The Peninsula

Assessing China-DPRK Trade and SEZ Potential: The Dandong Trade Fair

By Adam Cathcart

As the rest of the world gets accustomed to seeing Kim Jong-un walk with a cane, we might do well to figure out what, if anything, is changing about the way that the broader North Korean state engages with the economic powerhouses that engulf its southern and northern peripheries. KEI’s Director of Research recently assessed the outlook for improved inter-Korean economic relations in the aftermath of the surprising visit of a high-level North Korean troika to the closing day of the Asian Games in Incheon. And while there have been no equally high-level trips to Beijing from Pyongyang, North Korea’s economic relations with China, particularly developments along the shared frontier, are arguably as important to the future of the DPRK economy.

There has been an awful lot of ammunition provided lately to proponents of the point of view that Chinese-North Korean relations are in a downward spiral. The North Korean hijacking of a Chinese vessel from a small port outside of Dalian in September certainly did not help matters. But to point only to the problems and disputes — while they are many — should not blind us to the ongoing daily interactions and transactions that fuel the North Korean consumer economy and keep the DPRK afloat.

This past June, I prepared a research paper for KEI that showed that North Korea’s strategy for Special Economic Zones with China was changing rapidly, and argued that the power struggle around Jang Song-taek was intimately tied to the lack of progress on the Yalu River showcase SEZs at Hwanggumpyeong and Wihwa Islands. The new Economic Development Zones that Pyongyang proposed in lieu of these Chinese-financed zones have since made very little headway. In the meantime, the North Korean government has welcomed a University of British Columbia professor again to Pyongyang to lecture on SEZ law, small-scale training programs are going forward (often off-site, in places like Singapore), and the Rason Special Economic Zone has hosted very small seminars on SEZ set-up. In general, however, SEZs remain extremely peripheral to the broader economy and in many cases are nascent and conceptual at best.

The upcoming Sino-DPRK trade fair in Dandong, scheduled for October 16-20, thus should serve as an ideal test case for a number of things. (The formal title of the event is ‘The Third China-North Korea Trade, Culture and Tourism Exhibition Fair / 第三届中朝经贸文化旅游博览会.) I’d like to lay out five questions, and then offer some preliminary answers or possibilities:

1. What does Chinese information about the trade fair tell us about the direction of the China-North Korea trade ties?

Since the North Korean state has put forward virtually no preliminary public information about this event, we are largely beholden to Chinese state press releases. In one such release dating from September 19, the bureaucratic bodies listed as organizing the event on the Chinese side are the China Committee for the Advancement of International Trade (Liaoning Committee and Dandong Committee), the sub-committee on Industry/Trade & Banking of the China Committee for the Advancement of International Trade, the Liaoning Province People’s Association for Friendship with Foreign Countries, the Dandong City Government, and the Dandong Frontier Cooperative Zone Management Committee (丹东边境合作区管委会).

While there is less information available about North Korean interlocutors, it stands to reason that the North Korean members of the old Hwanggumpyeong and Wihwa Island SEZ joint management committee will be there, even if the SEZs themselves are not the centerpiece. These would include the provincial party secretary for North Pyong’an province, who appears to have survived the Jang Song-taek purge without a scratch.

Curiously, the name of the old Hwanggumpyeong and Wihwa SEZ committee appears to have been subtly altered to the Dandong Frontier Cooperative Zone Management Committee (丹东边境合作区管委会). This would fit in with the alterations by the CCP of Jang Song-taek out of the history of bilateral economic relations; photographs of Jang and pictures of the 2012 celebration of the SEZ launch outside of Dandong have now been covered up at the Yanbian Korean Autonomous Prefecture Museum.

2. To what extent are these businesses planning to avail themselves of the previously Jang Song-taek-affiliated SEZs just outside Dandong?

To a degree, this is one of the big questions that the trade fair itself will help to answer. The inaugural 2012 trade fair was very much tied in to the SEZ development, and benefitted from being on the heels of the big Jang Song-taek swing around the Northeast and Beijing in August of that year. The 2013 fair got caught in a kind of netherworld where it was clear the Sinuiju SEZs were not particularly going anywhere; the slogan for that year’s Trade Fair was appropriately amorphous and indicative of the need for some renewal: ‘新丹东、新机遇、新平台/New Dandong, New Opportunity, New Level.’  While PRC media touted the signing of 30 investment contracts at that fair for an alleged total of $500+ million USD and 50 investment contracts for an alleged total of $109 million USD, some portion of these were among minerals firms and little specific information was given about investment and trade contrasts specific to the SEZs.

This year’s event has had very little information released from the Chinese side that indicates that the Hwanggumpyeong and Wihwa Island SEZs are going to play any significant part in the proceedings. The inclusion of the term ‘safety/安全’ in the overall slogan for the Trade Fair would seem to function not just as a caution for North Korean comrades (see: fishing boat incidents in 2012, 2013, and 2014) but to Chinese companies that their investments in the DPRK are not a wholesale gamble. Of course, the legal protections of the SEZs between Dandong and Sinuiju were supposed to handle many of these concerns in the first place.

3. What role will tourism play at the fair, specifically tourism to the northwestern part of the DPRK?

It seems that the 2014 fair has made a conscious decision to broaden out the tourism and ‘folk-art’ aspects of bilateral exchange. The number of North Korean firms said to be coming to Dandong to participate is around 100 (this is up from 50 the year prior). Tourism along the border is picking up significantly and the North Korean border cities seem to be making more efforts (on a very small scale, usually) to accommodate Chinese tourists, about 190,000 of whom visited DPRK in 2012.

However, the Chinese market for tourism to North Korea is already rather saturated. A recent flight to the new airport at Tonghua from Beijing indicated that ambitions for tourist trips outstrips demand significantly, and China’s excess capacity along the border region has yet to be filled. The airport at Changbaishan (near Fusong) is another case in point, and new rail construction along the border is going at a good clip as well. The current amount of tourism to DPRK seems unlikely to make such construction expand for the next decade, so we will simply have to listen to the big dreams of the tour operators heading to Dandong with the hopes of making major progress.

4. Is this fair purely about bilateral relations, or will companies from third countries, and Taiwan and Hong Kong, also turn up?

Companies from 10 or more nations external to China and Korea are slated to attend. Russia will be a presence, but so, too, will Pakistan and India be represented among firms at the fair. In the past, firms from Taiwan and Hong Kong have participated, and that seems likely again this year.

5. What performing arts ensemble and/or officials will the North Koreans send, and what might that say about the importance with which they are approaching the event? What role will cultural exchange play?

Last year’s fair can be counted as a success on this front; a big opening gala in Dandong included a performance by the Mansudae Arts Troupe, which was a sure signal (if an indirect one), that Kim Jong-un approved of the bilateral fair and attached importance to it. This year, the Samjiyeon Ensemble of the Mansudae Arts Troupe seems the most likely group to represent North Korea’s large performing arts sector. Speaking from the standpoint of Party culture in both DPRK and PRC, Kim Jong-un could make a strong statement about his desire to improve relations with China by attending a test concert of the Arts Troupe ensemble before it goes to Dandong (as he did before the Unhasu Orchestra went to France), but given recent events, this seems highly unlikely. A small arts troupe from Dalian travelled to North Korea earlier this year, but cultural exchanges between the two countries are down significantly from their 2010-2011 high. Apart from getting a large North Korean ensemble onto Chinese soil, the main achievement of the fair in culture will probably be to sell yet more North Korean landscape and nature paintings to Chinese collectors. A broadening of bona fide people-to-people exchanges (such as exchanges of language teachers) seems again unlikely, so the fair’s emphasis on ‘culture’ needs to be seen in a rather limited light.

Adam Cathcart is a Lecturer in History at University of Leeds and Editor-in-Chief of SinoNK.com.  

Photo from Prince Roy’s photostream on flickr Creative Commons.