Southern Weekend
Since the end of the Cold War, the DPRK has continued to experience fluctuations of openness to change and contraction to stabilization, behind which there is a conflict between the Juche system of governance in the DPRK’s quest for stability and its quest for development. As the DPRK’s trade dependence on China increases, this fluctuation is more closely related to China.
Southern Weekend Reporter Qin Xuan
Editor: Shi Zhe
Fully loaded trucks traveling from one side of China to North Korea mostly return only empty. (CFP/Photo)
Since the end of the Cold War, the DPRK has continued to experience fluctuations of openness to change and contraction to stabilization, behind which there is a conflict between the Juche system of governance in the DPRK’s quest for stability and its quest for development. As the DPRK’s trade dependence on China increases, this fluctuation is more closely related to China.
On December 12, 2013, Jang Sung-taek, known as North Korea’s “No. 2 man,” was executed. As a longtime North Korean leader in charge of China-North Korea trade and commerce, his death seems to have brought China-North Korea trade and commerce into a period of wait-and-see.
Adjustments on the other side of the Yalu River are falling in the eyes of those who have a heart. Dandong, a border trade businessman told the Southern Weekend reporter, recently Dandong’s North Korean business associations for a new crop of leaders, the original old people are back to North Korea.
This wait-and-see period is temporary, and no one can give a definite answer as to how long it will last. For now, all one can do is wait.
New China-North Korea cooperation launched by Kim Jong-il
The recent economic and trade cooperation between China and North Korea was initiated by the late leader of North Korea, Kim Jong-il, who from 2009 to 2011 announced measures to initiate a new round of economic changes with the idea of realizing an economically strong and powerful country. These measures included currency reform, upgrading the city of Rason to a special city, and the establishment of the Daebong International Investment Group and the National Development Bank, among others.
This led to closer trade and commerce between China and the DPRK, and in 2010 and 2011, Kim Jong-il made three visits to China in two years, meeting with Chinese leaders and visiting Jilin and Liaoning – the two provinces with which the DPRK has the closest trade and commerce ties. Under the leader’s impetus, China and North Korea quickly reached an agreement to jointly develop and manage the Rason Economic and Trade Zone, as well as the development projects of Huangjinping and Weihua Island.
After Kim Jong-il’s death, this cooperation did not stagnate, but rather became more rapid, with North Korea showing an unprecedented openness.
In August 2012, Jang Sung-taek, then Minister of the Administration Department of the Central Committee of the Workers’ Party of Korea, led a delegation to visit Beijing and Jilin, etc., during which Jang Sung-taek attended the launching ceremonies of the Rason Economic and Trade Zone and the Management Committees of the Huangjinpyeong and Weihua Island Economic Zones together with the relevant Chinese leaders.
The Dafeng International Investment Group, which was established under Kim Jong Il, was not successful. The group, headed by Chinese ethnic Korean entrepreneur Park Chul-soo, is responsible for attracting investment to North Korea. The group was mainly responsible for attracting investment to the DPRK, and had unsuccessfully pitched a financing plan to Japan for the development of eight DPRK cities, and in early 2013 South Korea’s Ministry of Unification published a new Organizational Chart of Power in the DPRK, in which the Daebong International Investment Group and the DPRK Committee for the Promotion of International Trade had disappeared.
Since 2011, North Korea has been attracting investment projects in China in a high-profile manner, and has set up investment-attracting offices in Beijing and Hangzhou, in addition to organizing investment fairs in Beijing, Shenyang and Dandong. News about Chinese leaders meeting with Jang Sung-taek can still be seen in the dynamics displayed by the North Korean investment office in Beijing by the Southern Weekend reporter.
Among the Sino-Korean cooperation projects taken over by Jang Sung-taek, Rason Special City is obviously more important. Rason Special City was formed by the merger of the two cities of Rajin-Pioneer and the port of Rajin, which was established as a free trade zone by former leader Kim Il Sung at the end of 1991. As early as the end of 1991, it was set up as a free trade zone by former leader Kim Il Sung, and in 1996, the DPRK organized the Rajin-Pioneer Region Investment Fair, which attracted investments from 26 countries totaling 350 million U.S. dollars.
In the reforms of successive DPRK leaders, the Rojin-Pioneer region has been a top priority, and it was also the first pilot in the DPRK to abolish the food distribution system, legalize market freedom, and provide superior wages.In January 2010, the DPRK upgraded the Rason Free Trade Zone to a special city, assigned the Minister of Economy and Trade as the secretary in charge, and introduced the Law of Rason Economic and Trade Zone, as well as a special supply of 20,000 kilowatt-hours of electricity per day, and more than 30 new policies and regulations were introduced to it. The Rason Economic and Trade Zone Act was enacted and more than 30 new policies and regulations were introduced. In addition, the DPRK’s army was withdrawn along with its powerful departments in order to create an open environment for attracting investments.
In fact, as early as during the Japanese occupation of Korea, Rajin was developed as a hub connecting northeastern China, Korea, and Japan, and as of 2010, when China and North Korea cooperated in the development of the port, Rajin Port still maintains the 3 million tons of cargo throughput capacity that it had when it was built in 1933.
In 2012, Rason ETZ realized its positioning, i.e. focusing on the development of raw material industry, equipment industry, high-tech industry, light industry, service industry, modern and efficient agriculture, and gradually built into an advanced manufacturing base of the DPRK, an international logistic center in Northeast Asia and a regional tourism center.
Comparatively speaking, the economic value of the development of Jinping and Weihua Island is not great. The two islands are made up of sediment deposited from the Yalu River, which is not conducive to the construction of large-scale factories. Scholars from the Central Party School for North Korean Studies say that Geumjeongpyeong and Weihwa Islands are more of a Chinese aid project for North Korea than a business cooperation.
North Korea can’t change without China
Since the collapse of the Soviet Union, successive leaders of the DPRK have made moves to initiate economic change. Under Kim Il Sung, the DPRK launched the Rajin-Pioneer Free Trade Zone. During the same period, China and North Korea signed the China-North Korea Trade Agreement. This marked the end of barter trade within the socialist camp of China and North Korea, and China-North Korea trade entered the stage of cash-exchange trade between sovereign states. However, 2 years after the announcement of the establishment of the FTA, Kim Il Sung died, and North Korea reintroduced the politics of the First Army and the construction of the Juche Ideology. The Rason FTA came to a near standstill.
In 2000 and 2001, after Kim Jong Il’s visit to China, the DPRK put forward “new thinking” and introduced a series of “measures to improve economic management”, which was also known as the “7.1 measures”. This measure is also known as the “7.1 measure”. In addition to improving the market function of the currency, the series of measures sought to reduce government control and intervention in the market.
During the same period, the Kaesong Industrial Park, the Geumgangsan tourism project and the Sinuiju Special Administrative Region project were launched. The Sinuiju Special Administrative Region was designated to have a Chinese as its chief executive, which failed to materialize. However, the Kaesong Industrial Park and Mount Kumgang continue to benefit the DPRK to this day.
In 2006, North Korea’s first nuclear test caused international tension. This was the same year that economic reforms in the DPRK came to a sharp halt. In October 2006, the trade in rice, a “strategic material”, was banned throughout the country, and the government demanded that workers return to state-run factories, announcing that they would be re-supplied through the state rationing system.
However, this effort has failed to stop the growth of an underground black market in North Korea, where former leader Kim Jong-il presided over an initiative to promote a new round of economic reforms in 2009.
North Korea’s economic transformation during the Kim Jong-il era has been closely linked to the growth of China-North Korea relations.
According to statistics, at least nine members of the Politburo Standing Committee, including Jiang Zemin, Hu Jintao, Xi Jinping, Wen Jiabao, and Li Keqiang, have visited North Korea since 2000, and when former North Korean leader Kim Jong-il passed away at the end of 2011, Chinese leaders Wen Jiabao, Jia Qinglin, Li Keqiang, He Guoqiang, and Zhou Yongkang offered condolences at the North Korean embassy in Beijing. The weight of China’s diplomatic resources invested in North Korea is evident.
Whether it’s former North Korean leader Kim Jong Il’s visits to China since 2000 or Chinese leaders’ trips to North Korea, persuading North Korea to seek change is almost a mandatory topic of conversation when the two leaders meet.
In 2006, when Kim Jong Il visited China, then Premier Wen Jiabao said that China would, as in the past, support the DPRK in developing its economy and improving people’s livelihoods, and would be willing to introduce to the DPRK China’s experience in reform, opening up and construction. By the time Wen Jiabao visited North Korea in 2009, economic and trade cooperation between China and North Korea began to grow significantly. Projects such as the Golden Pyeong and Wihwa Islands gradually came into public view.
In the midst of North Korea’s economic liberalization since 2009, China has gradually adjusted its business and trade policies toward the DPRK. In the same month as Jang Sung-taek’s visit to China in 2012, Chinese Ministry of Commerce officials said that Chinese investment in the DPRK would gain momentum in the next few years as the DPRK works to develop its economy and improve people’s livelihoods, according to a report in the China Daily.
In October 2012, the Sino-Democratic People’s Republic of Korea Rason Economic and Trade Zone Management Committee was listed in Rason of the DPRK, the 50.3-kilometer-long secondary highway from Wonjeong to Rajin Port of the DPRK was formally opened to traffic, and international passenger buses from Yanji (Hunchun) of China to Rason of the DPRK were interconnected.
At the beginning of 2013, the General Administration of Customs of the People’s Republic of China approved the development of outbound processing and re-entry operations to the Democratic People’s Republic of Korea. Four garment processing enterprises in Hunchun City, Jilin Province, became the first batch of pilots, which can make use of the rich labor resources of the DPRK to carry out processing and manufacturing for the domestic market.
If the internal political situation of North Korea is stabilized, it is obvious that China-North Korea business and trade will have greater development.
Economic cooperation won’t cool off
Businessmen in Dandong and Yanji are always the first to feel the cold current from North Korea. According to their description of the Southern Weekend reporter, the border trade with North Korea has entered a cooling period. Yanji businessmen told the Southern Weekend reporter, the first half of the Chinese businessmen to Rason investment boom, and now most have withdrawn. The rumor mill is now full of rumors that the North Korean cadres in charge of Rason City have been recalled.
Many believe that the wait-and-see won’t last long. After all, North Korea’s dependence on China had reached 70.1 percent by 2011, along with the growth of trade between China and North Korea. Chinese businessmen are behind both new developments in the Rason area and large supermarkets in Pyongyang.
Since 2000, the trade between China and North Korea has always been in a unilateral dependence state, except for the import and export trade between the two countries, which was close to 1:1 in 2004, when China’s exports to North Korea roughly doubled its imports from North Korea. Cao Zhigang, a scholar at Yanbian University, mentioned in his paper “Study on the Development of Contemporary China-North Korea Trade” that China’s imports of resource commodities from the DPRK, including iron ore, anthracite coal, and timber, increased after 2005, enhancing the complementarity of China-North Korea trade.
However, mineral resources are non-renewable and controlled by the North Korean side. According to the observation of the reporter of Southern Weekend, after 2009, the DPRK entered a period of rapid growth in labor importation to China. Especially since 2010, the number of North Korean trips to China has jumped, from less than 120,000 trips in 2010 to 150,000 trips the following year, and in 2012 exceeded 180,000 trips, half of which were labor export.
What is most uncertain, relative to China-North Korea trade and economy, is whether North Korea’s new round of economic reforms has come to an end. For the DPRK, successive reforms have been constrained by its political system. Since the end of the Cold War, the fluctuation of openness to change – contraction for stability has always continued. Only with the North’s increasing trade dependence on China, this fluctuation is more closely related to China.
Interestingly, the infrastructure for trade between China and the Democratic People’s Republic of Korea is far more backward. All 10 cross-border bridges used for trade between China and the DPRK are in a serious state of disrepair, with all of them rated at Level 3 or above. The North Korean side has no intention of changing this situation, except for the cross-border bridge connecting Hunchun and Rason, which was reinforced in 2010, and the new Yalu River Bridge, which is still under construction.
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