North Korean trading officials on assignment in China are actively seeking businesspeople willing to invest in the North. The regime appears to be pressuring them to earn more foreign currency before Party Foundation Day.
“North Korean traders near Dandong have recently been encouraging Chinese businesspeople to invest in North Korea. They’re offering to help the businesspeople secure future concessions for commercial activities in North Korea if they agree to supply goods on credit,” a source in China told Daily NK recently.
The typical practice for trade between North Korea and China has been for North Korea to pay a portion of the cost upfront and the remainder upon delivery.
But now North Korean trading officials are asking their Chinese counterparts to send goods on credit, with payment scheduled for a later date. The North Koreans are promising that if these deals go through, they will place larger orders and authorize the Chinese to run their own stores in North Korea in the future.
Traders push hard for delayed payments
According to the source, a significant number of North Korean traders operate in Dandong, in Liaoning province. Their primary responsibilities include arranging imports of Chinese goods, promoting exports of North Korean goods, and attracting Chinese investment.
A major focus recently has been persuading Chinese businesspeople to accept delayed payments for shipments of imported goods.
“North Korean traders made many investment proposals to the Chinese in the past, but nowadays they’re pushing very hard to arrange delayed payments. That indicates the traders themselves are under significant pressure to get results,” the source said.
One North Korean trader in Dandong recently made a strong pitch to a Chinese businessperson viewed as a potential investor.
“Don’t assume the investment environment in North Korea is the same as it used to be. If any issues arise, the government will take responsibility for fixing them,” the trader said.
North Korean traders are emphasizing changes in the investment environment because many Chinese who invested in the North previously never recovered their principal investment.
“It’s widely believed among the Chinese that North Korean traders are likely to default on debts to foreigners and feign innocence. That has led Chinese businesspeople to be very cautious about making deals with North Korea,” the source explained.
Some Chinese willing to take the risk
Nevertheless, an increasing number of Chinese businesspeople have been considering investment in North Korea.
“Some Chinese businesspeople have been convinced by North Korean traders to ship goods to North Korea with the understanding they will be paid later. These businesspeople tend to be those with extensive experience doing business in North Korea and personal relationships with the traders involved,” the source said.
North Korean traders are generally using this payment strategy to import machinery needed for heating in winter, including hot-air blowers, solar panels, and transformers.
Since most of this equipment is impossible to import through official customs channels due to U.N. Security Council sanctions on North Korea, traders are smuggling it into the country. Even a single shipment of these goods can cost as much as 1 million Chinese yuan ($140,000).
Since North Korea is not paying any advance on these shipments, some Chinese businesspeople are reportedly concerned they will not receive payment.
“North Koreans have often appeared sincere at first only to go back on their word later. If North Korean traders return to their old tricks, no one will be willing to invest in North Korea anymore, no matter how strong Pyongyang-Beijing relations become,” the source said.
