We’ll Always Have Dandong

October 22, 2015 6:45 AM

The Chinese city of Dandong is ground zero for DRPK-China trade, the terminus of supply chains that run down the coast to the Pyongyang consumer market. The always helpful Sino-NK has a new post by Adam Cathcart and Chris Green, “Dead on Arrival? Taking Trade Notes in Dandong,” that dissects the recent trade fair there and concludes that for all the hoopla “Dandong has regressed somewhat.”

Cathcart and Green cite four pieces of evidence. First, the newly opened Guomenwan trade zone is, as they put it, a “ghost town” where “police threaten to outnumber shoppers.” Second, an analysis of the composition of the official Chinese and North Korean delegations reveals no upgrading relative to last year, and a possible downgrade signaled by the absence of the Liaoning Party Secretary. His absence meant that Bing Zhigang was the top provincial official at the event. Among the many hats he wears is senior Chinese member of the Management Committee for the Hwanggumpyeong Island Economic Zone with the DPRK. Cathcart and Green observe that when Bing and two other Chinese members of the Management Committee held a press conference on 14 October, they were not joined by anyone from the North Korean side. Finally, Cathcart and Green observe that despite emerging structural flaws in the existing colonial era bridge, two years after its scheduled opening, North Korean authorities continue to block the opening of the New Yalu River Bridge, a project that reportedly cost China $350 million to build.

Fair enough. But in some sense this is par for the course: the economic development that we have observed in North Korea over the past 25 years has, for the most part, come in spite of the state, not because of it.

So, for example, Chinese trade law has provisions for “border trade” under which individuals and entities domiciled within some distance from the border are permitted to engage in small amounts of cross-border trade duty free.  (My understanding is that this provision applies to all of China’s borders; it is not DPRK-specific.) This customs provision is one explanation for the multitude of mom and pop trading companies in towns like Dandong and Tumen, as well as larger enterprises from further inland setting up offices in these towns to exploit the opportunities created by the law. This trade has been going on for decades.  Could the Guomenwan trade zone facilitate its expansion? Probably. Is the Guomenwan trade zone necessary for its continuation? Certainly not.

Ditto the Hwanggumpyeong Island Economic Zone. Of course it would be nice, but when the history of China-DPRK economic relations is written it is more likely to merit a footnote than a chapter.

On the bridge, I concede: the refusal to open it is flat out stupid.  But then again we’re talking about the government that took years to allow the road from Hunchun to Rajin to be paved.

Commerce is a bit like water: it will find its way. Cathcart and Green mention in passing that an estimated 20,000 North Koreans are in Dandong. Most of them are working in factories. Anna Fifield at the Washington Post has provided the anecdotal color. Recall that at one time rumor had it that China was prepared to raise the ceiling on temporary work visas to 120,000.

Likewise recall that POSCO and Hyundai have built a large logistics facility in Hunchun, in essence waiting for North Korea to either open or collapse, whichever comes first.  The Korea Development Institute and  the Korean Small Business Institute have floated the idea of building Kaesong North in the border region. According to Yonhap, the Chinese and South Korean governments are in discussions.

So, yes, things may not be “back to normal” in DPRK-China relations, and pending how the $500 million KOTRA v. COMTRADE discrepancy is sorted out, the volume of bilateral trade may or may not be down. An improvement in relations (just open the bridge!) would certainly be helpful.  But remember, when incentives for exchange exist, enterprising groups and individuals will find a way.

https://www.youtube.com/watch?v=-crsuEOlUO0

Comments

Rudiger Frank

Very good points, I strongly agree. To add my own few thoughts:
China-NK trade has even more ghost-towns. In 2010, folks in Tumen showed me with some excitement a newly created gated area near the (narrow) bridge leading to NK's Namyang that could be entered without visa from both sides. This venue was meant to expand bilateral local trade. These days, grass grows on the plaza and the fences are rusting. But then, there is talk about expanding/renovating/replacing the bridge and make it usable for trucks.
Anyway, things ae quite dynamic a few dozen miles down the Tumen river at Hunchun/Wonjong, with huge infrastructure investment made by China and, as it seems, even NK.
What do we conclude? A pessimist would point at the risks of government-directed investments that can easly end up just wasting resources. An optimist would say that this simply happens if a relationship matures: some projects work, some don't. So what; life goes on, and so does business.

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