China: Betting On North Korea In Gamble To Save Its Rustbelt

Courtesy of Business Insider, an interesting look at China’s plans to utilize North Korea as part of its strategy to revitalize its NE rustbelt territory:

At China’s very farthest limits, a town sandwiched between North Korea and Russia stands at the heart of Beijing’s plan to revitalise its bleak, frigid northeastern rustbelt.

Beijing has a vision of turning the nondescript outpost of Hunchun into a regional Asian trading hub, and is spending tens of billions of dollars to turn it into reality.

Less than 70 kilometres away in North Korea, the port of Rason offers access to the sea and a shorter trade route to Japan, one of China’s biggest trading partners, than almost any of its own harbours. 

But the ambitious plan relies on Russian and North Korean co-operation and implementation, making it a monumental gamble.

“Hunchun is the effective tip of the commercial spear for China as it tries to get more reliable access to the sea,” said Adam Cathcart, a professor at Leeds University in Britain who also runs, a website on China-North Korea relations.

“China is more broadly trying to make its frontiers more prosperous and open in terms of trade and less restive and more easily controlled,” he added.

Hunchun has a population of only 225,000 but received investments totalling more than 100 billion yuan ($16 billion) last year from government and private sources, according to the commerce ministry.

A 42 billion yuan high-speed railway running 360 kilometres (225 miles) and connecting it to the Jilin provincial capital Changchun is slated to open by October.

City officials have budgeted 30 billion yuan to build a tri-national tourist zone enabling visitors to play golf in Russia during the day, dine in China and then gamble at a North Korean casino for the evening.

But the North can be a difficult business partner. 

Pyongyang has long earned hard currency from seafood exports but restaurateur Li Zhao pointed to a tank of North Korean king crabs he sells for more than 250 yuan each.

“There’s no predictable supply for these crabs, sometimes we’ll have too many and then none at all for weeks,” he said. “It’s not worth the hassle.” 

Dusty offices

China’s northeast used to be the country’s industrial heartland, but market reforms introduced in the 1980s and 1990s led to massive layoffs at the state-owned companies that dominated the region. 

Chinese President Xi Jinping visited Jilin at the weekend and stressed the area’s importance to economic restructuring and international co-operation, the official Xinhua news agency reported.

But last year China’s three northeastern provinces — Heilongjiang, Jilin and Liaoning — took three of the bottom four positions in China’s provincial economic growth table.

Many of Hunchun’s ethnic Korean Chinese citizens have left to work for South Korean companies, either in China or the South itself, like Jin Huxin, who only returned from Shanghai because her mother fell ill.

“Anyone with education or skills has already left to find work elsewhere, but if the government wants this massive trade hub to succeed, they need qualified workers,” she said.

The only foreigners to be seen were a few Russian customers in Hunchun’s main shopping area.

China’s biggest northern neighbour has economic problems of its own, battered by Western sanctions over Ukraine and low energy prices.

At the Sino-Russian Trade Complex, a business park on Hunchun’s outskirts, the 2,700-square metre (3,200-square yard) China Restaurant, topped with a Cyrillic sign, had long been abandoned.

A dusty office building called the International Trade Center was available for rent.

‘Completely unpredictable’

China’s biggest joint economic project with the North so far has been in Rason, a special economic zone where it invested in two ports.

But visitors describe little shipping and only a handful of operating businesses, while many Hunchun locals say relations with North Korea have been frigid in recent years.

Two Chinese entrepreneurs who have done business in Rason said their confidence was deeply shaken in 2013 when Pyongyang purged and executed Jang Song-Thaek — previously its point man on relations with China.

In the article announcing his death and branding him a “traitor”, the official Korean Central News Agency said Jang sold “off the land of the Rason economic and trade zone to a foreign country for a period of five decades”.

Chinese entrepreneurs describe arbitrary delays and a frustrating business climate.

“Doing business in North Korea is completely unpredictable, they’re really irresponsible,” Peter Wu told AFP.

He has been negotiating for almost a year to build a factory in North Korea to make a medicinal herbal drink for export to China, but after spending more than 100,000 yuan has nothing to show for his efforts.

“There’s silence for months on the North Korean side and then finally, just when you think you’ve reached a deal, all the rules change and you need to start over.”

This entry was posted on Wednesday, July 22nd, 2015 at 5:52 am and is filed under China, North Korea.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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