hankyoreh

North Korea into Dandong

By Park Min-hee, Beijing Correspondent in Dandong

70 percent of China‘s trade with North Korea goes through Dandong, a city on the Yalu river. Trucks line up at customs houses to carry freight over the border into Sinuiju in North Korea. It has been one year since a groundbreaking ceremony was held to announce the co-development of the nearby North Korean island of Hwanggumpyong.

The main topic of discussion at the Incheon-Dandong-Hankyoreh West Sea Cooperation Forum was the question of whether Dandong and Sinuiju can develop into a setting for three-way cooperation among North Korea, South Korea, and China.

Jeon Byung-gon, a researcher at the Korea Institute for National Unification‘s Center for International Relations Studies, said the two cities offer optimal conditions for cooperative trade. The region is a major base for Beijing’s Liaoning coastal development strategy, a gateway for North Korean-Chinese Trade, and the site of a border development project called “One Bridge, Two Islands,” referring to the New Yalu River Bridge, Hwanggumpyong, and Wihua Island. Its proximity to Seoul makes it accessible to South Korean businesses, and its new harbor, IT industrial complex, and new city construction create advantages for drawing South Korean corporate investment.

With inter-Korean economic cooperation in a state of crisis, cooperation between North Korea and China has been increasing. The percentage of North Korea’s total foreign trade done with China rose from 38.9% in 2005 to 57% in 2010. North Korean trade with China stood at US$6.15 billion in 2011, compared to US$1.71 billion with South Korea.

“The increased economic cooperation between North Korea and China has significance as a strong alternative for reviving the North Korean economy,” Jeon said, “but there have been frictions over the resources of Northeast Asia as China vacuums up North Korean resources with its northeastern development.”

Jeon added that Beijing is deepening the North Korean economy‘s dependence on China, which could reduce North Korean interest in and efforts toward cooperation with South Korea.

To overcome this state of affairs, Jeon called for the development of complementary projects combining South Korean technology, Chinese capital, and North Korean labor. China also could use South Korean money and technology to develop its northeast, while North Korea wants outside support to weather its economic problems. Jeon said the situation demands a flexible approach to inter-Korean economic cooperation from Seoul to minimize the costs of an eventual reunification and prepare for the possibility of an upheaval in North Korea.

Man Haifeng, director of the Institute of the Korean Peninsula at Eastern Liaoning University, said the relationship between Pyongyang and Beijing is turning into one between a “market economy and a planned economy.”

“More and more, we’re seeing areas of China‘s economic relationship with North Korea being based in market economy principles,” he said.

According to Man’s calculations, as of late 2010, there were approximately 400 companies in Dandong working in border trade with North Korea, and around 120 North Korean trading companies with offices in Dandong. Some five thousand North Korean merchants live in Dandong on a permanent basis.

“The foreign economic trade and cooperation environment is deteriorating right now in North Korea, so we can expect a heavier dependence on trade with China,” Man said, adding that this dependence had increased the value and influence of economic trade and cooperation at Dandong‘s port.

“If South Korean companies join in the North Korea-China economic cooperation, it would help improve inter-Korean relations from their current state, and it would also mean a more distributed investment risk for China,” he explained.

Participants in the discussion noted another change with the increasing levels of North Korea-China trade, namely North Korea’s incorporation into the renminbi (RMB) economic sphere as large amounts of the currency enter the country.

Yu Yingzi, chief researcher for the Institute for World Economy Studies at the Liaoning Academy of Social Sciences, said the RMB accounts for a very large portion of North Korea-China trade, and a large amount of the currency is circulating in North Korea.

Some participants voiced the need for North Korea to develop the Hwanggumpyong special economic zone into an industrial complex that complements rather than competes with the Kaesong Industrial Complex, saying that a division of labor was necessary to make this happen. The Kaesong complex was initially planned as a three-stage effort, but not even the first state has been finished. The Lee Myung-bak administration halted trade with the May 24 measures in the wake of the South Korean Cheonan warship sinking, which put development at Kaesong on hold.

“The reason North Korea is developing Hwanggumpyong with North Korea is primarily because it has become impossible to expand or develop the Kaesong complex,” said Cho Bong-hyun, a researcher at the Industrial Bank of Korea‘s economic research center.

“Because of the success North Korea enjoyed with the Kaesong complex, the current project is modeled on it almost completely,” Cho explained.

But the similarities between Hwanggumpyong and the Kaesong complex mean there is a strong chance the two regions will end up competing if inter-Korean relations do improve and the development of the Kaesong complex is resumed. Cho said it was necessary to have the complexes specialize in different areas, such as raw materials production and finished products. This should be done in order to make their relationship a complementary rather than competitive one.

“What we need to do is link Incheon, Kaesong, Haeju, Hwanggumpyong and Dandong into one connected industrial complex, developing it in the long term into an industrial region where companies not only from the three countries but from around the world can do business,” he urged.

In Feb. 2011, North Korea announced the outline of a joint North Korean-Chinese development plan for Rason and Hwanggumpyong. Related North Korean legislation was passed that December.

The law for the Hwanggumpyong economic zone has a provision to protect foreign companies that invest there, which was included to assuage concerns about North Korea’s confiscation of Hyundai Asan assets after the Mt. Kumkang tourism venture was halted. The provision states that North Korea will not unilaterally seize assets invested by foreign companies, and that it will allow them to freely transport those assets out of the zone.

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