North Korean-China trade hotter
than kimchi By Ting-I Tsai
TAIPEI - Business in Changbai county of
Jilin province in northeast China is booming. The
area, which faces North Korea's Hyesan City across
the Yalu River, has seen its exports rise 28.5%
year-on-year in the first eight months of this
year, the beneficiary of logjams created by
China's brisk trade with North Korea further
downstream to Dandong - the busiest border city in
northeast China bordering North Korea's Shinuiju
across the Yalu River.
As ice is melting
between North Korea and the United States, more
and more Chinese businessmen have been rushing to the
border
with the secretive communist country, looking to
cash in on its trade and investment potential.
"Traffic across the river has been so
busy," said Han Lihsin, who founded a China-Korea
trade website to promote business with China's
reclusive neighbor in April last year. "It is not
only trucks from China that have to line up to go
through customs, North Koreans have also sent
their own trucks to pick up goods."
According to statistics from Chinese
Customs, bilateral trade between North Korea and
China reached US$1.7 billion in 2006, a 7.58%
increase over the previous year. It has grown
another 16.7% in the first eight months of this
year to $1.25 billion. Chinese investment in North
Korea, meanwhile, had reached $38 million by the
end of 2006.
China's main exports include
agricultural products, consumer electronics,
textiles and fuel, but North Korean traders are
taking advantage of the Internet to diversify
their purchases. On China's business promotion
websites, buyers claiming to be from North Korea
are asking for items as varied as wine coolers,
necklaces, leather suitcases, soybean oil, pencil
cases and "plastic containers for aromas or
perfume".
Whether North Koreans now have
more money and are able to consume more remains a
hotly debated issue among Chinese traders. But
they agree that North Korean customers are now
more sensitive to product quality and brands.
"It's not just about being cheap anymore. Products
are required to be affordable with guaranteed
quality," said Tang Fuyou, manager of
Dandong-based Tigereye62.com.
To overcome
North Korean customers' resistance to Chinese
products, Tang says suppliers now market products
with brand names and descriptions printed in
English on the packaging. Small "Made in China"
markings are placed in unobtrusive spots. "That
way, goods can be sold for good prices," he said,
adding that South Korean and Japanese products are
still too expensive for North Koreans.
Used televisions, washing machines,
refrigerators and air conditioners are at the top
of North Korean shopping lists. Hoping to ride the
wave of this new demand for big-ticket household
goods, China's leading home appliance exporter
Haier has reportedly been operating across the
border since January of this year.
Traders
aren't the only ones looking to profit from North
Korea. Burdened by soaring labor costs and high
land prices, Chinese businessmen are finding this
virgin territory to be a potential paradise.
Xu You, chairman of the Changbai-based
China-North Korea investment association,
suggested that his joint-venture wood factory pays
10 yuan (US$1.3) per month to its North Korean
workers. Trader Wang Wei, whose Hsienhe
pharmaceutical manufacturing company is planning
to build a new factory in North Korea's Nanpo,
suggested that monthly salaries there average
about 50 yuan.
Ambitious North Korean
officials might not appreciate the intricacies of
capitalist operations, but they have skillfully
extended their networks for soliciting investment
by touting the country's advantages of cheap land
and labor. North Korean websites based in China
are advertising a broad range of investment
opportunities, including in the areas of energy,
restaurants and hotels, agriculture, mining,
manufacturing and general infrastructure.
Among the approximately 100 projects
circulating on these websites, hotels and
electricity generation seem to be particular
targets. One calls for a $30-45 million investment
in Pyongyang's yet finished tallest building, the
Ryugyong Hotel, while another requires a $50-60
million investment for the Taedong-gang Hotel.
Stakes in expansions of fuel-fired power plants
are being offered for $100-200 million, and,
hoping to take advantage of green energy, projects
to develop wind and solar power also appear but
minus a price tag.
As for manufacturing,
projects to make elevators, freezers, electronic
watches, shoes, sewing machines and even
disposable diapers all require foreign investments
in the form of machines, technology and raw
materials.
At the urging of North Korean
officials, investors Xu and Wang are now involved
in pitching investments south of the Yalu to other
Chinese prospects. According to Wang, Pearl River
delta-based Chinese businessmen have expressed the
most interest in relocating their factories, with
30 to 50 investment projects currently under
negotiation.
Among those still concerned
about the high uncertainty of operating in North
Korea, some have chosen to set up an office in
Pyongyang and bide their time until a timely
opportunity emerges.
Aware of the growing
significance of the bilateral commercial
relationship, China's central government and three
provinces near the North Korean border - Liaoning,
Jilin and Heilongjiang - have all made efforts to
boost bilateral cooperation.
In March
2005, Chinese Premier Wen Jiabao signed an
investment-protection agreement with his North
Korean counterpart, 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 2006, Wen
introduced new economic-cooperation guidelines.
In July of this year, Chinese Foreign
Minister Yang Jiechi noted during his three-day
visit to Pyongyang that economic cooperation was
an important part of China's relations with the
North, and said China would continue to promote
cooperation by following the previous agreements
and guidelines.
Provincial governments,
meanwhile, have been promoting cross-border trade
by attending and holding trade shows and building
new trade zones. Jilin's Hunchun, Jian and Tumen
are the cities along the North Korean border most
aggressively pursuing free-trade zones that would
allow visa-free access and offer duty-free
facilities.
North Korea introduced
economic reforms in 2002, but with embargoes
imposed by the United States and Japan and
Pyongyang's economic conservatism, the reforms
have accomplished little and the economy continues
to struggle. In an acknowledgement of those
problems, Dear Leader Kim Jong-il in January of
reportedly vowed to make 2007 North Korea's
economic development year.
Tang, the
Chinese businessman operating in Dandong, noted
that his company is about to be appointed by North
Korea's trade authority to assist the operations
of some 200 North Korean companies in China. He
believes, however, that patience is required when
dealing with the communist, reclusive nation.
"Even when North Korea and the US
normalize their relationship, more time will be
needed for economic reform," he said, "Chaos would
follow if the system is transformed too quickly."
Ting-I Tsai is a freelance
journalist based in Taipei.
(Copyright
2007 Asia Times Online Ltd. All rights reserved.
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(Copyright 2007 Asia Times
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about sales, syndication and republishing.)
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