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North Korea’s Complicated Relationship With China

April 04, 2017

Recently, eyes have been turned towards North Korea, especially in light of recent actions taken by its closest ally; China. Following a series of weapons testing throughout 2016 and early 2017, many nations issued sanctions on North Korea. [1] However, it remained unclear whether the Chinese authorities, who enjoy a close relationship with Pyongyang, would follow suit. By banning the importation of North Korean coal in March 2017, Beijing made a decision that indicates a radical change in its attitude towards North Korea. [2] China’s previous ambivalence and hesitance to act has morphed into increased support for the UN’s position on North Korea and a stricter response towards North Korean aggression. 

China’s Role in the North Korean Economy

For decades China has been providing North Korea with foreign aid and diplomatic support. China has continually argued on behalf of North Korea against harsh international sanctions, presumably to prevent a regime collapse and the subsequent refugee influx that would flood China. [3] In 2014, China backed North Korea by criticizing a UN report detailing the poor human rights conditions across North Korea and stood by its decision to continue providing aid with food and energy resources. [3]

Moreover, China is responsible for around 90% of North Korea’s imports and exports, making it an indispensable economic partner for North Korea. [2] It is, therefore, no surprise that following the sanctions, North Korea accused their neighboring country of “dancing to the tune of the US.” [4] Furthermore, in 2016 the net worth of North Korean coal imported by China amounted to US $1.2 billion [2] , accounting for around 5% of the country’s GDP. [5] Immediately after the sanctions were implemented, the price of one kilogram of rice in Pyongyang was 5160 Korean People’s Won (KPW), however, after China’s decision to ban coal imports, the price has since risen to 5400 KPW. [6] Prices in other regions of North Korea vary, but all have experienced an upward trend in the last few weeks. 

<a href="http://english.hani.co.kr/arti/english_edition/e_national/772806.html" target="_blank">Source</a>Source

North Korean Economic History and Present Structure

The North Korean economy has experienced problems in the past, which culminated in a famine that wiped out around 5% of the population in the 1990s. [4] During this time, the authorities’ success in establishing state control of the market and eliminating the private sector served to amplify the detrimental effects of the devastating famine. [4] Many people in despair defied the government’s orders and began to trade, once again developing a private market. This private market has persisted until today and consists largely of smuggling goods across the border with China. Nowadays, established firms that do business with China must give over half of their profits to the government as a show of loyalty. [8] Improvements in mortality rate and life expectancy are just some of the induced benefits of the private market. [4] Professor Hazel Smith, director of the International Institute of Korean Studies at the University of Lancashire and Korean expert on the UN Panel of Experts, claims that “on average, children in North Korea today are significantly better off than if they lived in India or Pakistan.” [4] Despite the emergence of the private market, the coal industry is still firmly under state control. Therefore, it is the North Korean government, rather than the people, that will be directly affected by the latest sanctions imposed by China.

<p>Source:<a href="http://www.telegraph.co.uk/business/2017/02/26/secretive-north-korea-edging-towards-new-crisis/" target="_blank"> Telegraph UK</a></p>

Source: Telegraph UK


A Review of the Economic Effects of Previous Sanctions

On July 15th, 2006, the first UN-imposed sanctions on North Korea were implemented in response to the firing of ballistic missiles. Later in 2009, North Korea detonated its first underground nuclear device, instigating a tightening of sanctions. Further sanctions were implemented in both 2013 and 2016 in response to North Korea’s transgressions. [9]

The long sequence of sanctions indicates that they were unsuccessful in their bid to deter North Korea from continuing to develop nuclear arms. The 2006 sanctions targeted weapons, nuclear-related materials, and luxury goods, while the 2009 sanctions extended the previous sanctions to include any financial transactions relating to arms. In 2013, specific individuals in the regime began to be targeted through the freezing of financial assets. The list of targeted individuals includes Paek Chang-ho, head of the North Korean satellite control center, Chang Myong-chin, head of the launch center at which the 2012 missiles launch took place, and Ra Ky’ong-su, high ranking officer at the Tanchon Commercial Bank who facilitated sales of missiles and related material. Finally, the 2016 sanctions stretched to encompass any object that could be deemed as contributing to the development of North Korea’s armed forces. [9]

Throughout the duration of this timeline, one of the few indications of economic distress was Pyongyang’s agreement in March 2012 to pause its nuclear tests in exchange for US humanitarian aid in the form of food. From this uncharacteristic plea for help, it can be surmised that the sanctions had taken a large toll on the economic conditions within the country. However, this agreement was short-lived, with the announcement of another rocket test being announced within the span of a month. [8]

Implications of the Sanctions

The sanctions were implemented with the goal of curbing North Korea’s nuclear program. By economically paralyzing North Korea, other countries could gain the leverage that they need to formulate deals with Pyongyang regarding the dismantling of their existing nuclear weapons and the halting of further advances. [2] Unfortunately, North Korea has issued a statement in response to the sanctions where it said it was “utterly childish to assume that it would discontinue its nuclear weapons program for a few pennies.” [2]

Instead, two potential alternatives present themselves. On one hand, the sanctions could present too great an economic strain and lead the despaired North Korean government to respond with even greater aggression. Alternately, the new middle class that formed as a result of the private market activity may refuse to support a government that does nothing to alleviate their hardship. [4]

The effectiveness of the sanctions is largely dependent upon China’s willingness to abide by and enforce their terms. As the hermit kingdom’s largest trading partner, China bears the burden of holding economic leverage allowing it to negotiate and bargain with North Korea. The largest portion of trade between North Korea and China is arms trade, so while coal sanctions are a step in the right direction, if China were to cease trading arms, perhaps North Korea would be more willing to adhere to the demands of the UN. [8]


  [1] https://www.bloomberg.com/news/articles/2017-03-06/north-korea-missile-launches-nuclear-detonations-timeline

  [2] http://www.dw.com/en/china-is-getting-tough-on-north-korea-with-coal-embargo/a-37708015


  [4] http://www.telegraph.co.uk/business/2017/02/26/secretive-north-korea-edging-towards-new-crisis/

  [5] https://www.ft.com/content/266a1c02-f8cf-11e6-9516-2d969e0d3b65

  [6] http://www.dailynk.com/english/read.php?num=14270&cataId=nk02900

  [7] http://www.scmp.com/news/asia/east-asia/article/2078187/life-shadows-how-kim-jong-nam-assassination-sheds-light

  [8] http://www.cnn.com/2013/04/09/business/north-korea-economy-explainer/

  [9] https://www.treasury.gov/resource-center/sanctions/Programs/pages/nkorea.aspx

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