North Korea remains highly dependent on China to survive and to achieve economic development given its increasing isolation from the rest of the world.
China is North Korea’s closest ally and the largest provider of food, fuel, and industrial machinery. The Chinese government also provides investment capital and economic expertise to the North Korean government. In other words, Beijing has a strong influence on Pyongyang both economically and politically because of their close relationship.
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North Korea sets China’s old economic policy as standard
Kwon Young –kyung, a professor at Institute for Unification Education in Seoul noted that North Korea is copying the economic reforms implemented by China more than 30 years ago since Kim Jong-un became the Supreme Leader of the country.
“North Korea has been adopting its own economic management method and economic development zone policy the past four years, which are similar to China’s economic reforms and market-opening policy in the 1980s,” said Prof. Kwon.
According to Prof. Kwon Pyongyang “s “vegetable garden assignment system” is similar to Beijing’s “agricultural production responsibility system” in 1978 to 1981. Under the system, the government asks people to cultivate a land together and allows them to sell part of the produce to encourage production.
Prof. Kwon noted that Kim Jong-un is implementing economic reforms on a step-by-step/experimental process unlike his late father, Kim Jong-il, who conducted a sweeping reform measure such as abolishing the rationing system.
Additionally, North Korea’s economic district development law is similar to China’s special economic zones, which serves as the center for reforms and openness for the rest of the country. Pyongyang designated 26 special districts and development zones.
Prof. Kwon is uncertain whether Kim Jong-un’s action demonstrates his willingness to open up his isolated country to the rest of the world. Pyongyang’s propaganda machine emphasized that the country’s economic district development is designed to improve the livelihood of North Koreans, but it did not mention anything about reform and openness.
China strengthening economic ties with North Korea
China is strengthening its economic relationship with North Korea. The Chinese government recently opened a new high-speed rail line from the industrial center of Shenyang to the North Korean border city of Dandong. The new railway was designed to increase the region’s economic competitiveness.
Dandong is close to Hwanggumpyong Island, one of the special economic zones of Pyongyang. The city is a center for trade and tourism with more than 600 border trade enterprises. Regional analysts noted that 80% of trade between China and North Korea moves through Dandong.
“The new Shenyang-Dandong line is more an expression of good intention to expand investment in infrastructure throughout the Asia-Pacific region and beyond, than a reflection of the prospect for increased economic collaboration with Pyongyang,” according to Professor Wei Liang as quoted by the Los Aneles Times in September.
Professor Wei Liang emphasized that North Korea’s leader and policies are full of uncertainty particularly its interaction with China over the past decade. He said, “Policies can change overnight, so investments are very risky for Chinese companies, especially private companies.”