TAIPEI - North Korea's nuclear test has
been a hot topic among analysts around the world.
But inside the isolated Stalinist state, getting a
hold of a pair of running shoes, a bicycle or a
television set is still what most excites ordinary
citizens.
And Chinese businesses continue
to cash in on these material desires by selling
goods manufactured at home or in North Korea at
prices higher than their quality justifies,
sparking much criticism.
When Pyongyang
publicized its intention to initiate economic
reforms in July 2002, most people had doubts about
how far the
policy would be taken. Four
years later, the regime is still struggling to
implement its reforms, but it has at least partly
satisfied some of the daily demands of citizens by
allowing more Chinese products to be manufactured
in North Korea and more Chinese goods to be
imported.
Shoes, bicycles, TV sets,
beverages and clothes made in China or by Chinese
companies in North Korea are helping to satisfy
demand, but some disreputable Chinese companies
are ruining their country's reputation by dumping
factory seconds and damaged goods on the market.
Over decades of isolation, North Koreans
have been suffering not just from food shortages,
but from a scarcity of basic consumer goods. In
past years, Pyongyang has reportedly asked the
South Korean government to donate thousands of
tons of soap and clothes, as well as material for
the production of 60 million pairs of shoes. In a
visit to Pyongyang in November, products such as
Colgate toothbrushes, toothpaste and a Japanese
facial cleaner were carefully displayed in glass
cases bearing price tags equivalent to
US$2.60-$5.90, well beyond the financial reach of
all but a few North Koreans.
After years
of studying China's experiences, Pyongyang is now
gearing up to solicit foreign investment and
advanced technologies to modernize its decades-old
manufacturing base.
Supply and
demand "Because the supply can't satisfy
the demand, prices of most of the Chinese products
simply soar in the North Korean market," said Su
Xiangzhong, chairman of a Tianjin company that
founded a beverage-manufacturing joint venture,
Lungjin, with a North Korean.
Trade
between the two countries increased by 35.4% in
2004, followed by a 35.2% increase in 2005. By the
end of October 2006, bilateral trade had reached
$1.38 billion, a 4% increase over 2005.
Beijing-based Winner International
Industries Ltd was one of the Chinese companies
that foresaw North Korea's consumption potential
in 2000. By then, the company had co-founded a
joint-venture running-shoe and
clothing-manufacturing presence in North Korea.
With advanced machinery from Taiwan, its
shoe-manufacturing division is now capable of
producing 8 million pairs of running shoes,
according to an official from the company, who
declined to identify himself. The
clothing-manufacturing division, he said, has been
a supplier to South Korean and Japanese companies.
However, he added that orders from the two
countries had recently decreased for unknown
reasons.
Leather shoes for soldiers are of
high quality, but they are not available to the
average person. In Pyongyang shops catering
exclusively to foreigners, a pair of leather shoes
could cost as much as $326. The North Korean
government is still soliciting foreign investment
and purchasing shoemaking equipment via Chinese
companies.
To get around in a country with
underdeveloped public transportation, getting a
pair of shoes is not enough. Taking advantage of
that situation, Tianjin's Digital Co started
making bicycles in Pyongyang in October 2005,
after the North Koreans agreed to let the Chinese
take a 51% controlling share in the joint venture,
virtually a monopoly, for 20 years.
It is
estimated that the nation's demand for bicycles is
about 7 million, according to the Chinese media.
The company now manufactures some 40 models and
60,000 bicycles annually, with the most popular
model costing $26. In coming years, it plans to
produce 300,000 bicycles annually and construct
another three bicycle plants.
Aside from
daily necessities, there are few entertainment
options for North Koreans, which means there is a
high demand for TV sets. Nanjing Panda, a TV
maker, appeared to be the only Chinese company to
foresee the emergence of the North Korean market
when it invested $1.3 million there in 2002. After
four years of operation, its 17-inch
black-and-white and 21-inch color TV sets are
reportedly the hottest items available in
Pyongyang. With Panda products beginning to
dominate the local market, it is becoming
increasingly difficult for others to import TV
sets into North Korea, according to Chinese
business people.
The Panda joint venture
is now digging up another potential gold mine by
manufacturing personal computers (PCs) in North
Korea.
In 2003, Chinese non-financial
investments in North Korea amounted to just $1.12
million. That total, however, soared to $14.13
million in 2004, and reportedly reached $53.69
million in 2005. According to the Chinese media,
there are now about 200 Chinese investment
projects operating in North Korea. A
Pyongyang-based foreign businessman described the
Chinese investors as "by far the largest group by
country doing business there, in all kinds of
fields - plus they are from one of the few
countries with the protection and representation
of a big embassy".
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 last January, Wen
introduced new economic-cooperation guidelines.
Despite these positive moves, controversy
over the role of Chinese businesses has emerged. A
Pyongyang-based Western businessman suggested that
quite a few disreputable companies "go there with
the intention of getting rid of old or damaged
goods they can't sell in China, and rip off North
Koreans, who have no way to get their money back".
"Also, a lot of fake goods come from
China," he added.
Still, more and more
Chinese business people are rushing to Pyongyang.
Su Xiangzhong, chairman of a Tianjin-based
company, noted that his firm is creating a new
beverage brand, like China's Wahaha, in Pyongyang.
North Koreans are also very interested in
cooperating with Chinese enterprises in
manufacturing and mining.
Chinese-made
clothes for women and children, low-end and
generic-brand household products and sundries,
color TVs and PCs are popular products in North
Korea.
Li Jingke, a Dandong-based Chinese
businessman who runs the China-DPR Korea Small
Investor Association, suggested that
natural-resource exploitation and manufacturing
are the best industries for foreigners to invest
in, adding that more investment-friendly policies
would likely be introduced in April. By then, he
said, Chinese business people might need to become
more concerned about unprofessional conduct.
"When North Korea introduces more
liberalized policies, competent companies from
everywhere will enter the market, which would
likely eliminate the existence of those Chinese
businessmen who don't have modern commercial ideas
in mind," Li said.
(This report is
based on the author's recent trip to mainland
China and North Korea.)
Ting-I Tsai
is a Taipei-based freelance journalist.
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