N korea leader said to be on visit to china

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By Christian Oliver in Seoul

North Korea's dictator, Kim Jong-il, reportedly arrived in China yesterday in a rare trip that has prompted speculation he is seeking to rescue his country's moribund economy and ease tensions over the sinking of a South Korean warship.

China could also be making another attempt to persuade Mr Kim to return to international talks on dismantling his country's nuclear weapons, as political tensions on the Korean peninsula rise. Seoul's military officials are demanding retribution for the sinking of a warship in March, in a suspected North Korean torpedo attack that killed 46 sailors.

A large North Korean delegation was spotted yesterday entering the Furama Hotel in Dalian, a port in north-east China. The hotel would not comment beyond saying it was booked up for two days.

Suspicions that Mr Kim was heading the delegation himself were supported by witness accounts of heavy security cordons when an armoured train crossed into China from North Korea early in the morning. Mr Kim is widely believed to shun air travel, making his rare trips outside the country in his armoured train.

If confirmed, this would be Mr Kim's first trip in four years to China, his country's main trading partner and, in effect, its life-support system. North Korea's Pibada(sea of blood) opera company travelled to China on Sunday, which fuelled suggestions the singers could be performing at a joint Chinese-North Korean ceremony.

South Korean media speculated that Mr Kim could be in Dalian to seek further investment in the port of Rajin, in north-east North Korea, and assistance in infrastructure projects such as railway lines. The Chinese see Rajin as an opportunity to gain access to the Sea of Japan.

Already suffering from crippling power shortages and food shortages, North Korea bungled its currency reform last year, which triggered sharp inflation, closed food markets and sparked extremely rare flashes of popular discontent against the one-party state.

Beijing has traditionally been fearful of a potential regime collapse in nuclear-armed North Korea.

Last October China appeared to have engineered a compromise on stalled international atomic negotiations when Mr Kim said he could come back to six-party talks on dismantling nuclear arms if the US would hold bilateral meetings with him as well. The six-party nations are the US, Russia, China, Japan and both Koreas.

This warmer tone was followed by a sweeping drive to attract investment

HERMIT ECONOMICS HOBBLES PYONGYANG
By Aidan Foster-Carter

Great Leader? Pyongyang's fawning hagiography not only grates, but is singularly unearned. Even by its own dim lights, North Korea's decision-making is going from bad to worse.

Last year saw two spectacular own goals. Missile and nuclear tests were a weird way to greet a new US president ready to reach out to old foes. The predictable outcome was condemnation by the United Nations Security Council, plus sanctions on arms exports that are biting.

Domestic policy is just as disastrous. December's currency "reform" beggars belief. Did Kim Jong-il really fail to grasp that redenomination would not cure inflation, but worsen it? Or that brazenly stealing people's savings – beyond a paltry minimum, citizens only got 10 per cent of their money back – would finally goad his long-suffering subjects into rioting? Forced to retreat, officials even apologised. One scapegoat was sacked – and possibly shot.

By his own admission, Mr Kim does not do economics. In a speech in 1996, when famine was starting to bite, the Dear Leader whined defensively that his late father, Kim Il-sung, had told him "not to get involved in economic work, but just concentrate on the military and the party".

That awful advice explains much. Incredibly, North Korea was once richer than the South. In today's world, this is the contest that counts. "It's the economy, stupid" is no mere slogan, but a law of social science.

Having taken an early lead, Kim senior threw it all away. He built the world's fourth largest army, crippling an economy that he refused to reform, viewing liberalisation as betrayal. His own personality cult was and is a literally monumental weight of unproductive spending.

Used to milking Moscow and Beijing, in the 1970s North Korea borrowed from western banks – and promptly defaulted. That was not smart; it has had to pay cash up front ever since.

Pyongyang also resorts to less orthodox financing. In 1976 the Nordic nations expelled a dozen North Korean diplomats for trafficking cigarettes and booze. In December a Swedish court jailed two for smuggling cigarettes. More than 100 busts worldwide over 30 years, of everything from ivory and heroin to "supernotes" (fake $100 bills), leave scant doubt that this is policy.

Yet morality aside, it is stupid policy. Pariahs stay poor. North Korea could earn far more by going straight. The Kaesong Industrial Complex (KIC), where South Korean businesses employ Northern workers to make a range of goods, shows that co-operation can work. Yet Pyongyang keeps harassing it, imposing arbitrary border restrictions and demanding absurd wage hikes.

Now it threatens to seize $370m (€275m, £247m) of South Korean assets at Mount Kumgang, a tourist zone idle since a southern tourist was shot dead in 2008 and the north refused a proper investigation. Even before that, Pyongyang's greed in extorting inflated fees from Hyundai ensured that no other chaebol has ventured north. Contrast how China has gained Taiwanese investment.

In this catalogue of crassness, the nadir came in 1991 when the dying Soviet Union abruptly pulled the plug on its clients. All suffered, but most adapted. Cuba went for tourism; Vietnam tried cautious reform; Mongolia sold minerals. Only North Korea, bizarrely, did nothing – except watch its old system crumble. Gross domestic product plunged by half, and hunger killed up to a million. Now famine again stalks the land. The state cannot provide, yet still it seeks to suppress markets.

All this is as puzzling as it is terrible. China and Vietnam show how Asian communist states can morph towards capitalism and thrive. Kim Jong-il may fear the fate of the Soviet Union if he follows suit. True, his regime has survived – even if many of its people have not. Yet the path he is on is patently a dead end. Mr Kim's own ill-health, and a belated bid to install his unknown third son as dauphin, only heighten uncertainty. Militant mendicancy over the nuclear issue – demanding to be paid for every tiny step towards a distant disarmament, then backsliding and trying the same trick again – will no longer wash. North Korea has run out of road; the game is finally up.

What now? A soft landing, with Mr Kim embracing peace abroad and reform at home, remains the best outcome. But if he obdurately resists change, we need a plan B. The US and South Korea have contingency plans for the north's collapse. So does China, separately. Tacit co-ordination is urgent, lest future chaos be compounded by a clash of rival powers – as in the 1890s. Koreans have a rueful proverb: when whales fight, the shrimp's back is broken.

But Beijing will not let it come to that. China is quietly moving into North Korea, buying up mines and ports. Some in Seoul cry colonialism, but it was they who created this vacuum by short-sightedly ditching the past decade's "sunshine" policy of patient outreach. President Lee Myung-bak may have gained the Group of 20 chairmanship, but he has lost North Korea.

Nor will Mr Kim nuzzle docile under China's wing, though his son might. As ever, North Korea will take others' money and do its own thing. In early 2010 new fake "super-yuan" of high quality, very hard to detect, started appearing in China. They wouldn't; would they?

The writer is honorary senior research fellow in sociology and modern Korea at Leeds University