> Insight
Bridge over troubled water...
By Li Xiaokun and Wang Huazhong (China Daily)
Updated: 2009-08-05 07:51

 Bridge over troubled water...

Chinese vehicles head back to Dandong across the "Grand Bridge of Sino-DPRK Friendship" over the Yalu River. Chen Hao

Sitting on a cardboard box outside the customs building in Dandong, a major city in northeast China's Liaoning province, Xu shielded her eyes from the scorching midday sun and sighed.

She had been staring across the border to the Democratic People's Republic of Korea (DPRK) for hours, hoping for the sight of an oncoming truck.

Xu is a smuggler. For the past seven years, she has fed her family by helping clients sneak food, clothing and various other basic supplies across the border to the DPRK, the land of her birth.

It is a small operation and one of the many that exploit the city's position as a main point of trade between China and its reclusive neighbor, which over the years has relied heavily on the relationship to survive.

Dandong and its people, however, have been one of the worst casualties of the tension that has arisen between the two nations following the DPRK's decision to again test its nuclear might on May 25.

"Business used to be very good but we have suffered a lot recently because of a serious decline in trade," explained Xu, who is in her 40s and refused to give her full name due to the sensitivity of her profession.

Xu, along with her husband and son, were able to flee the DPRK in 1990 after telling officials they planned to visit relatives in Dandong. They have never returned and, as the couple were both children of overseas Chinese, they successfully applied for permanent residential permits after five years.

On an average day, Xu would receive a call from a client in the DPRK with a list of items, from washing powder to television sets. She would then buy the goods and liaises with DPRK truck drivers, who concealed the contraband cargo before heading back across the border, marked by the Yalu River and 66-year-old "Grand Bridge of Sino-DPRK Friendship".

Bridge over troubled water...

"Last year, I earned 100,000 yuan ($15,000)," said Xu, boasting a figure more than 10 times the official average income of an urban Dandong resident. "But fewer and fewer trucks are coming to China. Now I make just 213 yuan a day and only made 20,000 yuan during the first half of this year."

Xu's story is just the tip of the iceberg, according to Dandong Federal Business Corp Chairman Shan Jie, who said: "Most of the nearly 1,000 legal enterprises involved in border trade here have stopped operations."

Shan, who has run the corporation for 16 years, said he has forged close relations with officials in Pyongyang, the capital of the DPRK, with turnover hitting a peak of

$6 million in 2000.

"Political events like the first nuclear test back in 2006 had limited impact on our company," he said. "But our business has hit rock bottom since the May test. We agreed 17 deals worth 3 million yuan with Pyongyang in April, but so far only one of them has materialized.

"We are under a great deal of pressure, but at least we have one deal going. Many other firms have no deals, no income and are desperate."

Xu Ziyun, who works for Hantong International Forwarding Agent, one of the largest trading companies in Dandong, agreed that the amount of cargo crossing the border was shrinking fast.

"Before the nuclear test in May, more than 100 trucks were checked by Chinese customs officers every day. At the peak, our company alone sent 129 vehicles to the DPRK daily. But now only about 30 trucks from each side are crossing," he said.

The fate of Dandong has for decades been inextricably linked with its mysterious neighbor. In 1950, when the city was called Andong, it became a household name when the Chinese army of volunteers marched across the bridge over the Yalu River to fight in the Korean War.

The many Chinese parents who named their children Andong assured its place in history, while today China's northernmost port city is where more than half of all Sino-DPRK trade is conducted.

International trade became the city's economic pillar in the 1990s following the collapse of light industry amid the reform of the State-owned enterprises. Transactions with the DPRK accounted for 80 percent of its foreign trade last year, said the Dandong Customs Bureau.

"Dandong's trade with Japan and Republic of Korea (ROK) has also been severely hit by the financial crisis," said Shan. "If the situation continues, the city will be trapped in the mire."

In Yanji, a city further north along the border in the neighboring province of Jilin, the economic climate is also gloomy. A local businessman was quoted in the Los Angeles Times last month as saying this year had been the hardest of his 10-year career trading with the DPRK.

Recent figures from the Ministry of Commerce showed China's trade with the reclusive nation had surged 40 percent from $192 million in May to $269 million in June. However, Zhang Baoren, an expert on the Korean Peninsula economy with Jilin University, said the figures covered various kinds of trade, including Beijing's aid to Pyongyang, and did not reflect the real picture of the situation in border cities.

Dandong's foreign trade authorities declined to offer statistics for local dealings with the DPRK.

"China controls the lifeline to the DPRK as 90 percent of crude oil and 80 percent of commodities there come from China," said an article in Japan's Yomiuri Shimbun newspaper recently, while media in ROK reported that Pyongyang's reliance on trade with Beijing increased from 32 percent in 2003 to 73 percent last year, largely due to a deterioration in relations between the DPRK and Seoul after the hardline Lee Myung-bak administration took power.

This has left some analysts scratching their heads over the subsequent drop off in trade with China, with some blaming the nuclear test and 18 missile launches it has carried out since April, which military staff in the ROK estimated cost their northern neighbors a cool $700 million.

Dandong businessman Shan disagreed. According to the United States' Institute for Foreign Policy Analysis, the DPRK's gross domestic product stands at $17 billion. The White House has also claimed Pyongyang has raised funds by selling nuclear technology abroad, although there are no exact figures for the alleged deals.

"The DPRK can afford $700 million," said Shan. "The DPRK is saving money for extreme circumstances, such as a war or domestic turmoil, given the huge pressure exerted by the international community, the unstable health of the nation's leader Kim Jong-il and a possible power transfer, maybe to his third son Kim Jong-un.

"These complex factors have made Pyongyang more cautious with its money compared to after the 2006 nuclear test," he said.

The Los Angeles Times reported on July 5 that the DPRK was taking a "great leap backward" to restrict its commodities economy, which it has been developing for the past decade. It said some items of food, clothing and even pharmaceuticals imported from China were banned in its markets, with local traders now stocking only 35 percent of the merchandise previously available.

Liu Jiangyong, one of China's leading experts on Northeast Asian studies with Tsinghua University in Beijing, however, believes the opposite is true and said the DPRK was actually looking to boost its commercial economy.

Bridge over troubled water...

"The nation's first television commercial, one for Taedong Beer, was broadcast on July 3 and is as a signal they want to follow China's way of economic reform," he said. "The reduction in trade is largely due to the tight control Pyongyang has placed on its border with China since May."

Liu said reasons behind the tightened border controls are the uncertainty surrounding the DPRK's political situation, which has been exacerbated by Kim Jong-il's suspected ill health and fears of information leakage.

"In this unstable political situation, the DPRK leadership wants to consolidate its domestic political control, keeping a tight lid on contact with foreign countries and people," said Yongwook Ryu, a ROK-born Northeast Asian studies specialist with Harvard University in the US. "Politics comes before economics in the DPRK right now, and they will do things even if doing so would hurt their economy."

Many businessmen and women involved in DPRK trade in Dandong told China Daily they were pessimistic about the future, but Shan insisted he was upbeat.

"I'm a native of Dandong and, based on my experience, the strained situation will last for no more than three months," he said. "And, to tell you the truth, as border merchants we don't fear war, which will bring even greater opportunities.

"What does concern me is the domestic situation over there. The power shift will definitely affect trade."

He is not alone in his fears and experts have suggested there is now a subtle balance between legitimate trade and smuggling in the border cities.

"Keeping the trade flowing between the duo is the only choice for the DPRK," said Lu Chao, director of DPRK study center of Liaoning Provincial Academy of Social Sciences. "It is a basic prerequisite to develop and participate in world trade."

Ryu at Havard University added: "Both countries see lots of benefit in bilateral trade but the speed of the resumption depends on how fast it takes for the DPRK regime to become politically stable. If they feel they have a firm grip on power, and if the leadership issue is settled, then they will start engaging with the outside world strategically as before."

Bridge over troubled water...

(China Daily 08/05/2009 page7)