North Korean Economy Watch

UPDATE:  According to Defense News:

Fears that China will establish a naval presence at a port facility at North Korea’s Rajin Port appear unfounded.

An agreement with a Chinese company to lease a pier at Rajin for 10 years was reported by the Chinese state-controlled Global Times on March 10.

The Chuangli Group, based at Dalian in China’s Liaoning province, invested $3.6 million in 2009 to rebuild Pier No. 1 and is constructing a 40,000-square-meter warehouse at the port. The leasing agreement has given way to suggestions China could be attempting to establish its first naval base with access to the Sea of Japan.

The North Korean Navy does use Rajin as a base for smaller vessels, such as mine warfare and patrol vessels, but for the time being, it appears economics are the primary motivation for the Chinese company’s presence there, said Bruce Bechtol, author of the book “Red Rogue: The Persistent Challenge of North Korea.”

“Chinese investment has increased a great deal in North Korea in the past five years,” he said. “It would not be a military port for the Chinese – as the North Koreans would be unlikely to ever allow such a thing.” He noted there are no Chinese military installations in North Korea.

The Rajin facility will give Chinese importers and exporters direct access to the Sea of Japan for the first time. “It is the country’s first access to the maritime space in its northeast since it was blocked over a century ago,” the Global Times reported.

China lost access to the Sea of Japan during the Qing Dynasty in the 19th century after signing treaties under duress from Japan and Russia.

Various media in Japan and South Korea have suggested the lease might give China an opportunity to place a naval base at Rajin, but Bruce Klingner of the Heritage Foundation in Washington, D.C., also downplayed the notion, saying North Korea’s negative attitudes toward China and a fear of excessive Chinese influence would negate any chance Beijing could establish a naval presence there.

Klingner also said he doubts North Korea would make a success out of the agreement. “Pyongyang’s aversion to implementing necessary economic reform and its ham-fisted treatment of investors suggests the new effort to turn Rajin into an investment hub will be as much a failure as the first attempt in the 1990s.”

ORIGINAL POST: According to the Choson Ilbo:

China has gained the use of a pier at North Korea’s Rajin Port for 10 years to help development of the bordering region and establish a logistics network there.

Lee Yong-hee, the governor of the Yanbian Korean Autonomous Prefecture in China’s Jilin province, made the announcement to reporters after the opening of the People’s Congress at the Great Hall of People in Beijing on Sunday.

He was quoted by the semi-official China News on Monday as saying, “In order for Jilin Province to gain access to the East Sea, a private company in China in 2008 obtained the right to use Pier No. 1 at Rajin Port for 10 years. Infrastructure renovation is currently underway there.”

In an interview with Yonhap News on Monday, Lee said, “We’re considering extending the contract by another 10 years afterward.”

Jilin abuts the mouth of the Duman (Tumen) River in the southeast but its access to the East Sea is blocked by Russia and North Korea. “We hope that an international route to the East Sea will be opened via Rajin Port,” he added.

Lee did not specify which Chinese company obtained the right and which North Korean agency awarded the concession. The Chinese Foreign Ministry on Feb. 25 said business investment in the North Korea-China border area is a normal business deal and does not therefore run counter to UN sanctions against the North.

According to Yonhap:

South Korea is keeping a close watch over North Korea’s efforts to draw greater foreign investment to one of its ports, as the move might indicate Pyongyang is opening up to the outside world and signal its return to stalled international nuclear talks, officials said Tuesday.

The North has agreed to give a 50-year lease on its Rajin port to Russia, and the country is also in talks with a Chinese company on extending its 10-year lease by another decade, according to an official from China’s Jilian Province, currently in Beijing for the National People’s Congress.

The North’s opening of the port on its east coast has a significant meaning for China as it will give the latter a direct access to the Pacific, but it also means millions of dollars, at the minimum, in investment for the cash-strapped North.

Officials at Seoul’s foreign ministry said the North’s opening of its port or its economy was a positive sign, but that it was too early to determine whether the move will also have a positive effect on international efforts to bring North Korea back to the nuclear negotiations.

“We are trying to confirm the reports, though they appear to be true because they were based on China’s official announcement,” an official said, asking not to be identified due to the sensitivity of the issue.

“We are trying to find out the exact details of the contracts (between North Korea and Russia and China),” the official added.

Additional information 

1. A previous report indcated that there were 250 Chinese companies registered in Rason.  The North Koreans reportedly closed out the insolvent and inoperable businesses. I do not know how many are there now. Read more here.

2. The Russian government recently built a Russian-gauge railway line from Kashan to Rason. Read more here.  It will be interesting to see if China upgrades roads and railways which could connect Rason to China.

3. Rason is sealed off by an electric fence. Read more here.

4. Many other stories about Rason here.

Read the full stories here:
China’s Jilin Wins Use of N.Korean Sea Port
Choson Ilbo
3/9/2010

Seoul closely watching N. Korea’s opening of port to China: officials
Yonhap
Byun Duk-kun
3/9/2010