North Korea’s foreign exchange rates — which collapsed during the COVID-19 pandemic — are recovering to their pre-COVID levels with the county’s recent expansion of trade. With foreign exchange rising in value as the exchange rate climbs, more people are using foreign currency in markets in Pyongyang and certain border areas, just as they did before the pandemic.
According to multiple Daily NK sources in North Korea on Wednesday, more and more locals in border cities of Yanggang Province and North Hamgyong Province are buying goods in markets using Chinese yuan. Not only are they using yuan to purchase industrial goods or foodstuffs imported from China, but also to buy rice, corn and other domestic agricultural produce.
Prior to the border closure to block COVID-19, in border regions such as Hyesan, Yanggang Province, people used yuan everywhere, just like the local currency. However, after the closure of the border in January 2020, people greatly reduced their use of foreign currency in their daily lives as its value plummeted.
According to Daily NK’s regular survey of exchange rates in North Korea, the yuan was trading at KPW 1,270 in Hyesan on Jan. 17, 2020, just prior to the closure of the border.
The yuan remained about KPW 1,000 through October of that year on the back of expectations that the border closure would soon be lifted. However, the rate began falling from late 2020, and by June 2021, the yuan was trading below KPW 500.
At the time, not only was it difficult to purchase imported items in markets, but people believed they would take a loss by using yuan. So, many people decided to hold on to their yuan until the exchange rate climbed rather than use it to purchase items.
However, the reporting partners all agree that recently, more and more people are using foreign currency rather than the greatly weakened local currency to purchase items as the exchange rate climbs to pre-border closure levels.
In fact, the yuan was trading at KPW 1,250 in Hysan as of Monday, little different from the rate prior to the border closure.
Pyongyang markets see increase in foreign currency use as well
In Pyongyang’s foreign exchange shops and department stores, people continued to use dollars even after the closure of the border, but the use of dollars noticeably dropped in markets. However, with the recent increase in imported items at markets, more people have been using dollars to pay for items.
People can use dollars to purchase not only industrial goods like clothes, fans, refrigerators and freezers, but also imported foodstuffs like seasonings and soybean oil. In particular, at some stalls that sell imported industrial goods, prices are marked in both local currency and dollars.
Because merchants who deal in imported goods use foreign currency to obtain their wares, they prefer to sell their goods in foreign currency as well, sources told Daily NK.
However, in Pyongyang, sales of domestically produced agricultural items or domestic industrial items are done in local currency only.
The problem is that if the use of foreign currency rises in North Korea, the value of the local currency could fall and the authorities’ foreign exchange holdings could worsen. Because of this, North Korean authorities could try to indirectly restrict the use of foreign currency by banning the dual marking of prices in local currency and foreign currency at markets, forcing merchants to mark items in local currency only.
Along the same lines, North Korean authorities appear to be taking a very careful approach to expanding trade. This is because if trade expands, people may use foreign currency more frequently.
The 19th Plenary Meeting of the 14th Standing Committee of the Supreme People’s Assembly in January amended and supplemented the nation’s trade law, adding “articles to expand and develop trade in a direction so that all trade activity contributes to the independent development of the national economy, and to strengthen centralized and unified guidance and control over trade activities.”
Given that the authorities intend to conduct limited trade activities under centralized guidance and control even after the COVID-19 situation has stabilized, state control and management of trade is unlikely to ease even if trade itself expands.
Translated by David Black. Edited by Robert Lauler.
Daily NK works with a network of sources who live inside North Korea, China and elsewhere. Their identities remain anonymous due to security concerns. More information about Daily NK’s reporting partner network and information gathering activities can be found on our FAQ page here.
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