Asan Institute for Policy Studies

Report Part Title: China-North Korea Economic Relations

Report Part Author(s): Piao Jianyi

Report Title: Outside Looking In:

Report Subtitle: A View into the North Korean Economy
Report Editor(s): J. James Kim, Han Minjeong
Published by: Asan Institute for Policy Studies (2014)
Stable URL: https://www.jstor.org/stable/resrep20693.8

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74

age problem, but also set the stage for later reform. More investment can be
made on technology and skill upgrade as well.

Since 2013, North Korean government has devised various measures to insti-
tute change. It is desirable for the international community to induce North
Korea to “reform and open-up” by seeking cooperation, since the stability Part II
and development of North Korea will be beneficial to stability, development,
and peace of the whole Northeast Asian region as well. The China Connection

Chapter 3

China-North Korea Economic Relations

Piao Jianyi

Chapter 4

North Korea’s External Trade Relations

Lee Jong-kyu & Nam Jin-wook

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76 77

Chapter 3 to maintain exchanges via letters and telegraphs.

China-North Korea Economic Relations

As soon as the People’s Republic of China was established, Pyongyang ac-
knowledged the government’s legitimate right to engage in official diplomatic
relations. In December 1949, the first official intergovernmental agreement
Piao Jianyi was reached through an exchange of letters, telegrams, and phone conversa-
Chinese Academy of Social Science tions. In August 1950, after the Korean War, the two countries signed a com-
pensation-trade deal. A month later, the US-led UN forces succeeded (i.e. Oper-
Bilateral economic relations between China and North Korea have a long and ation Chromite) in advancing above the 38th parallel up towards the Yalu River.
complex history. The discussion in this section will trace this history from
its inception after World War II up to the present time and consider the driv- Another month later, China deployed its troops and witnessed a domestic
ing factors that explain the critical turning points. In doing so, we show how movement to “Resist US Aggression and Aid Korea.” The Chinese voluntarily
the structural complementarity of the two economies along with geographi- enlisted and organized logistical and medical corps. In addition, they donated
cal proximity as well as geopolitical necessity drove the two countries closer weapons and established a fund equal in value to 3,710 aircraft. Such assis-
together on the economic front. tance continued until 1952, in following volumes: 7,500 tons of food items;
100,000 blankets; 35,000 pieces of fabric; 384,000 articles of cotton cloth-
ing; 200 tons of raw cotton; 150,000 pairs of shoes; 818,000 towels; 140,000
The Historical Roots of Economic Cooperation between China and North care packages; 1,279,000 boxes of other supplies; and cash amounting to
Korea RMB 182.9 billion.

Any understanding of the economic relationship between China and North The Northeast Province offered aid of its own: fund donations equivalent in
Korea must begin at the point of Japan’s unconditional surrender on August value to 5,700 tons of food; 150,000 towels; 20,000 articles of clothing; 300,000
15, 1945 when the North Korean Communist Party established the “North packs of cigarettes; and 25,000 “care packages.” The regional governments took
Korean Provisional People’s Committee.” It was at this time that the Chinese responsibility for helping 21,000 orphans who had lost their parents during
Communist Party set in place a strategy to build and solidify a base in the the war. The Chinese aid corps also sent medical supply and services to North
Northeastern Provinces and dispatch forces to the region. North Korea was Korea. The Chinese Army cut its expenditures to help North Korea rebuild.42
strategically significant in that it links the southern and eastern fronts. To-
wards the end of 1947, the Chinese Northeast Administrative Commission 42. “jungguk inmini nopeun gukjejueui ujeongeul balhuigayeo 3nyeonrae daeryangeui muljaro josun-

and the North Korean Provisional Committee signed a tentative agreement inmineul jiwoenhada”, Inmin Ilbo, August 4,1953.

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76 77

Chapter 3 to maintain exchanges via letters and telegraphs.

China-North Korea Economic Relations

As soon as the People’s Republic of China was established, Pyongyang ac-
knowledged the government’s legitimate right to engage in official diplomatic
relations. In December 1949, the first official intergovernmental agreement
Piao Jianyi was reached through an exchange of letters, telegrams, and phone conversa-
Chinese Academy of Social Science tions. In August 1950, after the Korean War, the two countries signed a com-
pensation-trade deal. A month later, the US-led UN forces succeeded (i.e. Oper-
Bilateral economic relations between China and North Korea have a long and ation Chromite) in advancing above the 38th parallel up towards the Yalu River.
complex history. The discussion in this section will trace this history from
its inception after World War II up to the present time and consider the driv- Another month later, China deployed its troops and witnessed a domestic
ing factors that explain the critical turning points. In doing so, we show how movement to “Resist US Aggression and Aid Korea.” The Chinese voluntarily
the structural complementarity of the two economies along with geographi- enlisted and organized logistical and medical corps. In addition, they donated
cal proximity as well as geopolitical necessity drove the two countries closer weapons and established a fund equal in value to 3,710 aircraft. Such assis-
together on the economic front. tance continued until 1952, in following volumes: 7,500 tons of food items;
100,000 blankets; 35,000 pieces of fabric; 384,000 articles of cotton cloth-
ing; 200 tons of raw cotton; 150,000 pairs of shoes; 818,000 towels; 140,000
The Historical Roots of Economic Cooperation between China and North care packages; 1,279,000 boxes of other supplies; and cash amounting to
Korea RMB 182.9 billion.

Any understanding of the economic relationship between China and North The Northeast Province offered aid of its own: fund donations equivalent in
Korea must begin at the point of Japan’s unconditional surrender on August value to 5,700 tons of food; 150,000 towels; 20,000 articles of clothing; 300,000
15, 1945 when the North Korean Communist Party established the “North packs of cigarettes; and 25,000 “care packages.” The regional governments took
Korean Provisional People’s Committee.” It was at this time that the Chinese responsibility for helping 21,000 orphans who had lost their parents during
Communist Party set in place a strategy to build and solidify a base in the the war. The Chinese aid corps also sent medical supply and services to North
Northeastern Provinces and dispatch forces to the region. North Korea was Korea. The Chinese Army cut its expenditures to help North Korea rebuild.42
strategically significant in that it links the southern and eastern fronts. To-
wards the end of 1947, the Chinese Northeast Administrative Commission 42. “jungguk inmini nopeun gukjejueui ujeongeul balhuigayeo 3nyeonrae daeryangeui muljaro josun-

and the North Korean Provisional Committee signed a tentative agreement inmineul jiwoenhada”, Inmin Ilbo, August 4,1953.

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
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78 79

Consolidation of the Bilateral Economic Cooperation (2) economic and cultural aid or cooperation to facilitate cultural exchange;

After the Korean Armistice, North Korea consulted with the Soviet Union, (3) a series of agreements on the economy, trade, transportation, culture,
the Eastern European socialist bloc, and China on the issue of post-war re- and education;
covery. In November 1953, Pyongyang and Beijing announced an agreement
that all financial and physical debt from the Korean War be forgiven. Between (4) ratification as soon as possible, with a validity of 10 years after ratifica-
1954 and 1957, China donated RMB 8 trillion to help North Korea purchase tion; and
essential goods necessary for economic recovery.43 China reconstructed rail-
ways that had been destroyed during the war; it also provided machinery, (5) an automatic ten-year extension of the agreement unless one party were
buses, and trucks. North Korea’s suggestion was accepted to allow for the to make a claim to repeal.45
creation of joint venture airlines of North Korea and Soviet Union fly China’s
northeast airspace. Chinese technicians were sent to North Korea to aid in Bilateral economic relations developed in tandem with multilateral coopera-
technology training, and North Korean technicians were sent to China for tion among socialist bloc countries. The former differs from the latter in that
training. The Chinese government accepted North Korean students for aca- the relationship was not based on interests but on companionship through-
demic purposes.44 out the long-lasting revolutionary struggle. While the Soviet Union, at North
Korea’s behest, extended the due date for paying back wartime assistance,
With the Agreement on Economic and Cultural Cooperation between China China changed its aid into donations. Another difference was that the rela-
and North Korea signed, bilateral economic relations became more formal. tionship had a legal base that depended upon a long-term agreement. Chi-
The salient points of the Agreement were: nese assistance focused on transportation, shipment, light industries, and
agriculture, which directly contribute to people’s improved living standards.
(1) the development of an economic and cultural relationship based on These traits constituted the basis of the bilateral economic cooperation that
principles of mutual cooperation supported by equal, mutual benefits; ensued.

43. This list included coal, fabric, raw cotton, food, building materials, transportation infrastruc-

ture, metal goods, agricultural and other types of machinery, fishing boats, paper, stationery,

and daily necessities.

44. “junghwa-inmin-gonghwa-guk jeongbu-wa Josun-minju-juui-inmin-gonghwa-guk jeongbu daepyo- 45. “junghwa-inmin-gonghwa-guk-gwa josun-minju-juui-inmin-gonghwa-guk gyeongje mit mun-

dan dampan-gongbo”, Inmin Ilbo, November 24, 1953. hwa-hyupryeok hyupjeong,” Inmin Ilbo, November 24, 1953.

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78 79

Consolidation of the Bilateral Economic Cooperation (2) economic and cultural aid or cooperation to facilitate cultural exchange;

After the Korean Armistice, North Korea consulted with the Soviet Union, (3) a series of agreements on the economy, trade, transportation, culture,
the Eastern European socialist bloc, and China on the issue of post-war re- and education;
covery. In November 1953, Pyongyang and Beijing announced an agreement
that all financial and physical debt from the Korean War be forgiven. Between (4) ratification as soon as possible, with a validity of 10 years after ratifica-
1954 and 1957, China donated RMB 8 trillion to help North Korea purchase tion; and
essential goods necessary for economic recovery.43 China reconstructed rail-
ways that had been destroyed during the war; it also provided machinery, (5) an automatic ten-year extension of the agreement unless one party were
buses, and trucks. North Korea’s suggestion was accepted to allow for the to make a claim to repeal.45
creation of joint venture airlines of North Korea and Soviet Union fly China’s
northeast airspace. Chinese technicians were sent to North Korea to aid in Bilateral economic relations developed in tandem with multilateral coopera-
technology training, and North Korean technicians were sent to China for tion among socialist bloc countries. The former differs from the latter in that
training. The Chinese government accepted North Korean students for aca- the relationship was not based on interests but on companionship through-
demic purposes.44 out the long-lasting revolutionary struggle. While the Soviet Union, at North
Korea’s behest, extended the due date for paying back wartime assistance,
With the Agreement on Economic and Cultural Cooperation between China China changed its aid into donations. Another difference was that the rela-
and North Korea signed, bilateral economic relations became more formal. tionship had a legal base that depended upon a long-term agreement. Chi-
The salient points of the Agreement were: nese assistance focused on transportation, shipment, light industries, and
agriculture, which directly contribute to people’s improved living standards.
(1) the development of an economic and cultural relationship based on These traits constituted the basis of the bilateral economic cooperation that
principles of mutual cooperation supported by equal, mutual benefits; ensued.

43. This list included coal, fabric, raw cotton, food, building materials, transportation infrastruc-

ture, metal goods, agricultural and other types of machinery, fishing boats, paper, stationery,

and daily necessities.

44. “junghwa-inmin-gonghwa-guk jeongbu-wa Josun-minju-juui-inmin-gonghwa-guk jeongbu daepyo- 45. “junghwa-inmin-gonghwa-guk-gwa josun-minju-juui-inmin-gonghwa-guk gyeongje mit mun-

dan dampan-gongbo”, Inmin Ilbo, November 24, 1953. hwa-hyupryeok hyupjeong,” Inmin Ilbo, November 24, 1953.

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80 81

Critical Junctures in Economic Cooperation During this period, North Korea and China signed a compensation trade
protocol (Agreement on Economic and Cultural Cooperation), which rapidly
Bilateral economic relationship between China and North Korea developed increased trade volume between the two countries. In 1954, China provided
in association with the multilateral relationship among communist countries approximately RMB 3 trillion of coal, fishing boats, construction materials,
and can be analyzed according to the following development phases. machines and industrial raw materials, while North Korea provided electric-
ity, minerals, seafood, and medicine as a mutual offer. In 1957, China pro-
Post-war Recovery and Founding of the Socialist State (1954-1960) vided food, raw and refined cotton, coal, salt, steel, chemical industrial ma-
terials, paper, and construction materials; meanwhile, North Korea exported
The years from 1954 to 1957 marked North Korea’s post-war recovery peri- iron powder, silicon, tool steel, angle steel, colored metals, cement, fruits,
od. The Socialist Bloc supported North Korea through aid. During this time, seafood and regional special products as part of the mutual trade.
and thanks to China’s RMB 5 trillion aid, the North Korea-China Economic Co-
operation supported railroads, stamps, and currency; the two countries also In 1958, North Korea entered the Socialist Foundation Construction period.
officially started compensation trade. The North Korea-China Economic Cooperation started to transition from an
aid-oriented relationship to a more equitable one. During that time, China pro-
In 1954, China, the Soviet Union, and North Korea were part of nine socialist vided coal, coke, cotton, various machines, railroads, beans, and industrial
countries that promoted international railroad transit links. China and North chemicals, while North Korea provided iron, iron powder, steel ingots, sea-
Korea signed agreements on border railways, mail and parcel exchanges, bor- food, and medicine as part of its mutual trade. Trade volume between the
der-area currency exchanges, and protocols for foreign trade and exchange. two countries increased more than 50 percent compared to the same period
Since then, China has sent workers and technicians from various fields, such in the previous year, and increased ten times compared to 1954.
as construction, shipbuilding, welding, cement, enamel, glass, ceramics, tex-
tiles, and commodities, to North Korea to help the latter country develop. The two countries also signed a 1959-1962 long-term mutual supply agree-
Also, Chinese companies have received thousands of North Korean techni- ment. The agreement entailed China’s supplying of coal, cotton, tires, curb-
cians and laborers in smelting, steelmaking, shipbuilding, construction, rail- ing, rolled-steel materials, ferromanganese, sulfur, paraffin, and plaster,
roading and repairing, fertilizer manufacturing, dyeing, sericulture, printing, while North Korea would supply iron ore, copper, zinc, high-speed steel, car-
tanning, wood processing, can-making, tobacco-making, and other fields, bon steel, calcium carbide, ginseng, and seafood. North Korea would also,
and taught them professional skills. China also sent massive quantities of con- through joint investment, construct the Yalu River Unbong hydroelectric
struction materials, transportation equipment, metal goods, trucks, chemi- power plant. In the agreement, China agreed to loan North Korea half of the
cals, textile machines, coal, fabric, paper, and other goods to North Korea. construction fee on a long-term basis, and North Korea would pay the loan
By the end of 1957, China had sent RMB 8 trillion in aid as well. back with barter within 10 years, starting from 1961. Another long-term loan

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
All use subject to https://about.jstor.org/terms
80 81

Critical Junctures in Economic Cooperation During this period, North Korea and China signed a compensation trade
protocol (Agreement on Economic and Cultural Cooperation), which rapidly
Bilateral economic relationship between China and North Korea developed increased trade volume between the two countries. In 1954, China provided
in association with the multilateral relationship among communist countries approximately RMB 3 trillion of coal, fishing boats, construction materials,
and can be analyzed according to the following development phases. machines and industrial raw materials, while North Korea provided electric-
ity, minerals, seafood, and medicine as a mutual offer. In 1957, China pro-
Post-war Recovery and Founding of the Socialist State (1954-1960) vided food, raw and refined cotton, coal, salt, steel, chemical industrial ma-
terials, paper, and construction materials; meanwhile, North Korea exported
The years from 1954 to 1957 marked North Korea’s post-war recovery peri- iron powder, silicon, tool steel, angle steel, colored metals, cement, fruits,
od. The Socialist Bloc supported North Korea through aid. During this time, seafood and regional special products as part of the mutual trade.
and thanks to China’s RMB 5 trillion aid, the North Korea-China Economic Co-
operation supported railroads, stamps, and currency; the two countries also In 1958, North Korea entered the Socialist Foundation Construction period.
officially started compensation trade. The North Korea-China Economic Cooperation started to transition from an
aid-oriented relationship to a more equitable one. During that time, China pro-
In 1954, China, the Soviet Union, and North Korea were part of nine socialist vided coal, coke, cotton, various machines, railroads, beans, and industrial
countries that promoted international railroad transit links. China and North chemicals, while North Korea provided iron, iron powder, steel ingots, sea-
Korea signed agreements on border railways, mail and parcel exchanges, bor- food, and medicine as part of its mutual trade. Trade volume between the
der-area currency exchanges, and protocols for foreign trade and exchange. two countries increased more than 50 percent compared to the same period
Since then, China has sent workers and technicians from various fields, such in the previous year, and increased ten times compared to 1954.
as construction, shipbuilding, welding, cement, enamel, glass, ceramics, tex-
tiles, and commodities, to North Korea to help the latter country develop. The two countries also signed a 1959-1962 long-term mutual supply agree-
Also, Chinese companies have received thousands of North Korean techni- ment. The agreement entailed China’s supplying of coal, cotton, tires, curb-
cians and laborers in smelting, steelmaking, shipbuilding, construction, rail- ing, rolled-steel materials, ferromanganese, sulfur, paraffin, and plaster,
roading and repairing, fertilizer manufacturing, dyeing, sericulture, printing, while North Korea would supply iron ore, copper, zinc, high-speed steel, car-
tanning, wood processing, can-making, tobacco-making, and other fields, bon steel, calcium carbide, ginseng, and seafood. North Korea would also,
and taught them professional skills. China also sent massive quantities of con- through joint investment, construct the Yalu River Unbong hydroelectric
struction materials, transportation equipment, metal goods, trucks, chemi- power plant. In the agreement, China agreed to loan North Korea half of the
cals, textile machines, coal, fabric, paper, and other goods to North Korea. construction fee on a long-term basis, and North Korea would pay the loan
By the end of 1957, China had sent RMB 8 trillion in aid as well. back with barter within 10 years, starting from 1961. Another long-term loan

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
All use subject to https://about.jstor.org/terms
82 83

that North Korea would pay back with barter over 10 years would be textile, na-US relations, among others. It was also during this time that North Korea
cement, and paper-bag factory machines supplied by China, with China also accelerated its economic development to the point that its economy leap-
supplying North Korea the means of production for steel ball bearings, silk frogged that of South Korea.
weaving, flour, and sugar. Through these arrangements, the two countries’
economic cooperation developed from one-sided aid and compensation to In July 1961, the Chinese and North Korean governments signed the Treaty
large-scale construction and financial cooperation. of Friendship and Cooperation, which took the two countries’ relationship to
unprecedented heights. Based on the agreement’s stipulation that China would
To fulfill the agreement, China and North Korea have signed a compen- supply plants and technical support, the two countries signed another protocol
sation-trade protocol each year since 1959. The two countries also have a establishing China’s support of commodity production companies in North Ko-
non-trade payment currency-clearing agreement, a border-currency exchange rea. China confirmed that it would support the establishment of fountain pen,
protocol, a convention on civil aviation, an air-transportation mutual service knitting, and natural-rubber product factories, and that it would also support
protocol, a civil-aviation technology cooperation protocol, and the Yellow Sea planting techniques and equipment for light-industry development.
fishery protocol. In 1960, China signed agreements to provide loans, plants,
and technology support. As a result, between 1961 and 1964, China sup- In 1962, the two governments decided to extend their agreement period from
plied RUB 420 million in loans, and contributed to the establishment of a four to five years; they signed the 1963-1967 long-term agreement to mutually
rubber-tire factory, a radio communication-equipment factory, and a com- supply high-priority products. China would provide fuel, mineral products,
modity-production factory. China also agreed to supply cotton textiles and agricultural goods, chemical industrial products, black metals, and plants,
radio-station equipment. Finally, China signed a border river- and air-trans- while North Korea would provide minerals, metals, equipment and machines,
portation cooperation agreement, provided that territory in Liaoning prov- industrial chemical products, seafood, textile products, among others. The
ince and Pyeonganbuk-do would be available for joint use. two countries also signed the Normalized Air and Sea Cargo Treaty. As a result
of these developments, North Korea-China trade entered a new stage capped
Comprehensive Socialist Consolidation by the opening of formal trade link between Shanghai and Nampo in 1964.

From 1961 to 1974, North Korea officially started to establish its own form Although the Great Proletarian Cultural Revolution did not engender the cli-
of socialism. This period was also marked by several major events, such as mate for long term agreements between the two governments during 1968-
the Cuban Missile Crisis, growing animosity between China and the USSR, 1976, they did engage in short term cooperation. In 1971 and 1973, the two
the establishment of diplomatic ties between South Korea and Japan, the governments signed an economic and technical cooperation agreement, but
Great Proletarian Cultural Revolution, the Vietnam War, the Pueblo Incident, this did not bring about significant changes. In 1972, the two countries’ trade
the Sino-Soviet border conflict at Zhenbao Island, the improvement in Chi- volume increased 50 percent compared to 1963. During that period, the two

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
All use subject to https://about.jstor.org/terms
82 83

that North Korea would pay back with barter over 10 years would be textile, na-US relations, among others. It was also during this time that North Korea
cement, and paper-bag factory machines supplied by China, with China also accelerated its economic development to the point that its economy leap-
supplying North Korea the means of production for steel ball bearings, silk frogged that of South Korea.
weaving, flour, and sugar. Through these arrangements, the two countries’
economic cooperation developed from one-sided aid and compensation to In July 1961, the Chinese and North Korean governments signed the Treaty
large-scale construction and financial cooperation. of Friendship and Cooperation, which took the two countries’ relationship to
unprecedented heights. Based on the agreement’s stipulation that China would
To fulfill the agreement, China and North Korea have signed a compen- supply plants and technical support, the two countries signed another protocol
sation-trade protocol each year since 1959. The two countries also have a establishing China’s support of commodity production companies in North Ko-
non-trade payment currency-clearing agreement, a border-currency exchange rea. China confirmed that it would support the establishment of fountain pen,
protocol, a convention on civil aviation, an air-transportation mutual service knitting, and natural-rubber product factories, and that it would also support
protocol, a civil-aviation technology cooperation protocol, and the Yellow Sea planting techniques and equipment for light-industry development.
fishery protocol. In 1960, China signed agreements to provide loans, plants,
and technology support. As a result, between 1961 and 1964, China sup- In 1962, the two governments decided to extend their agreement period from
plied RUB 420 million in loans, and contributed to the establishment of a four to five years; they signed the 1963-1967 long-term agreement to mutually
rubber-tire factory, a radio communication-equipment factory, and a com- supply high-priority products. China would provide fuel, mineral products,
modity-production factory. China also agreed to supply cotton textiles and agricultural goods, chemical industrial products, black metals, and plants,
radio-station equipment. Finally, China signed a border river- and air-trans- while North Korea would provide minerals, metals, equipment and machines,
portation cooperation agreement, provided that territory in Liaoning prov- industrial chemical products, seafood, textile products, among others. The
ince and Pyeonganbuk-do would be available for joint use. two countries also signed the Normalized Air and Sea Cargo Treaty. As a result
of these developments, North Korea-China trade entered a new stage capped
Comprehensive Socialist Consolidation by the opening of formal trade link between Shanghai and Nampo in 1964.

From 1961 to 1974, North Korea officially started to establish its own form Although the Great Proletarian Cultural Revolution did not engender the cli-
of socialism. This period was also marked by several major events, such as mate for long term agreements between the two governments during 1968-
the Cuban Missile Crisis, growing animosity between China and the USSR, 1976, they did engage in short term cooperation. In 1971 and 1973, the two
the establishment of diplomatic ties between South Korea and Japan, the governments signed an economic and technical cooperation agreement, but
Great Proletarian Cultural Revolution, the Vietnam War, the Pueblo Incident, this did not bring about significant changes. In 1972, the two countries’ trade
the Sino-Soviet border conflict at Zhenbao Island, the improvement in Chi- volume increased 50 percent compared to 1963. During that period, the two

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
All use subject to https://about.jstor.org/terms
84 85

countries signed a mutual-cooperation agreement regarding the fishing in- Korea and China did away with the bartered trade to one based more on mar-
dustry and geological economic technical cooperation, thus completing the ket based trade. Efforts were being made to develop border-trade coopera-
“North Korea-China Friendship Pipeline.” tion and border-region development. The two countries also signed various
agreements on such matters as mail communication, railroad transportation,
Renewal of Long Term Cooperation (1974-1989) water transportation, aviation service, irrigation facilities, hydroelectric pow-
er generation, currency and finance, and so on. As a result, the two countries’
After 10 years of the Great Proletarian Cultural Revolution, the Chinese and trade volume increased 29.5 percent and reached USD 890 million during
North Korean governments signed a 1977-1981, 1982-1986 long-term trade 1992-1993. The Chinese border-trade companies also made significant invest-
agreement. 1978 was the year that North Korea started to focus on foreign ments in Pyeongyang and Rajin-Sonbong, while North Korean government
trade and exchange. North Korean and Chinese economic cooperation paved decided to open restaurants in Beijing, Dandong, Yanji and other regions.
the way for new opportunities. Afterwards, the two countries signed agree-
ments on trade, nontrade payment, and a fixed basic exchange rate on curren- While China began its journey towards prosperity during this period, North
cy (1982), as well as an agreement regarding the consignment of partial ex- Korea’s international and domestic situation did not turn for the better. The
ports from Jilin and Heilongjiang, China, to Japan passing through the port collapse of Eastern Europe and Soviet Union meant the tapering of important
of Chungjin. In September 1984, North Korea implemented the “partner- imports such as oil, coke, cotton rubber and other raw materials. North Ko-
ship-management law,” “partnership company income-tax law,” “foreigner rea’s decision to develop its own nuclear program also sparked international
income-tax law.” These measures bolstered the two countries’ economic co- sanctions. With Kim Il Sung’s passing in July 1994, many observers were brac-
operation. North Korea signed a consular agreement with China; Ryanggang ing for a possible collapse of the North Korean regime. North Korea was also
Province and Jilin Province agreed to build a road and bridge connecting Hy- dealing with the problem of severe food shortage as a result of the drought and
esan and Changbai. In 1985, China signed an agreement supporting North weather related disasters (i.e. tsunami and floods) during 1995-1998. Aver-
Korea economically. age food production dropped by more than 50 percent. Due to other resource
shortage, electricity generation also dropped significantly leading to lower
Post Cold War Transition in China-North Korea Economic Cooperation productivity; for instance, factory operations were reduced by 70 percent.

The international context changed significantly as a result of the end of Cold Trade between China and North Korea also suffered with trade volume de-
War. In China, Deng Xiaoping, the architect of Chinese reform, proposed the creasing to USD 370 million by 1999. Hence began yet another turning point
Three-Step Strategy to open and reshape the Chinese economy. North Korea in relations between these two countries with China coming to North Korea’s
agreed to the UNDP’s plan, which announced the establishment of a free eco- aid through emergency contributions amounting to RMB 50 million during
nomic-trade zone (FETZ) in the Rajin-Sonbong region. In 1992-1993, North 1995-99.46

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84 85

countries signed a mutual-cooperation agreement regarding the fishing in- Korea and China did away with the bartered trade to one based more on mar-
dustry and geological economic technical cooperation, thus completing the ket based trade. Efforts were being made to develop border-trade coopera-
“North Korea-China Friendship Pipeline.” tion and border-region development. The two countries also signed various
agreements on such matters as mail communication, railroad transportation,
Renewal of Long Term Cooperation (1974-1989) water transportation, aviation service, irrigation facilities, hydroelectric pow-
er generation, currency and finance, and so on. As a result, the two countries’
After 10 years of the Great Proletarian Cultural Revolution, the Chinese and trade volume increased 29.5 percent and reached USD 890 million during
North Korean governments signed a 1977-1981, 1982-1986 long-term trade 1992-1993. The Chinese border-trade companies also made significant invest-
agreement. 1978 was the year that North Korea started to focus on foreign ments in Pyeongyang and Rajin-Sonbong, while North Korean government
trade and exchange. North Korean and Chinese economic cooperation paved decided to open restaurants in Beijing, Dandong, Yanji and other regions.
the way for new opportunities. Afterwards, the two countries signed agree-
ments on trade, nontrade payment, and a fixed basic exchange rate on curren- While China began its journey towards prosperity during this period, North
cy (1982), as well as an agreement regarding the consignment of partial ex- Korea’s international and domestic situation did not turn for the better. The
ports from Jilin and Heilongjiang, China, to Japan passing through the port collapse of Eastern Europe and Soviet Union meant the tapering of important
of Chungjin. In September 1984, North Korea implemented the “partner- imports such as oil, coke, cotton rubber and other raw materials. North Ko-
ship-management law,” “partnership company income-tax law,” “foreigner rea’s decision to develop its own nuclear program also sparked international
income-tax law.” These measures bolstered the two countries’ economic co- sanctions. With Kim Il Sung’s passing in July 1994, many observers were brac-
operation. North Korea signed a consular agreement with China; Ryanggang ing for a possible collapse of the North Korean regime. North Korea was also
Province and Jilin Province agreed to build a road and bridge connecting Hy- dealing with the problem of severe food shortage as a result of the drought and
esan and Changbai. In 1985, China signed an agreement supporting North weather related disasters (i.e. tsunami and floods) during 1995-1998. Aver-
Korea economically. age food production dropped by more than 50 percent. Due to other resource
shortage, electricity generation also dropped significantly leading to lower
Post Cold War Transition in China-North Korea Economic Cooperation productivity; for instance, factory operations were reduced by 70 percent.

The international context changed significantly as a result of the end of Cold Trade between China and North Korea also suffered with trade volume de-
War. In China, Deng Xiaoping, the architect of Chinese reform, proposed the creasing to USD 370 million by 1999. Hence began yet another turning point
Three-Step Strategy to open and reshape the Chinese economy. North Korea in relations between these two countries with China coming to North Korea’s
agreed to the UNDP’s plan, which announced the establishment of a free eco- aid through emergency contributions amounting to RMB 50 million during
nomic-trade zone (FETZ) in the Rajin-Sonbong region. In 1992-1993, North 1995-99.46

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86 87

In September 1998, the 10th National People’s Congress the 1st plenary ses- Rapid expansion of trade was also coupled with increased investments. Dur-
sion, North Korea announced “Juche Socialism Strong and Prosperous Na- ing 2003-04 the amount of Chinese investments in North Korea rose from
tion” policy (also referred to as Juche Sahweju-eui Kangsung-dae-guk) de- USD 1.3 million to 50 million. North Korea also opened more restaurants in
velopment plan. The idea as it was announced placed emphasis on “heavy China followed by its first computer software developing company. The two
industry as priority while simutaneously develop[ing] light and agricultural governments signed an agreement to protect investments in March 2005. In
industries.” North Korea’s economy showed signs of recovery by 1999. October, the Vice Premier of the State Council of China Wu Yi brought with him
300 tons of float glass to Daean Wuho Glass Company during his visit to North
Towards the end of May 2000, North Korea and China jointly expressed the Korea. Based on “state-led and company engaged market” principle, the two
intention to “look to the future and strengthen good neighbor relations” dur- countries signed the governments technology cooperation agreement and an
ing Kim Jung-il’s visit to Beijing. In January 2001, Kim once again expressed agreement to establish a joint venture involving the Wuguang Group and the
the desire to renew North Korea’s economic relations with China during his North Korean government. The two countries also agreed to jointly develop
visit to Shanghai. North Korea’s biggest mine47 and establish a bicycle factory jointly owned
by the Tianjin Digital Trade Company and the North Korean government.
By 2002, North Korea’s economy had stabilized and entered the develop-
ment track. North Korea-China trade volume recovered to USD 740 million In October 2005, President Hu Jintao visited North Korea and reaffirmed Chi-
with border trade accounting for 25 percent of this. In November of that year, na’s commitment to economic and technological cooperation. In January 2006,
Chinese Panda Electrics engages in a joint venture to establish a production Kim Jong-il visited Hubei, Guangdong and Beijing. At the time, China’s econom-
facility in North Korea. ic policy was built on the foundation of “state-led, company engage market op-
eration.” The two countries sought to explore new areas of economic coopera-
In October 2003, the Chairman of the Standing Committee of the National tion through the use of economic, trade, science and technology committees.
People’s Congress Wu Bangguo visited North Korea and delivered Hu Jintao
government’s message of reaffirming “the good neighbor” policy. After Kim In November 2005, China’s biggest state operated iron ore trading company
Jong-il’s visit in April 2004, the two countries signed an agreement to de- Sino Steel and Shougang Tonggang Group decided to invest RMB 7 billion in
velop the border region. In 2003-04, two countries’ trade volume peaked to North Korea and agree to develop the Musan Iron Mine which is projected
over USD 2.3 billion. China had become North Korea’s largest trade partner. to have an annual yield amounting to about 1 million tons. There was also
a closer coordination between China and North Korea to simplify customs
entry protocol during March and October 2006 through “the green channel”

46. The aid included 620 thousand tons of food, 20 thousand tons of chemical fertilizer, 80 thou-

sand tons of oil and 400 thousand tons of coke. 47. The Yongdeung mine was estimated to have an annual yield of about 1 million tons.

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86 87

In September 1998, the 10th National People’s Congress the 1st plenary ses- Rapid expansion of trade was also coupled with increased investments. Dur-
sion, North Korea announced “Juche Socialism Strong and Prosperous Na- ing 2003-04 the amount of Chinese investments in North Korea rose from
tion” policy (also referred to as Juche Sahweju-eui Kangsung-dae-guk) de- USD 1.3 million to 50 million. North Korea also opened more restaurants in
velopment plan. The idea as it was announced placed emphasis on “heavy China followed by its first computer software developing company. The two
industry as priority while simutaneously develop[ing] light and agricultural governments signed an agreement to protect investments in March 2005. In
industries.” North Korea’s economy showed signs of recovery by 1999. October, the Vice Premier of the State Council of China Wu Yi brought with him
300 tons of float glass to Daean Wuho Glass Company during his visit to North
Towards the end of May 2000, North Korea and China jointly expressed the Korea. Based on “state-led and company engaged market” principle, the two
intention to “look to the future and strengthen good neighbor relations” dur- countries signed the governments technology cooperation agreement and an
ing Kim Jung-il’s visit to Beijing. In January 2001, Kim once again expressed agreement to establish a joint venture involving the Wuguang Group and the
the desire to renew North Korea’s economic relations with China during his North Korean government. The two countries also agreed to jointly develop
visit to Shanghai. North Korea’s biggest mine47 and establish a bicycle factory jointly owned
by the Tianjin Digital Trade Company and the North Korean government.
By 2002, North Korea’s economy had stabilized and entered the develop-
ment track. North Korea-China trade volume recovered to USD 740 million In October 2005, President Hu Jintao visited North Korea and reaffirmed Chi-
with border trade accounting for 25 percent of this. In November of that year, na’s commitment to economic and technological cooperation. In January 2006,
Chinese Panda Electrics engages in a joint venture to establish a production Kim Jong-il visited Hubei, Guangdong and Beijing. At the time, China’s econom-
facility in North Korea. ic policy was built on the foundation of “state-led, company engage market op-
eration.” The two countries sought to explore new areas of economic coopera-
In October 2003, the Chairman of the Standing Committee of the National tion through the use of economic, trade, science and technology committees.
People’s Congress Wu Bangguo visited North Korea and delivered Hu Jintao
government’s message of reaffirming “the good neighbor” policy. After Kim In November 2005, China’s biggest state operated iron ore trading company
Jong-il’s visit in April 2004, the two countries signed an agreement to de- Sino Steel and Shougang Tonggang Group decided to invest RMB 7 billion in
velop the border region. In 2003-04, two countries’ trade volume peaked to North Korea and agree to develop the Musan Iron Mine which is projected
over USD 2.3 billion. China had become North Korea’s largest trade partner. to have an annual yield amounting to about 1 million tons. There was also
a closer coordination between China and North Korea to simplify customs
entry protocol during March and October 2006 through “the green channel”

46. The aid included 620 thousand tons of food, 20 thousand tons of chemical fertilizer, 80 thou-

sand tons of oil and 400 thousand tons of coke. 47. The Yongdeung mine was estimated to have an annual yield of about 1 million tons.

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
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88 89

border ports in Quanhe-Wonjung, Sanhe-Hoeryong. Meanwhile, Vice Premier government also hosted “the 1st Pyeongyang China Light Industry Product
Hui Liangyu visited Pyeongyang and completed the economic and technolo- Trade Fair” in July. China followed up with the presentation on “Planning
gy cooperation agreement. China National Tourism Administration opened for Promotion of Traditional Industrial Foundation in Northeast,” and an-
tour routes between Hunchun-Rason, Tumen-Onsong, Heilong-Taehongdan, nounced the construction of a mining supply channel between Nampyeong
and Samjiyon. North Korea had established the Taepoon International In- and Musan. In September, North Korea-China economic trade science tech-
vestment Group to channel and direct more investment from China. The re- nology committee held its 3rd meeting and discussed the construction of
sult is a rise in Chinese investments in North Korea to USD 1.35 billion. Fuchun-Nasun and Rajin Industrial Park.

Increased Chinese investment in North Korea was followed by a rise in two This was followed by more joint ventures. Tangshan Steel Group and Dae-
countries’ trade. In 2005, the total trade between China and North Korea tang Group signed an LOI with the Taepoong International Investment Group
peaked at USD 1.58 billion. China’s major export goods were mineral raw ma- to build a 150 ton smelting facility as well as the 600 thousand KW thermal
terials, crude oil, machines, electronic goods and grain, while North Korea’s power plant in Kim-chaek Industrial Park. The largest scale joint manage-
major export goods were coal, mineral, steel, clothes and seafood. Border ment company called the Hae-joong Joint Mining Company was established
trade increased 47 percent accounting for a third of all trade volume be- through the partnership of Zhonguang International Investment and North
tween the two countries. Korea’s Hyesan Youth Mine. East Sea Joint Venture Company was established
through a joint investment by China’s major magnesite manufacturing com-
There were some signs of change when North Korea completed its first nu- pany and the North Korean government. The result of this effort was the
clear test in October 2006. The Chinese government responded by halting development of the Oongjin Mining facility as well as the construction of the
all permits to Chinese companies for investments in North Korea. None- 150 thousand KW thermal power plant and a smelting facility.
theless, trade between North Korea and China continued and managed to
reach a new peak at 1.8 billion dollars. China’s major export goods were Taepoong International Investment Group announced that it will support
oil, minerals, TV, electronics and plastic products, while North Korea’s ma- the USD 10 billion loan if Chinese companies were willing to invest in North
jor export goods were minerals, coals, fiber, seafood and steel. Things be- Korea’s road, railroad, port, and other infrastructure with China’s National
came more favorable when the Six Party Talks resulted in the signing of “the Development Bank. Between October 2006 and January 2008, the Chinese
2.13 Agreement” in February 2007. The port connecting Qingshi, Jilin and investment in North Korea amounted to USD 260 million. In 2007, the total
Unbong, Zagang was opened shortly thereafter. North Korea’s Pyeonghaw trade volume was USD 1.974 billion. China’s major exports were petroleum
Motors decided to switch its partnership from Fiat to a Chinese automobile and other oil while North Korea’s major export items were coal, fossil fuel
company. Models based on this new collaborative effort resulted in the sale and other minerals. China’s coal import was increased almost two fold, and
of “Sam-Chun-Ri” and “Hwi-Pa-Rham I” in North Korea. The North Korean North Korea became the 3rd largest coal exporting nations to China after ASE-

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
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88 89

border ports in Quanhe-Wonjung, Sanhe-Hoeryong. Meanwhile, Vice Premier government also hosted “the 1st Pyeongyang China Light Industry Product
Hui Liangyu visited Pyeongyang and completed the economic and technolo- Trade Fair” in July. China followed up with the presentation on “Planning
gy cooperation agreement. China National Tourism Administration opened for Promotion of Traditional Industrial Foundation in Northeast,” and an-
tour routes between Hunchun-Rason, Tumen-Onsong, Heilong-Taehongdan, nounced the construction of a mining supply channel between Nampyeong
and Samjiyon. North Korea had established the Taepoon International In- and Musan. In September, North Korea-China economic trade science tech-
vestment Group to channel and direct more investment from China. The re- nology committee held its 3rd meeting and discussed the construction of
sult is a rise in Chinese investments in North Korea to USD 1.35 billion. Fuchun-Nasun and Rajin Industrial Park.

Increased Chinese investment in North Korea was followed by a rise in two This was followed by more joint ventures. Tangshan Steel Group and Dae-
countries’ trade. In 2005, the total trade between China and North Korea tang Group signed an LOI with the Taepoong International Investment Group
peaked at USD 1.58 billion. China’s major export goods were mineral raw ma- to build a 150 ton smelting facility as well as the 600 thousand KW thermal
terials, crude oil, machines, electronic goods and grain, while North Korea’s power plant in Kim-chaek Industrial Park. The largest scale joint manage-
major export goods were coal, mineral, steel, clothes and seafood. Border ment company called the Hae-joong Joint Mining Company was established
trade increased 47 percent accounting for a third of all trade volume be- through the partnership of Zhonguang International Investment and North
tween the two countries. Korea’s Hyesan Youth Mine. East Sea Joint Venture Company was established
through a joint investment by China’s major magnesite manufacturing com-
There were some signs of change when North Korea completed its first nu- pany and the North Korean government. The result of this effort was the
clear test in October 2006. The Chinese government responded by halting development of the Oongjin Mining facility as well as the construction of the
all permits to Chinese companies for investments in North Korea. None- 150 thousand KW thermal power plant and a smelting facility.
theless, trade between North Korea and China continued and managed to
reach a new peak at 1.8 billion dollars. China’s major export goods were Taepoong International Investment Group announced that it will support
oil, minerals, TV, electronics and plastic products, while North Korea’s ma- the USD 10 billion loan if Chinese companies were willing to invest in North
jor export goods were minerals, coals, fiber, seafood and steel. Things be- Korea’s road, railroad, port, and other infrastructure with China’s National
came more favorable when the Six Party Talks resulted in the signing of “the Development Bank. Between October 2006 and January 2008, the Chinese
2.13 Agreement” in February 2007. The port connecting Qingshi, Jilin and investment in North Korea amounted to USD 260 million. In 2007, the total
Unbong, Zagang was opened shortly thereafter. North Korea’s Pyeonghaw trade volume was USD 1.974 billion. China’s major exports were petroleum
Motors decided to switch its partnership from Fiat to a Chinese automobile and other oil while North Korea’s major export items were coal, fossil fuel
company. Models based on this new collaborative effort resulted in the sale and other minerals. China’s coal import was increased almost two fold, and
of “Sam-Chun-Ri” and “Hwi-Pa-Rham I” in North Korea. The North Korean North Korea became the 3rd largest coal exporting nations to China after ASE-

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
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90 91

AN and Australia. Current Status of the Bilateral Economic Cooperation

Economic cooperation between China and North Korea continued into 2008 Trade
as the People’s Bank of China announced the establishment of the border
trade balancing accounts which enabled North Korean companies to open Bilateral trade took a sharp downturn for the first time in over a decade to
RMB trade account in Dandong. This became an important source of finan- USD 2.68 billion in 2009. In 2010, the bilateral trade was USD 3.47 billion, an
cial capital (in RMBs) to the North Korean market. Continual deepening of increase of 29.6 percent; China export increased by 20.8 percent while that
joint ventures resulted in the establishment of the new firms in tobacco, of North Korea grew by 50.6 percent. China’s top exports to North Korea
lighting, processing, travel, and beverage. were rice, corn, mineral, fuel, heater, machinery, electronic goods, audio and
visual equipment, automobiles and its parts, iron, steel and related goods,
Xi Jinping visited North Korea in June 2008 and renewed China’s commit- plastic, rayon, and chemical fertilizer. North Korea’s top exports were coal,
ment to economic and technology cooperation as well as expansion of air seafood, iron ore, textile, iron, and steel.
and ground transport. 2008 marked the 10th consecutive year of increasing
trade between China and North Korea (USD 27.8 billion). Another interesting This period can be characterized as an unprecedentedly stable phase of the
fact to take note of is that about half of all trade occurring between China relationship. Notably, North Korea ran an increasing trade deficit against
and North Korea can be attributed to trade via Jilin. In the past, 70 percent China since 2003 when the bilateral trade increased by a large margin. The
of the China’s export to North Korea was from Dandong. This implies that deficit grew from USD 23 million in 2003 to USD 110 million in 2009 and
the nature of trade between these two countries have shifted from one large- USD 1.09 billion in 2010. This is largely due to the fluctuating prices of North
ly centered around simple consumption goods to one that is based more on Korea’s imported goods in the international market. It is noteworthy though
sophisticated manufactured goods. that such deficits imply North Korea’s improved purchasing power.

North Korea’s deficit is actually structural as China invests in sectors boost-

Current Status of the Economic Relationship ing its exports like mining development, construction of ports and heavy
machineries. Unless North Korea utilizes such investment to develop its ex-
As of October 2005, the two countries agreed on the principle that the bilat- port sector, its exports will not surpass imports. In this context, it can be
eral economic relationship should “be state-led, enterprise-based, and mar- said that the structure contributed to a dramatic surge of the bilateral trade
ket-operated.” Starting in 2008, this notion had become more apparent in in the first half of 2011.
the areas of trade, investment, border development, and local government
cooperation.

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90 91

AN and Australia. Current Status of the Bilateral Economic Cooperation

Economic cooperation between China and North Korea continued into 2008 Trade
as the People’s Bank of China announced the establishment of the border
trade balancing accounts which enabled North Korean companies to open Bilateral trade took a sharp downturn for the first time in over a decade to
RMB trade account in Dandong. This became an important source of finan- USD 2.68 billion in 2009. In 2010, the bilateral trade was USD 3.47 billion, an
cial capital (in RMBs) to the North Korean market. Continual deepening of increase of 29.6 percent; China export increased by 20.8 percent while that
joint ventures resulted in the establishment of the new firms in tobacco, of North Korea grew by 50.6 percent. China’s top exports to North Korea
lighting, processing, travel, and beverage. were rice, corn, mineral, fuel, heater, machinery, electronic goods, audio and
visual equipment, automobiles and its parts, iron, steel and related goods,
Xi Jinping visited North Korea in June 2008 and renewed China’s commit- plastic, rayon, and chemical fertilizer. North Korea’s top exports were coal,
ment to economic and technology cooperation as well as expansion of air seafood, iron ore, textile, iron, and steel.
and ground transport. 2008 marked the 10th consecutive year of increasing
trade between China and North Korea (USD 27.8 billion). Another interesting This period can be characterized as an unprecedentedly stable phase of the
fact to take note of is that about half of all trade occurring between China relationship. Notably, North Korea ran an increasing trade deficit against
and North Korea can be attributed to trade via Jilin. In the past, 70 percent China since 2003 when the bilateral trade increased by a large margin. The
of the China’s export to North Korea was from Dandong. This implies that deficit grew from USD 23 million in 2003 to USD 110 million in 2009 and
the nature of trade between these two countries have shifted from one large- USD 1.09 billion in 2010. This is largely due to the fluctuating prices of North
ly centered around simple consumption goods to one that is based more on Korea’s imported goods in the international market. It is noteworthy though
sophisticated manufactured goods. that such deficits imply North Korea’s improved purchasing power.

North Korea’s deficit is actually structural as China invests in sectors boost-

Current Status of the Economic Relationship ing its exports like mining development, construction of ports and heavy
machineries. Unless North Korea utilizes such investment to develop its ex-
As of October 2005, the two countries agreed on the principle that the bilat- port sector, its exports will not surpass imports. In this context, it can be
eral economic relationship should “be state-led, enterprise-based, and mar- said that the structure contributed to a dramatic surge of the bilateral trade
ket-operated.” Starting in 2008, this notion had become more apparent in in the first half of 2011.
the areas of trade, investment, border development, and local government
cooperation.

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92 93

Investment Aside from encouraging trade between Dandong and Sinuiju, this project
is expected to bring a significant change to the relationship between North
Investors changed from small commercial companies to large state-owned Korea and China. A development project is already under way on the two
companies in 2002. Such change is considered strategically critical to the re- biggest islands in the Yalu River (i. e. Wihwado and Hwanggumpyong) as well
lationship. Larger companies mean longer term contracts and increase in the as the effort to build two hydroelectric power plants in Wangjianglou and
overall volume of investment. By the end of 2009, large public companies in- Wenbing. Development of Rajin as an international logistics hub that can
cluding China Minmetals Corporation, Sinosteel Corporation, and Shougang function as a complex for trade, export processing, and inventory is part of
Tonggang Group were making sizable investments in North Korea.48 this broader effort. While other sections in this report provide a more de-
tailed account, we can look to examples such as the highway construction
Border Regional Development project linking Wonjong and Rajin where Chinese investment has played a
major role in infrastructure development. The give and take was not one
The two countries built a total of 16 ports together along the border areas way, however. China’s long term loan of USD 10 million to DPRK to repair
to encourage trade. Various construction projects followed to expand ship- 179 kilometer railway linking Domun and Chungjin was possible because
ping, roads, hydroelectric power plants, and railways. Cross border travel North Korea agreed to extend the leasing rights to Ports 3 and 4 in Rajin for
was also eased. Comprehensive cooperation reaching over 1,330 kilometers additional 15 years.
along the Yalu and Tumen River resulted in the development of three major
trade routes; Dandong - Sinuiju, Tonghua - Hyesan, Hunchun – Rason. Movement of people is also increasing. According to the 2009 statistics, 103.9
thousand North Koreans officially visited or immigrated to China. 52,100
When the former Prime Minister Wen Jiabao visited North Korea in October were employed in foods, clothing and IT industries along the border.
2010, he concluded the negotiation for the joint construction of the new
Yalu River Bridge, which is expected to be 20.4 kilometers long and 33 me- Cooperation at Local Government Level
ters wide. China announced its investment of RMB 1.7 billion in the project.
Given the extensive history and depth of cooperation at the national level, it
48. China Nonferrous Metal Mining (Group) Co., Ltd., (Luanhe), Tangshan Iron and Steel Group Com- is only sensible that cooperation also permeates the local regional and mu-
pany made investment in about 20 mines like Gangan, Oryong, Gogeonweon, Yongbukcheong-
nicipal level as well. In fact, the central government of China continues to link
neyon in Northern Hamgyeong province, Musan, Deokseong, Sangnong in Southern Hamgyeong
local level planning and policies with the national objectives through promo-
province, Yongdeung, Seongchoen in Nothern Pyeongan province, Yongmun, Cheonseongcheong-
tion of Northeast China Revitalization policy, Liaoning Coastal Economic Belt
nyeontangwang, 2•8 Jikupdongmaengcheongnyeontangwang, Yongheung in Southern Pyeongan

province, Suan, Eunpa in Northern Hwanghae province, and Oongjin in Southern Hwanghae prov- Development Plan, Changjitu (Jangchun-Jilin-Tumen) Development Project,
ince. and the establishment of the Daxingangling Environmental Protection Zone.

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92 93

Investment Aside from encouraging trade between Dandong and Sinuiju, this project
is expected to bring a significant change to the relationship between North
Investors changed from small commercial companies to large state-owned Korea and China. A development project is already under way on the two
companies in 2002. Such change is considered strategically critical to the re- biggest islands in the Yalu River (i. e. Wihwado and Hwanggumpyong) as well
lationship. Larger companies mean longer term contracts and increase in the as the effort to build two hydroelectric power plants in Wangjianglou and
overall volume of investment. By the end of 2009, large public companies in- Wenbing. Development of Rajin as an international logistics hub that can
cluding China Minmetals Corporation, Sinosteel Corporation, and Shougang function as a complex for trade, export processing, and inventory is part of
Tonggang Group were making sizable investments in North Korea.48 this broader effort. While other sections in this report provide a more de-
tailed account, we can look to examples such as the highway construction
Border Regional Development project linking Wonjong and Rajin where Chinese investment has played a
major role in infrastructure development. The give and take was not one
The two countries built a total of 16 ports together along the border areas way, however. China’s long term loan of USD 10 million to DPRK to repair
to encourage trade. Various construction projects followed to expand ship- 179 kilometer railway linking Domun and Chungjin was possible because
ping, roads, hydroelectric power plants, and railways. Cross border travel North Korea agreed to extend the leasing rights to Ports 3 and 4 in Rajin for
was also eased. Comprehensive cooperation reaching over 1,330 kilometers additional 15 years.
along the Yalu and Tumen River resulted in the development of three major
trade routes; Dandong - Sinuiju, Tonghua - Hyesan, Hunchun – Rason. Movement of people is also increasing. According to the 2009 statistics, 103.9
thousand North Koreans officially visited or immigrated to China. 52,100
When the former Prime Minister Wen Jiabao visited North Korea in October were employed in foods, clothing and IT industries along the border.
2010, he concluded the negotiation for the joint construction of the new
Yalu River Bridge, which is expected to be 20.4 kilometers long and 33 me- Cooperation at Local Government Level
ters wide. China announced its investment of RMB 1.7 billion in the project.
Given the extensive history and depth of cooperation at the national level, it
48. China Nonferrous Metal Mining (Group) Co., Ltd., (Luanhe), Tangshan Iron and Steel Group Com- is only sensible that cooperation also permeates the local regional and mu-
pany made investment in about 20 mines like Gangan, Oryong, Gogeonweon, Yongbukcheong-
nicipal level as well. In fact, the central government of China continues to link
neyon in Northern Hamgyeong province, Musan, Deokseong, Sangnong in Southern Hamgyeong
local level planning and policies with the national objectives through promo-
province, Yongdeung, Seongchoen in Nothern Pyeongan province, Yongmun, Cheonseongcheong-
tion of Northeast China Revitalization policy, Liaoning Coastal Economic Belt
nyeontangwang, 2•8 Jikupdongmaengcheongnyeontangwang, Yongheung in Southern Pyeongan

province, Suan, Eunpa in Northern Hwanghae province, and Oongjin in Southern Hwanghae prov- Development Plan, Changjitu (Jangchun-Jilin-Tumen) Development Project,
ince. and the establishment of the Daxingangling Environmental Protection Zone.

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94 95

The value of cooperation has also been recognized by the leadership in North and market-operated” economic policy epitomizes the evolution of this rela-
Korea. Kim Jong-il, for instance, stated that “the DPRK and Chinese North- tionship as of 2005. Chinese firms have made significant investment based
east provinces share a border with similar environment and industrial struc- on the principle to long run benefits.
ture. Pyongyang will encourage exchange and cooperation with the North-
east provinces to learn from its experience and policies.” As an illustration Thirdly, the two countries have a complementary economic structure. While
of how much emphasis is now being placed on the local level, when Zhou China is in need of resources and more international markets to continue
Yongkang (a former member of China’s Politburo Standing Committee now its economic development, North Korea is in need of modern technology
under investigation in China) visited North Korea to renew the bilateral eco- and entrepreneurialism for improvement in the people’s standard of living
nomic and technical cooperation agreement, a North Korean envoy was dis- and its economy. North Korea’s abundance of natural resources and Chi-
patched a few days later to assess the developments in Jilin and Heilongjiang na’s economic takeoff complements each other quite well. Given that China’s
before the agreement was concluded. There is realization on both sides that Northeast provinces have experience and competence in modernizing heavy
deepening relations at local level would be the key to unlocking the growth industries and infrastructure, which is a part of North Korea’s development
potential in North Korea. plan, bilateral relationship is poised to only grow into the future.

Lastly, geographical proximity creates a favorable environment for coopera-

Discussion tion to flourish. Beijing and Pyongyang are very close geographically. Abun-
dance of entry points by air and sea across the Northeast province, Bohai
The historical overview illustrates the importance of structural ties in the bi- Bay, and Yangtze River Delta makes access among economic zones relatively
lateral economic relationship between North Korea and China. First, former easy. In other words, infrastructures are already in place free movement of
leaders of the two countries shared a special bond forged through a collec- people, goods and services. With the Northeast China Revitalization Policy
tive memory founded on the revolutionary past. The bond has grown under being implemented in earnest, the bilateral cooperation would facilitate fur-
each successive leadership. They support and respect the idea of coming up ther development of infrastructure, exploitation and processing of natural
with a development plan that suits the other’s situation or circumstances. resources, cross-border trade, and more cross border flow of capital.
The two countries see the economic cooperation as one of many means to
carry on this tradition and to achieve common prosperity. Such bond is a
critical political base for future cooperation.

Second, the history of cooperation between these two countries has continued
after the end of the Cold War. The principle of “state-led, enterprise-based,

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94 95

The value of cooperation has also been recognized by the leadership in North and market-operated” economic policy epitomizes the evolution of this rela-
Korea. Kim Jong-il, for instance, stated that “the DPRK and Chinese North- tionship as of 2005. Chinese firms have made significant investment based
east provinces share a border with similar environment and industrial struc- on the principle to long run benefits.
ture. Pyongyang will encourage exchange and cooperation with the North-
east provinces to learn from its experience and policies.” As an illustration Thirdly, the two countries have a complementary economic structure. While
of how much emphasis is now being placed on the local level, when Zhou China is in need of resources and more international markets to continue
Yongkang (a former member of China’s Politburo Standing Committee now its economic development, North Korea is in need of modern technology
under investigation in China) visited North Korea to renew the bilateral eco- and entrepreneurialism for improvement in the people’s standard of living
nomic and technical cooperation agreement, a North Korean envoy was dis- and its economy. North Korea’s abundance of natural resources and Chi-
patched a few days later to assess the developments in Jilin and Heilongjiang na’s economic takeoff complements each other quite well. Given that China’s
before the agreement was concluded. There is realization on both sides that Northeast provinces have experience and competence in modernizing heavy
deepening relations at local level would be the key to unlocking the growth industries and infrastructure, which is a part of North Korea’s development
potential in North Korea. plan, bilateral relationship is poised to only grow into the future.

Lastly, geographical proximity creates a favorable environment for coopera-

Discussion tion to flourish. Beijing and Pyongyang are very close geographically. Abun-
dance of entry points by air and sea across the Northeast province, Bohai
The historical overview illustrates the importance of structural ties in the bi- Bay, and Yangtze River Delta makes access among economic zones relatively
lateral economic relationship between North Korea and China. First, former easy. In other words, infrastructures are already in place free movement of
leaders of the two countries shared a special bond forged through a collec- people, goods and services. With the Northeast China Revitalization Policy
tive memory founded on the revolutionary past. The bond has grown under being implemented in earnest, the bilateral cooperation would facilitate fur-
each successive leadership. They support and respect the idea of coming up ther development of infrastructure, exploitation and processing of natural
with a development plan that suits the other’s situation or circumstances. resources, cross-border trade, and more cross border flow of capital.
The two countries see the economic cooperation as one of many means to
carry on this tradition and to achieve common prosperity. Such bond is a
critical political base for future cooperation.

Second, the history of cooperation between these two countries has continued
after the end of the Cold War. The principle of “state-led, enterprise-based,

This content downloaded from 202.43.95.117 on Fri, 16 Apr 2021 12:31:15 UTC
All use subject to https://about.jstor.org/terms