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North Korea banks on
China
By Michael Rank
A
North Korean bank is planning to open its first
branch in China but, as with all things North
Korean, nothing is certain and there are still a
number of hurdles to overcome. The branch of
Hwaryo Bank in the northeastern city of Shenyang,
if it comes into being, will be the first North
Korean bank in China, and it reflects the
fast-growing trade between the two neighbors.
Hwaryo, also known as Brilliance Bank, has
had representative offices in Beijing and Macau
for some years but they are not full branches and
only do liaison and market research work, not full
banking business. A Hwaryo official in Beijing was
quoted as saying on a Chinese website specializing
in North Korean affairs that a delegation visited
Shenyang last year and the bank is now planning to
open a branch there.
"Last year, we did
indeed visit Shenyang and did an inspection and
are planning to establish a branch in Shenyang,"
he said. But asked when it will open and confirm
that it will be a full branch and not a
representative office, he replied, "I'm not sure,
it's all decided by our headquarters" in
Pyongyang.
The Chinese website said that
because Shenyang is not too far from Beijing,
Hwaryo saw little point in opening a
representative office there. The Shenyang
authorities were very keen on it opening a branch
in the city and a large team of officials visited
Pyongyang last year to discuss this, it added.
Hwaryo is a North Korean-Chinese joint
venture and the reclusive Stalinist state's only
commercial bank that is permitted to do business
in yuan as well as its only bank trading as a
limited liability company. The bank announced in
February 2000 that it was planning to open a
representative office in Seoul but permission for
this has not so far been forthcoming. The proposal
for a Seoul office is said to have been made
through a Korean-Chinese broker who also promoted
North Korea's plans to attract South Korean
investment funds via the bank's office in the
Southern capital.
South Korea's Financial
Supervisory Commission is reported to have
referred Hwaryo's plan to the National
Intelligence Service (NIS) for confirmation, but
the NIS was unable to verify its intentions,
resulting in the discontinuation of the talks with
the broker, Korea Herald quoted Southern officials
as saying. To allow a Northern bank to open an
office in the South would be a highly sensitive
issue even though President Roh Moo-hyun has
continued his predecessor's controversial
engagement policy toward the North, much to the
concern of US President George Bush who regards
Pyongyang as part of the "axis of evil".
Hwaryo clearly sees an important niche for
itself in promoting North Korea-China trade, which
increased 35.4% to a record US$1.38 billion last
year, according to the Korea International Trade
Association (KITA), a non-government agency. The
boom in trade with China comes against a
background of falling trade with the impoverished
state's two other main partners, South Korea and
Japan, which declined by 3.8% and 4.8%
respectively.
KITA said North Korea's
exports to China rose in 2004 to $585.7 million
due to higher sales of fishery products, iron ore
and anthracite coal, and international price
increases for raw materials fuelled by China's
soaring economy. Its imports from China also
jumped by 27.4% to $799.95 million with increases
in the volume of pork and crude oil among other
items. Basic Chinese consumer goods such as soap
and beer are widely seen in North Korea's
fledgling free markets, making available
commodities, which would otherwise be in short
supply or impossible to find despite the country's
tentative attempts at economic reform. North Korea
takes great pride on its juche or
self-reliance policy and takes little part in
international trade. In 2003, its overall foreign
trade totaled just $3.115 billion, almost
two-thirds of it with China, South Korea and
Japan.
The heavy industrial center of
Shenyang, capital of Liaoning province, is North
Korea's main focus in China after Beijing; its
only consulate in China is there and it also owns
a hotel and software company in the city. In
addition, there are regular flights to Pyongyang,
operated by North Korea's Air Koryo and China
Southern Airlines.
Koryo Bank was
founded in November 1997 and is under the supervision
of North Korea's central bank. Its
Chinese-language website boasts of how "its birth and growth
have received the care and support of [North
Korean leader] Kim Jong-il, and that it
provides facilities for personal and company bank
accounts as well as extending loans, carrying out
foreign-exchange dealings and other standard banking
business. However, it does not have an unblemished
reputation, and in 1997 it was reportedly involved
in a $50 million money-laundering operation with
South African partners.
Shenyang has been
suffering badly from China's economic
restructuring and the laying off of hundreds of
thousands of workers that has sparked protests
throughout the northeast. A Hwaryo official in
Beijing declined to say why the bank had picked
Shenyang for its first foreign branch. But
according to a Sino-North Korean trade expert, it
has been chosen because of its "central position"
and that it receives more North Korean investment
than any other foreign city.
North
Korea's biggest investment in Shenyang is probably
the 15-story Qibaoshan Hotel, which has 160 rooms
and bills itself as a four-star establishment, with
a nightclub and sauna. Apart from the hotel, a
North Korean-owned software company, Korea 615
Editing Corp, set up shop in Shenyang last
year, announcing that it would develop software
systems and programs for print media and also
produce advertising materials - something of a novelty
for a country that officially despises Western
capitalist ways.
Another computer company,
Silibank, is also based in Shenyang, and in 2001
became North Korea's first Internet service
provider. It's unlikely to be a popular choice for
ISP though as it's aimed solely at people who want
to contact North Korean businesses and government
bodies.
Michael Rank, graduate
in Chinese studies from Cambridge University,
1972, was a Beijing correspondent for Reuters from
1980-84; he is a freelance writer in
London.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
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