North Korea recently upgraded the status of a North Korean-Chinese joint venture company as part of efforts to encourage the sale of public bonds to the country’s wealthy entrepreneurial class, the donju, Daily NK has learned.
A source in North Korea told Daily NK on May 13 that the Pyongjin Joint Venture Company (평진합영무역회사, also formerly known as the Pyongjin Bicycle Joint Venture Company) had recently been “promoted” in status to become the Pyongjin Trade Guidance Bureau (평진무역지도국, referred to as “Pyongjin” below). This promotion reportedly allows the company to exercise greater autonomy and authority over its operations.
Trading companies in North Korea typically operate under the aegis of the Ministry of External Economic Affairs. When North Korea promotes trading companies to “guidance bureaus” they can directly pitch their business plans to the country’s Cabinet without having to go through an intermediary government agency.
Pyongjin is headquartered in the Chinese coastal metropolis of Tianjin and holds a symbolic place in trade relations between North Korea and China.
In the past, the company was mainly involved in the import of parts for bicycles and motorcycles. These parts have been imported into North Korea from China and used to assemble bicycles and motorcycles for sale in the country.
The company’s recent change in status suggests that it will move beyond its existing activities to import and sell Chinese equipment and even become involved in the purchase of local North Korean factories. North Korean officials have also reportedly granted the company various preferential benefits with regard to customs fees and logistics within North Korea.
The change in the status of the company, however, is mainly related to the North Korean government’s efforts to increase the sale of public bonds, which were floated in mid-April, according to Daily NK’s source in the country. This is evidenced by the fact that the authorities have given the company greater authority over its businesses along with the right to sell off business rights.
“The donju have reacted negatively to the government’s efforts to force them to purchase public bonds in exchange for commercial business permits. State authorities then decided to use the joint venture with China to encourage the donju to invest in the company or to purchase business rights related to the company using public bonds,” the source said.
“The authorities are essentially expecting the donju to invest in the company because while many donju don’t trust the state they know that Chinese-backed companies aren’t likely to fail,” he added.
In short, North Korean authorities are hoping to absorb as much foreign currency from the donju as possible through investments they make into the joint venture company.
Pyongjin has control over a range of commercial interests in North Korea. The company also reportedly sells North Korean minerals in high demand in China to the Chinese at cheap prices.
“Pyongjin has effectively become a link between the donju and the North Korean government to promote the purchase of public bonds,” the source said.
“In exchange [for helping promote the purchase of bonds], Pyongjin representatives reportedly held a meeting with the North Korean Cabinet to ‘readjust’ prices for iron ore, gold, magnesia clinker and other materials,” he added.
Daily NK recently reported that North Korea had resumed exports of minerals to China, and that these transactions reportedly consisted of such minerals such as iron ore, magnesia clinker and gold.
This development suggests that trading companies operated by the North Korean military along with trading companies like Pyongjin have resumed exports of minerals to China.
“Apart from the government’s desire to encourage purchases of public bonds, North Korean officials want to forge closer trade ties and friendship with China [by promoting Pyongjin to become a “guidance bureau],” the source said.
“The company’s promotion in status was due to the Chinese government’s efforts to open up paths to business between companies already in North Korea and between Chinese companies and individuals who work with North Korea. The Chinese government also wanted to to help invigorate economic development in the country,” the source further noted.
*Translated by Violet Kim
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