Chinese business as usual in North
Korea By Ting-I Tsai
TAIPEI - Shortly before North Korea tested
its Taepodong missiles last month, Huang Mingzhe
paid a visit to Pyongyang to check his company's
project, decorating a new 6,000-square-meter
commercial market in the capital.
"Testing
those missiles was not a big deal," said Huang,
general manager of Shenyang-based Yunlong
Decoration Engineering. "I am going back next
month."
Huang is one of thousands of
Chinese businessmen trading or investing in the
isolated Stalinist state. With the geographical
proximity and historical links between China and
North Korea, Chinese businesses have slowly become
dominant in the North Korean market. While Beijing
is reluctant to acknowledge its significant
leverage on Pyongyang, Chinese investment in this
neighboring country at the least strengthens
China's interest in
the
region.
China's non-financial direct
investment in North Korea was about US$14.9
million in 2005 and $14.1 million in 2004, jumping
from $ 1.1 million in 2003, according to
statistics from the Chinese Commerce Ministry.
Bilateral trade reached almost $1.4
billion in 2004, and further jumped to about $1.6
billion in 2005, while the first five months of
2006 hit $61 million.
"I think products
from China take up about 70% of Pyongyang's
market, local products take another 20%, and the
other 10% is shared by others such as Japan and
Russia," said Xu Wenji, a professor at Jilin
University's Northeast Asia Research Institute who
paid a 20-day visit to Pyongyang in March.
Since Pyongyang initiated economic reform
in July 2002, Chinese businessmen have crowded
into North Korea - perhaps the last virgin
territory for capitalism.
Last year,
Zhijiang-based Guohao won the rights to operate
for 10 years the department store Pyongyang 100.
Executive manager Lu Yunlei has spent most of his
time since the department store officially opened
this year in North Korea's capital selling
products imported from Yiwu, China's
small-commodities manufacturing center, said a
company official, who only gave his surname Tong.
Also, the company recently won another
contract to operate in the underground market
under Kim Il-sung Square, he said, declining to
provide further details on the amount his company
paid for the rights.
Zeng Chengbiao, who
also is interested in operating a department store
in Pyongyang, complained that North Korean
officials have been conservative and failed to
implement the nation's regulations. Noting that
his commercial market in Pyongyang is ready to
operate, Zeng said he continues to wait for
authorities to approve regulations on how
foreigners can transfer earnings out of the
nation.
"Without the law, all of my
profits might be in vain after all," he said.
In Dandong, a Chinese city that borders
North Korea, the city government has further acted
as North Korea's business broker, soliciting
investments from around China for this neighboring
country.
Currently, 38 projects in North
Korea, ranging from mining and vehicle
manufacturing to seaweed processing and candy
making, are seeking investors from China,
according to a website. Investment for these
projects ranges from 500 million euros ($644
million) for the Musan iron mine to 40 million
euros for upgrading two power plants. As well,
there is almost unlimited investment needed for
computer software, biotechnological and
nano-science development.
Many of the
listed projects are under negotiation, said a
website official, who spoke on condition of
anonymity. Chinese businessmen are interested in
resource-related and manufacturing investments, he
said, adding that lately the North Korean
government has been more flexible on soliciting
investments, allowing these entrepreneurs to
submit proposals for investments they are
interested in and then evaluating the
possibilities for cooperation.
Aside from
private investment, the Chinese government donated
the Daean Friendship Glass Factory, which was
completed in October, shortly after another
Chinese company, Fuhua, signed a contract to
invest about $7.3 million to produce tires in a
neighboring area.
By the end of 2005, the
two countries had agreed to exploit offshore
oilfields jointly, particularly in the Yellow Sea.
Early this year, Pyongyang granted 50-year
exclusive operation rights of Rajin port's two
docks and a highway connecting the port and
China's Huchun, realizing Chinese strategy on
promoting economic development in its Tuman River
area. Also, China signed an agreement to invest
some $43 million to construct a hydroelectric
power station on the Yalu River, equidistant to
both Chinese and North Korean cities.
Chinese President Hu Jintao, during his
last trip to North Korea in October, also promised
to build another factory for that country at
China's cost, according to Xu. The type of factory
is up to Pyongyang.
China approved 38
investments in North Korea last year, mostly
light-industrial projects in the Pyongyang and
Rajin-Sonbong areas, according to Chinese
statistics.
By the end of 2005, 10 ports
in China's Liaoning and Jilin provinces were
conducting trade with North Korea, while about 100
Chinese companies in Liaoning's Dandong city and
50-60 companies in Jilin's border city of Yanbian
were approved for cross-border trade.
To
ease traffic, China's Southern Air on May 1
initiated three flights weekly between Beijing and Pyongyang.
According to Chinese state media, some 240,000
Chinese visited North Korea last year, while
125,000 North Koreans crossed the border.
Reflecting the trend, Chinese Prime
Minister Wen Jiabao signed an
investment-protection agreement with his North
Korean counterpart in March 2005, and the two
nations inked five bilateral economic-cooperation
agreements between 2002 and 2005.
During
North Korean leader Kim Jong-il's visit to China
in January, Wen introduced new
economic-cooperation guidelines: government
guiding, enterprises participating and market
operating.
With China's domination in
North Korea's economy, some analysts in South
Korea have warned that Beijing might have intended
to adopt it as the fourth province in its
northeast, while other observers challenge
Beijing's claim that it exerts only slight
leverage on Pyongyang.
"Of course they
could close North Korea down tomorrow if they
wanted - they don't want to, which is their
problem, they have to support the regime as a
buttress against their fears," said David Wall, a
professor at London-based Chatham House
specializing in developments in North Korea and
northeastern China.
Calculations on
China's economic and political interests in the
region and Pyongyang's stubbornness on political
affairs are the reasons for China's current
attitude toward Pyongyang's missile tests,
analysts said. The Chinese Foreign Ministry
expressed "serious concern" over the tests and
Beijing has sent officials to talk to the North
Koreans, but will not go as far as sanctions.
"Kim doesn't listen to anyone," said Cui
Yingjiu, a retired professor at Peking University.
Jeong Hyung-gon, research fellow at Korea
Institute for International Economic Policy,
echoed Cui's argument, suggesting North Korea
wants global economic cooperation and humanitarian
aid, even from the United States, but the North
insists on remaining independent in diplomatic and
political areas. "So Pyongyang will not accept
any of Beijing's recommendations on [the] North
Korea nuclear issue," he said. "They will solve
the nuclear problem with their own method."
Most Chinese analysts believe Pyongyang
will eventually come back to the six-party talks,
but not because of pressure by China. They believe
North Korea has no better option. According to one
report, the Bank of China recently froze some of
North Korean's accounts, indicating a tougher
policy toward its neighbor.
Beijing has
lacked a policy on assisting the US and North
Korea to diminish the bilateral disputes, said Jin
Linbo, director of the Asia-Pacific Center of the
China Institute of International Studies.
Pressure, however, will slowly be brought to bear
on Beijing if it fails to take actions against
some of Pyongyang's moves, Jin explained.
As North Korea's decades-long ally,
Beijing's moves and arguments on its influence
over its neighbor may be difficult to understand,
but some teaching material from Peking
University's international affairs department,
titled Asian Pacific Major Powers and Korea
Peninsula, might provide an answer.
"The best way to cope with the US is
creating a military-ties-to-be relationship with
Russia and DPRK," or the Democratic Republic of
Korea, the book said. "China's economic
cooperation with the peninsula [both North and
South Korea] will create significance to China's
modern establishments."
Ting-I
Tsai is a Taipei-based freelance writer.
(Copyright 2006 Asia Times Online Ltd.
All rights reserved. Please contact us about sales, syndication and republishing
.)
