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North Korea

How China hopes to profit from its close ties to North Korea

While UN sanctions have limited the scope for economic engagement, there are still many areas where China can do business with North Korea

PUBLISHED : Wednesday, 18 July, 2018, 1:39pm
UPDATED : Wednesday, 18 July, 2018, 4:45pm

As China reasserts its influence over North Korea, it has pledged to restore its economic ties to the country after years of UN sanctions.

Last month, during North Korean leader Kim Jong-un’s third visit this year to China, President Xi Jinping told him that Beijing would support North Korea’s efforts at economic development.

Wang Enbin, the deputy director of the Commerce Department of Liaoning – a province that borders North Korea – said on Monday that China should be prepared to resume cooperation projects which had been suspended under the sanctions, Japan’s Kyodo News reported.

China’s economic support will give the country a clear advantage over other major players in the region – South Korea, Japan, Russia, and the United States – which have lost or never had a viable economic partnership with North Korea.

While the United Nations sanctions prevent individuals and companies doing business with North Korea, there are grey areas that China can explore.

Here are four possible areas where China is expected to build up its economic ties with North Korea.

North Korean leader Kim Jong-un visits factories near Chinese border

Reviving the border economy

The 1,400km (870 mile) border has at least 16 security checkpoints which have long served as de facto free-trade zones.

One checkpoint at Dandong, a port city at the mouth of the Yalu River at the southern end of the border, accounts for roughly 70 per cent of China’s cross-border trade with North Korea.

In one of its latest efforts to bolster economic ties, Beijing last month called on local governments to step up their efforts to promote development in the border region.

The directive is expected to help companies in Dandong and Hunchun, which specialise in border projects.

In fact, China already maintains a few special economic zones in the border region, including Hwanggumpyong and the Wihwa Islands in the Yalu River.

Plans to develop them as special economic zones were originally announced in 2011, but the project was virtually halted after Kim’s uncle, Jang Song-thaek, who led the North Korea side, was executed for treason in 2013. These projects may now be reanimated.

Strengthening agricultural ties

During Kim’s visit to Beijing last month, he visited the Chinese Academy of Agricultural Sciences, a national research agency specialising in machinery and the development of hybrid rice and corn.

Pak Thae-song, vice-chairman for science and education in North Korea’s Workers’ Party, last month said he wished to “strengthen the cooperation between the two countries in agriculture”.

In its most recent analysis of the North Korean economy, South Korea’s central bank estimated that North Korea’s gross domestic product was US$28.5 billion in 2016 – around 30 per cent of which, or US$8 billion, was attributable to agriculture.

UN lets North and South Korea restore military communications

Fishing rights

United Nations sanctions prohibit North Korea from selling or transferring its fishing rights, but previous agreements are allowed to continue.

According to South Korean officials, North Korea had already sold its fishing rights in some parts of the Yellow Sea and the Sea of Japan to China for US$75 million annually before the sanctions came into force.

As of 2016, an estimated 2,500 Chinese fishing boats had been operating in North Korean waters.

Enhancing tourism

China is rapidly restoring its person-to-person exchanges with North Korea through tourism.

North Korea’s national carrier Air Koryo, which has not been targeted by sanctions, has recently resumed flights between Pyongyang and Shanghai.

There are already direct flights to Pyongyang from other Chinese cities including Beijing and Shenyang.

Given the severe restrictions on North Korean citizens’ movements, the traffic is largely one way.

Gu Gab-woo, a professor at the University of North Korean Studies in Seoul, noted that the scope of bilateral cooperation need not be limited to political issues, saying: “One may see this expansion of human exchange as a strengthening of economic cooperation.”