Image: Restaurant owned by North Korea by serapio on 2007-08-23 20:24:31
In the early 1970s, the North Korean government wanted to impress their Chinese neighbors, with whom they have always had rather uneasy relations. To do so, they decided to build a number of nice-looking buildings on the North Korean side of the Yalu river. The idea was to produce envy amongst the much poorer residents of the sleepy town of Dandong on the Chinese side.
These buildings are still there, but they have taken on a near comical feel, since the Chinese side is now marked with many shiny high-rise buildings. The contrast between two river cities is especially startling at night: The Dandong side shines with light, while on the North Korean bank, it is almost completely dark (though admittedly, in recent years, some lights began to be seen in Sinuiju as well – a sign of the economic improvement).
Nonetheless, Sinuiju and Dandong are a remarkable pairing. Located on opposite sides of the Yalu river, they serve as the major conduit for nearly all economic interaction between China and North Korea. The old bridge that connected them, built back in the days of Japanese imperialism, is basically a single-track road and a single railway. Nevertheless, it still handles around 75 percent of all trade between the two countries.
In recent years, Dandong has become the Chinese city with the heaviest North Korean presence
In recent years, Dandong has become the Chinese city with the heaviest North Korean presence. It probably has since pushed aside Shenyang – the major foreign trade capital of North Korea since the late 1990s. Nowadays, there are some 25,000 North Koreans permanently living in Dandong. The vast majority of them, around 20,000, are North Korean workers who are employed by Chinese companies as “cheap labor.” However, these people are now seldom seen on the street.
The personnel of foreign trade companies are far easier to spot. These well-dressed and well-fed people form the elite of the North Korean community in Dandong.
A LICENSE TO SELL
Currently there are roughly 150 North Korean foreign trade companies with offices in the city – the largest concentration of North Korean trade offices in any city worldwide. Most of these offices are tiny, with the total personnel consisting of one representative (whose wife might double as secretary, office manager and, if necessary, janitor). In larger offices, there might be two employees, but such offices are not that common. In total, the number of the “foreign trade workers” stationed in Dandong, along with their family members, reaches 2-3,000.
As early as the 1970s, North Korea began to quietly discard one of the basic principles of the Stalinist economic model: the monopoly of the central government on foreign trade. Since the late 1970s in North Korea, many factories, government agencies and even military units have obtained the right to conduct export/import operations. In most cases, such agencies are issued permits to import certain kinds of goods like coal, seafood and/or herbal drugs. Curiously, in most cases, the agencies in question do not produce such items, but rather, purchase them from the real producers and then use the export license, known as vakhu, to sell the items.
On the other hand, the North Korean “foreign trade workers” buy, in China, pretty much everything that the North Korean economy needs, from socks to bulldozers to sweets to microchips. These goods are then shipped to North Korea to be sold at great profit – it was said that 1 yuan invested into such goods in China usually brings 3 yuan after the goods are sold in North Korea.
Most of the items that bring good money are consumption goods. As has been the case for two decades, North Korean foreign trade companies buy substantial quantities of Chinese-made garments, footwear and other household items. Recently, solar panels, extremely popular and widely used in North Korea, have become a major hit. Another successful item has been small power generators, which one can often see on the balconies of North Korean houses. These and other items are widely advertised (in Korean) across the city of Dandong.
In most cases, foreign trade companies are expected to earn a certain amount of money, which should be given to a bureaucratic agency, military unit or state-owned enterprise that controls such an institution. Part of such earnings eventually winds up in central government coffers. If a Dandong office exceeds its quota, the bosses back in North Korea usually do not mind when a significant part of the excess cash finds its way into the pockets of the “foreign trade workers.” Technically it is still illegal, but widely seen as a fair reward for the representatives’ hard work and business success.
The exact size of currency quotas differs from company to company, but normally, for a small company that can afford only one representative in Dandong, it is expected that such an office brings in around $30-40,000 per year in profits. As contacts on the ground informed me, these quotas are increasingly difficult to meet nowadays, because of the slowdown in the Chinese economy and a decline in demand for North Korean exports, i.e. coal and other raw materials.
Nonetheless, some of these North Korean representatives are still making good money. This is noticeable in a local “international school” where the children of North Korean parents make up almost half of all students. As with similar institutions worldwide, these schools with their Western-trained teaching staff, are not cheap, to put it mildly. In Dandong, the tuition costs $8,000-$9,000 per year. Nonetheless, many North Korean businessmen in the area can still afford to send their children there (of course, it matters that they are Koreans, and hence seriously crazy about the education of their kids).
MAKE MONEY TO MAKE MONEY
Of course, the dream of the successful businesspeople is to use these earnings to make even more money. When it is time to leave, they often take money to North Korea, but sometimes they park the booty at a Chinese bank account. Understandably, they are in no rush to go home: While the normal tour of duty lasts three-five years, many “foreign trade workers” get extensions, so some of them have been around for a decade. Of course, in order to stay longer, one needs to meet quotas and also keep one’s superiors happy with cash and gifts.
Most of these state-licensed but semi-private trade operations are rather irregular in nature. Banking transactions with North Korea may be complicated, and sometimes impossible. Thus, many deals are paid in cash, and sometimes it is difficult to draw a clear line between legitimate trade and smuggling.
While the normal tour of duty lasts three-five years, many ‘foreign trade workers’ get extensions, so some of them have been around for a decade
This is one of the reasons that the North Korean “foreign trade workers” do not always deal with regular Chinese companies. Their partners tend to come from two specific groups: the Chosonjok (ethnic Korean citizens of the PRC) and Hwagyo (Han Chinese with permanent residency in North Korea).
Historically, most of the Hwagyo used to reside in North Korea permanently, but in the past 10-15 years, many have quietly resettled in China, especially in Dandong. They still frequently go to North Korea and make sure that their permanent residency rights will be renewed regularly – this is important because they constitute a group that enjoys uniquely free access to North Korea. They can visit North Korea, stay there for a long time and leave North Korea more or less at will. This is a unique and highly profitable privilege, used for all kinds of business activity.
The Chosonjok are less privileged, and they face big problems when they want to arrange meetings with their relations on the other side of the border. Nonetheless, ethnic Koreans of China, unlike the second or third ethnic Koreans of elsewhere, are fluent Korean speakers and use their linguistic abilities to develop and maintain profitable business relations with ethnic kin both in the North and South.
Currently, in Dandong, there are a few hundred Hwagyo (most of them are remarkably rich) and, officially, 8,000 Chosonjok. The latter group is actually significantly more numerous, since most of them live in Dandong without official registration. The actual number is likely close to 20,000.
In Dandong, it is sometimes difficult to tell the difference between legal trade and smuggling. Nonetheless, “classical smuggling,” i.e. when goods prohibited from sale are secretly moved across the river, is quite unusual in this area, being much more common on the opposite end of the border in the Yanbian area, in the low Tumen River. The low Yalu region is less hospitable for smugglers: It is too densely populated, and the river itself is too broad there. Nonetheless, some smuggling is known to occur in Dandong as well – like sales of art and illegal drugs delivered from North Korea in boats. In most cases, however, illegal trade is much less romantic: it is about bribing customs officers or being creative with paperwork.
Next time, we will go into more detail about the life a North Korean worker in Dandong.
In the early 1970s, the North Korean government wanted to impress their Chinese neighbors, with whom they have always had rather uneasy relations. To do so, they decided to build a number of nice-looking buildings on the North Korean side of the Yalu river. The idea was to produce envy amongst the much poorer residents of the sleepy town of Dandong on the Chinese side.These buildings are still
Andrei Lankov is a Director at NK News and writes exclusively for the site as one of the world's leading authorities on North Korea. A graduate of Leningrad State University, he attended Pyongyang's Kim Il Sung University from 1984-5 - an experience you can read about here. In addition to his writing, he is also a Professor at Kookmin University.