in Beijing on 15th August 2005.

The creation of the Chosun Fund and the authorisation & regulation by the UK Financial Services Authority of Chosun Fund’s Fund Manager has now formally been announced to the DPRK government.

Update: the money went missing.

South Korea criticizes North Korea for failing to disclose how aid was used
Herald Tribune
2/11/2008 

South will give money directly to North Korea
Joong Ang Daily
Lee Young-jong and Ser Myo-ja
3/12/2007

Although South Korea does not allow cash to be given directly to North Korea, it made a deal of its own.

The two countries announced Saturday that Seoul would give Pyongyang cash to buy video conference equipment. A South Korean official said yesterday the amount will be $400,000.

North Korea will use the money to set up video conference calls between families separated during the Korean War, according to a joint statement issued Saturday by the two countries.

The South Korean government has strictly banned humanitarian groups ― as well as all residents ― from giving cash to the North due to concerns the money could be spent for other purposes.

“We decided to assist the North to smoothly resolve the separated family issue,” the official said, adding that the government will thoroughly monitor the spending of the money and the use of the equipment.

The cash payment agreement was first made at a Red Cross meeting in June 2006, but never publicly announced. The money was not exchanged because North Korea conducted a missile test the next month, temporarily freezing inter-Korean relations.

After progress in the recent six-party talks designed to make North Korea nuclear-free, South Korean Red Cross officials pledged again on Saturday at a meeting at a Mount Kumgang resort to give Pyongyang the money, the official said on condition of anonymity.

According to the joint statement, the two Koreas agreed that video conference call reunions will be expanded. The two Koreas also agreed a video conference call reunion center will be built in Pyongyang, separately from the reunion center under construction at Mount Kumgang, and that Seoul will provide construction material and equipment. The material and money will be released at the end of March, the agreement said.

Neither the joint statement nor the press release specified the amount of money, but the Seoul official said it will be $400,000. The construction material to be provided to the North is worth another $3.5 million, he said.

The South Korean government was unable to give the video conference call equipment, such as liquid crystal display monitors and computers, directly to the North because of United States regulations banning the export of dual-use goods to North Korea. Under the United States export administration regulations, strategic goods that include more than 10 percent of United States-made components or technology, are banned for export to state sponsors of terrorism, which include North Korea.

According to the official, South Korea advised the North to purchase the items from China with the cash. Washington could make an exception to the export ban, presumably at Seoul’s request, but it would take time to do so.

In addition to the cash, the $3.5 million worth of goods, such as trucks, construction materials, air conditioners, heaters and cables, will be provided to build a video conference call center in Pyongyang.

At the Red Cross talks, the North also agreed to resume the construction of the reunion center on Mount Kumgang on March 21. The two Koreas began the construction in August 2005, but the work stalled last July. The buildings are about 30 percent complete.

Last week’s Red Cross meeting was scheduled for only one day, for about two hours. Due to the North’s persistent demands for cash and materials, the talks went on for a second day, the government official said.

Bloomberg
Bradley Martin, Allen Cheng
3/6/2007

Chinese entrepreneur He Ho was burned by his first North Korean investment, a bakery in the shabby border city of Sinuiju. He lost his entire $20,000 when the plan to make the city a special economic zone stalled in 2003.

If another opportunity comes along, though, “I’ll be the first to go in,” the 34-year-old said in an interview in Dandong, the bustling Chinese city facing Sinuiju across the Yalu River. “North Korea’s a good investment because so many things are lacking.”

Business executives in Dandong, one of the main conduits for trade in and out of North Korea, see opportunity in the recent six-nation agreement to end Kim Jong Il’s nuclear-weapons program. They think the 65-year-old North Korean leader will now focus on fixing his country’s nearly flattened economy and may revive plans for a special economic zone — an area designed to promote foreign investment, with fewer rules and regulations than elsewhere in the country — on the western border with China.

“Most of North Korea’s trade with China is via Dandong, so a special zone in this corridor could make sense,” said Marcus Noland, senior fellow at the Peterson Institute for International Economics in Washington. “This could be the North Korean equivalent of the Chinese coastal SEZs in the early years of the Chinese reform.”

No Guarantee

There’s no guarantee against another disappointment for entrepreneurs like He Ho, said Peter Beck, Seoul-based Northeast Asia project director for the International Crisis Group, a Brussels-based organization that works to resolve crises around the world.

“The eternal optimist in me hopes that Kim will see the light and recognize the direction in which he needs to lead the economy,” Beck said in a telephone interview. “But the jury’s still out.”

At the same time, “the North Koreans have been talking about putting a special economic zone in the far northwest aimed at China for a decade,” said the Peterson Institute’s Noland. “If they get the politics right, this venture could work.”

China is North Korea’s top trading partner, with 2006 exports of $1.23 billion and imports of $468 million, according to its Ministry of Commerce.

A little over a year ago, Kim visited six booming Chinese cities, including the special economic zone of Shenzhen, bordering Hong Kong. North Korea’s Central News Agency described the nine-day trip as a visit to places “where the cause of modernization is being successfully carried out.”

Executives’ Speculation

Business executives in Dandong speculate that North Korea will develop a new zone in Cholsan County, a peninsula on the east side of the mouth of the Yalu some 50 to 60 kilometers (31 to 37 miles) south of Dandong and Sinuiju. China’s commerce and foreign ministries and North Korea’s embassy in Beijing didn’t respond to faxed requests to comment on their plans.

In 1991, North Korea built a special economic zone at Rajin-Sonbong, in the remote northeast of the country, which has failed to attract much foreign investment because of its location.  Another zone near the southern border at Gaeseong, only 60 kilometers from Seoul, has proven more popular, especially with South Korean manufacturers in search of low-cost labor.

In 2002, North Korea announced plans for the zone in Sinuiju, which would have included export factories and casinos to lure gamblers from China. Kim named Dutch-Chinese businessman Yang Bin governor of the zone. China, which hadn’t given its approval, squelched the plan by arresting Yang and jailing him in 2003 on charges of fraud and illegal land use.

Strained Relations

Kim’s test of a nuclear device in October, which strained relations with the Beijing government, didn’t halt commerce on the border, according to Shen Yuhai, general manager of Dandong Jade Ocean Trade Co. “We didn’t stop trading at any time,” he said in a recent interview.

Shen’s office overlooks a busy parking lot where Chinese customs officials examine trucks departing neon-lit, high-rise Dandong for the run-down and darkened Sinuiju.

The trucks cross on the Friendship Bridge’s single lane in the morning with manufactured goods and return in the evening, either empty or carrying minerals, silkworm cocoons and seafood, Shen said. Four trains a week cross in each direction, connecting the North Korean capital of Pyongyang with Beijing.

China is supplying its neighbor with “daily necessities, home electrical appliances and, in this season, farming tools and chemical fertilizer,” said Shen.

While business is booming, he said he’s still cautious about the risks. He requests payment in yuan, dollars or euros, not North Korean won, and accepts bank transfers only after business relations have been established.

Even then, he said, “sometimes we are cheated.”

–With additional reporting by Hideko Takayama in Tokyo and Lee Spears and Dune Lawrence in Beijing.

For a copy of a list of banned goods to North Korea: http://www.state.gov/t/isn/76138.htm

Yonhap
3/8/2007

Red cross officials from South and North Korea are to meet this week on resuming the construction of a family reunion center on the North’s scenic mountain bordering the South along the east coast, South Korean officials said.

The one-day meeting, slated to be held at the North’s Mount Geumgang resort on Friday, will also address the next family reunions via video link to be held on March 27-29.

Last week, the two Koreas agreed to resume reunion events for families separated by the border since the end of the Korean War. The next face-to-face family reunions will be resumed in early May.

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

“The construction has been put on hold for about eight months, so we will have to resume construction after checking whether there are technical problems. The construction will likely be completed next year, far later than the originally scheduled April of this year,” a South Korean Red Cross official said on condition of anonymity.

High on the agenda will be discussions on when to resume construction, how to check the facilities needed for construction, and how to provide supplies and dispatch engineers, the official said. The South Korean delegation will be headed by Hwang Jeong-ju, while Pak Yong-il will lead the North Korean team.

The two sides started the construction at a village near the scenic mountain resort in August 2005. The envisioned 12-story building will house two reunion halls and serve as the venue for family reunion events.

The two Koreas have held 14 rounds of family reunions. More than 90,000 people from South Korea alone have remained separated from their loved ones since the end of the 1950-53 Korean War.

Daily NK
Kim Min Se
3/7/2007

90% daily goods made in China, 50% circulated by Chinese merchants

While some prospect that North Korea may be an affiliated market of China’s 4 provinces in the Northeast, the real focus is on the merchants who actually control North Korea’s markets. Recently, North Korean citizens have been asserting that markets would immobilize if Chinese merchants were to disappear.

Lately, Chinese merchants are nestling themselves with their newly found fortune in North Korea, undeniably to the envy of North Korean citizens.

In a recent telephone conversation with the DailyNK, Kim Chang Yeol (pseudonym) a resident of Shinuiju said “Most of the tiled houses in Shinuiju are owned by Chinese merchants in Shinuiju are upper class and the rich.” Unlike Pyongyang, tiled houses in Shinuiju are greater in value than apartments. In particular, the homes owned by Chinese merchants are luxurious and impressing.

Kim said “At the moment, 90% of daily goods that are traded at Shinuiju markets are made in China.” What Kim means by 90% of goods is basically everything excluding agricultural produce and medicinal herbs. Apparently, about half of the (90% of) supplies are circulated by Chinese merchants.

Kim affirmed that the market system could be shaken if supplies were not provided by the Chinese merchants. Hence, Chinese merchants have elevated themselves in North Korea’s integrated market system, to the extent that the market could break down without their existence.

In addition to this, Chinese merchants are playing a vital role in conveying information about the external world into North Korea. Even in 2004, it was Chinese merchants to first telephone China through mobile phones relaying the news about the Yongcheon explosion. As a result, rumors say that the movement of Chinese merchants can either be a “cure” to the economic crisis in which the North Korean government seems unable to fix, or “poison,” as more and more foreign information flows into the country.

How many Chinese merchants are there in North Korea?

A report by China’s Liaoning-Chosun Newspaper in 2001 sourcing data from North Korea, states that immediately after WWII, approximately 80,000 overseas Chinese were residing in the Korean Peninsula. Then following the Korean War and the formation of a Chinese government, the majority of people, approximately 60,000 Chinese, returned home. In 1958, statistics show that 3,778 families of overseas Chinese were living in North Korea, totalling 14,351 people.

These Chinese engaged in business related to farming, home made handicrafts and restaurant business, and in the late 50’s, lost all this due to the implementation of economic planning and dictatorial regime. Since then, the majority of merchants continued to return to China until the early 80’s.

In 2001, Liaoning-Chosun Newspaper confirmed that approximately 6,000 Chinese were living in North Korea. Of this figure, more than half were residing in Pyongyang, approx. 300 families living in North Pyongan and approx. 300 families residing throughout Jagang and northern districts of South Hamkyung.

At present, there are 4 middle and high schools for children (11~17 years) of Chinese merchants, located in Pyongyang, Chongjin, Shinuiju and Kanggae. In addition to these schools, there are a number of elementary schools (for children aged 7~11 years) located sporadically throughout each province.

Wang Ok Kyung (pseudonym) a resident of Shinuiju attended Chongjin Middle School for children of overseas Chinese in 1981~86. Wang said “At the time, there were about 40 students in each year. Now there is only about 5~6 students.” Nowadays, many Chinese children complete their elementary studies in North Korea, but the general trend is to send the children to China for middle school. She said “In order to enter a Chinese university, students must have completed their middle school studies in China and must be fluent in Chinese. He/she can also go to private institutes in China.”

Fortunes made through trade between North Korea-China during the food crisis

Even until the early 80’s there were no such thing as a wealthy North Korean-Chinese merchant. They were no different to North Korean citizens.

However, in the 80’s, many people began importing and selling goods such as socks, handkerchiefs, hand mirrors and cards from China, literally through their sacks. As the 90’s approached North Korean-Chinese merchants began to experience great wealth, the time where North Korea-China trade fundamentally kickstarted.

Today, Son Kwang Mi (pseudonym, 52) falls under the top 10 wealthiest Chinese merchants in Dandong, characterizing an unique rags to riches story. In the past, Sun lived in Chongjin and was one of the first figures to trade with China in the 80’s.

In the beginning, Son was so poor that she had to sell her watch received as a wedding gift in order to buy goods to sell.

Fortunately, Son found her money smuggling gold. In North Korea, gold is considered a public good or simply put Kim Jong Il’s personal inheritance, so private trade of gold is strictly regulated. Nonetheless, there are still some laborers who export gold secretly and a great number of people still collect gold through dubious ways. In particular, after the 80’s as North Korea began to experience economic decline, more and more people sold gold secretly.

Hence, a small number of Chinese merchants infiltrated the market of secretly trading gold with China. Chinese smugglers were able to take advantage of North Koreans by greatly raise their market margins, as the supply of gold and North Koreans wanting to sell their gold was high yet the demand in North Korea low.

Son said “Of the Chinese merchants in North Korea, 60% earned a great fortune at that time through illicit trade.”

She says that there were two opportunities for overseas Chinese to make a great fortune. The first was in 1985~89 through illicit trade of gold and the second, during North Korea’s mass food crisis in 1995~98.

“During the mass famine, everything in North Korea was in shortage and so Chinese merchants began to provide the daily necessities of life. At the time, if you brought large amounts of goods such as fabric and sugar, you could make a profit of 1 million Yuan (US$137,000),” she said.

Son was fortunate enough not to miss these two opportunities which led her to great wealth and allowed her to possess a fortune of 50 million Yuan (US$6.31 million).

Chinese merchants can relatively enter and exit China freely. Also, with the ability to speak Chinese fluently and the possibility of staying in the homes of many relatives in China, the occupation possesses ideal conditions.