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Diplomacy gives jolt of energy to North Korea-China trade

May 24,2018
DANDONG, China - Spirits are rising on both sides of the Yalu River, which separates North Korea from China, following Kim Jong-un’s meeting with Xi Jinping in Dalian.

The May 8 meeting was the second summit between the two leaders in seven weeks, and since there have been multiple public exchanges between the two allies, the most notable being a May 16 visit by a North Korean delegation to China aimed at studying its economic development model.

Xi told the delegation that Beijing supports Pyongyang “in developing its economy and improving its people’s livelihood,” after which the high-level North Korean officials were taken on a whirlwind tour of China’s economic infrastructure.

With relations between the two countries warming after a prolonged freeze following Kim Jong-un’s rise to power in 2011, China’s border town of Dandong, which faces North Korea, has been witnessing renewed economic expansion.

As North Korea’s gateway to the outside world, Dandong is teeming with officials and merchants from the other side of the river and offers a rare glimpse of the reclusive country’s contact with the international economy.

On the opposite side of the Yalu on the North Korean side lies Sinuiju, the border town designated by Pyongyang as a Special Administrative Region and home to light industry factories.

Sinuiju has changed completely since this reporter’s last visit to Dandong two years ago, with five or six new high-rises on its skyline.

Lee Yong-cheol, an ethnic Korean-Chinese citizen, runs a business on the border. A construction boom is currently underway in Sinuiju, he says.

“Though most of the construction costs are borne jointly by North Korea and China, the North Koreans always argue that it is entirely funded by money from the North,” he said. “The majority of these buildings under construction are trade offices and lodging facilities for Chinese tourists.”

According to British newspaper The Times, real estate prices have recently spiked in the city, with a residential apartment going for around 52,000 pounds ($69,470) ? a third of prices in Pyongyang, the nation’s capital. While only the government has the official prerogative to offer housing, a black market for real estate has been flourishing, particularly in economically important cities like Pyongyang, Sinuiju and Rason in the country’s northeastern border with China and Russia.

It isn’t entirely clear whether the construction boom and the housing price rise can be attributed to economic cooperation between North Korea and China or the growth of private markets ? called jangmadang ? in North Korea.

But it is undeniable that expectations for a better future have been ramping up since China-North Korea relations have warmed.

Twenty minutes away from the China-North Korea Friendship Bridge, the steel railway crossing actually built by the Japanese in 1943 when they occupied Korea and northern China, is a new bridge between the two countries, the New Amrok ? the Korean word for Yalu ? Bridge.

Construction of the bridge was completed in October 2014 but it has yet to be opened. Extending 3,030 meters (1.9 miles) with a width of 33 meters, the bridge was built entirely on Chinese financing at a cost of 1.7 billion yuan ($266 million).

“North Korea also requested that a new road be paved from its side of the new bridge to the customs offices in Sinuiju, which China accepted,” said another ethnic Korean businessman in China, Kim Yong-hui. “But things went awry when they said they would pave it themselves and asked China for the money.”

This dispute between the two parties stopped the bridge from opening. Kim Jong-un’s two recent visits to China have raised hopes that the bridge will be finally opened this year or the next.

In Dandong, real estate prices have also jumped with apartment values in the district next to the New Amrok Bridge soaring from 3,500 yuan per 3.3 square meters (35.5 square feet) of space to 5,500 yuan ? a 63 percent rise ? since the two summits. Kim, who owns an apartment in this neighborhood, remarked that he feels richer every day thanks to these price spikes.

Even the commercial buildings on Yueliangdao ? the small island on the Yalu near Dandong ? which were empty until recently, have been sold and occupied since.

Dandong’s Chinese merchants, who have been discreet in their dealings with the North following tightened UN sanctions, have also been ramping up their activities.

An affiliate of the Dandong branch of the Korean Community in China, a private organization that represents the interests of South Koreans in China, reported that “competition over control of seafood and alcohol exports from North Korea, which have been banned by the sanctions, is fierce.” He added that “calls from Chinese merchants have been going through the roof.”

Dandong is home to over 200 refrigeration centers and serves as the base for many Chinese buyers of North Korean seafood.

Business is also booming for North Koreans. Merchants from the North have recently acquired the know-how to make banana and strawberry-flavored milk, popular products among North Koreans.

“They are now working on learning how to produce soymilk,” says Choi Chol-yong, another Korean-Chinese businessman. “Since they don’t have the technology to make it themselves, they are trying to learn from South Korean companies.” Choi added that demand for nonessential consumer products demonstrates that living standards have improved in the North.

According to a report by Japan’s Yomiuri Shimbun on Saturday, Kim Jong-un is said to have remarked, “We will embark on reform and opening up of our economy,” to Xi Jinping at their Dalian meeting.

The high-level North Korean delegation that visited China on May 16 were given a tour of Zhongguancun in Beijing, China’s version of Silicon Valley, as well as a number of cutting-edge agricultural research centers such as the Chinese Academy of Agricultural Sciences. They even listened to a seminar on development financing from the Asian Infrastructure Investment Bank (AIIB), a multilateral development bank and China’s counterpart to the West’s World Bank.

Cho Bong-hyun, vice president of the Industrial Bank of Korea Economic Research Institute, a private think tank based in Seoul, says, “The North Korea-China economic collaboration appears to be transcending simple economic aid to include information and agricultural technology.”

He added, “Since four years ago, the North has been focusing on producing results by shifting from labor-intensive industries to a technology-intensive ones.”

The Chinese responded by sending their own delegation to the North, which was called the Eastern Cultural Development and Progress Committee. It met Kim Yong-dae, vice president of the Presidium of Supreme People’s Assembly Thursday. The delegation also delivered a present to North Korean leader Kim and visited the Pyongyang University of Art, further indications of improved relations between the two nations.

The Chinese have sent multiple task forces to the North with the aim of extending Beijing’s One Belt, One Road project to North Korea. Among their plans are the construction of high-speed railways and highways from Dandong to Pyongyang and from Hunchun in northwestern China to Chongjin, a port city on North Korea’s northeastern coast. The Tumen River Area Development Programme, a long-term project between China, North Korea, South Korea, Russia and Mongolia aimed at developing the North’s northeastern river valley into a major commercial hub, is also in the works.

“Chinese companies are preparing to jump into North Korea’s economy if the denuclearization talks progress successfully,” says Lim Eul-chul, professor at the Institute for Far Eastern Studies at Kyungnam University. “They are working to meet the standards of the North Koreans who want to establish an economic structure focused on advanced scientific technology.”

BY KO SOO-SUK, SHIM KYU-SEOK [shim.kyuseok@joongang.co.kr]