China signals strong support for decaying North Korea economy

Ray

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China signals strong support for decaying North Korea economy

BEIJING (Reuters) - China on Tuesday promised to help major firms invest in impoverished neighbor North Korea, signaling strong support for the North's untried young leader just as he is believed to be planning reforms to his country's broken economy.

Vice Commerce Minister Chen Jian, in an article in the People's Daily, said priority would be given to two economic zones China and North Korea set up just over a year ago and which would represent a rare major foray by isolated Pyongyang into international commerce.


The comments coincide with this week's trip to China by Jang Song-thaek, the powerful uncle of young dictator Kim Jong-un and seen as likely to be a driving force for reforms.

"We will support big Chinese companies who are willing to invest in North Korea to broaden the economic and trade cooperation with North Korea, to push the two sides to upgrade two-way trade and investment structures and study the feasibility of cooperation on big projects," Chen wrote.

North Korea's official media said Jang had gone to China to discuss commercial projects between the two countries.

Jang's trip is seen as the latest sign that Kim is looking seriously at ways to revive his reclusive country's decaying economy that has been in decline for years and is unable even in years of good harvests to feed its 24 million people.

North Korea already relies heavily on China to support its economy, which has been dragged down by decades of mismanagement and international sanctions over its weapons programmes.

Kim's father, who died last December, flirted with reform but never really let it take root, wary of anything that might undermine his family's iron grip over the state.

But the new leader has presented a very different image to his father and is believed to want economic and agricultural reform. Jang has long advocated such reforms.

In another sign that Kim may be looking to end international isolation, he has sent the country's nominal head of state Kim Yong-nam this month to Vietnam and Laos, where he was reported to have discussed economic development.

Chen said there were good opportunities to develop ties between the two nations - Beijing is Pyongyang's only major ally - and to expand fast-growing bilateral trade, which he said was up 24.7 percent in the first half of 2012 on a year earlier, worth some $3.1 billion.
Total trade between the two countries was $5.7 billion in 2011, up 62.4 percent, Chen cited data from China's Customs Administration as saying.

ECONOMIC ZONES

Chen said the first priority was to "actively and steadily push forward the development and cooperation of two economic zones" that the two had established in June 2011.

The zones are in Rason on the North's east coast, and in Hwanggumphyong, an area on the border between the two countries that is yet to be developed.

"Governments should bring existing economic and trade mechanisms into play appropriately and push forward and improve the two-way trade and investment environment," Chen said.

He called for expanding and deepening the cooperation between North Korea and China's north eastern Liaoning and Jilin provinces which border the country, and to strengthen cooperation on building infrastructure.

The two countries have planned to develop a new industrial district on the Yalu River that runs along their border, but the construction of a bridge that will be part of the project has been suspended because of disagreements on how to proceed.

China is believed to be wary of pursuing a major new commercial venture with North Korea amid its own leadership transition and as Pyongyang continues to defy calls to divert scarce resources away from its arms development programme.

So far, North Korea has received little more than $300 million in non-financial direct investment from about 100 Chinese companies mainly in the food, medicine, electronics, mining, light industry, chemicals and textile sectors.

Chen said North Korean companies had made investments in China worth more than $100 million.

South Korea is the only other partner in commercial development in the North, with an industrial park in Kaesong, just north of their heavily fortified border that is the site of factories where about 120 South Korean firms use cheap local labour to make goods.

North Korea has been creating special economic zones since the 1990s, but with little success outside of Kaesong, with investors wary about the absence of clear commercial laws to protect their holdings.

China signals strong support for decaying North Korea economy - Yahoo! News
China is building a stronger relationship with North Korea basically to boost its own flagging economy through investments.

By entering into the mining sector, China will be able to extract the ores required for its own industry. Other investment to include light industry will allow China to have cheaper products for Chinese export products that are becoming expensive as the Chinese labour is no longer ready to work for crumbs as offering.

By closer relationship with China, it will allow China the leverage to pressure South Korea and Japan, both of which are not taking China's activities in the SCS and elsewhere favourably.

Thus, it is a win win for China.
 

drkrn

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china needs to send some sigmals to pakistan tooo
 

sob

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sir, as you have correctly pointed out for China it is a win win situation. On one hand it gets access of raw materials and also a new low cost manufacturing base for their export industry.

Already Vietnam and Cambodia have attracted a few industries from China with their cheaper labour cost.

With this China also secured their border by propping up the regime. It ensures that they will not have to face a refugee crisis in case there is a collapse of the regime.
 

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