A growing number of North Korean merchants have been suffering losses in the face of plummeting prices for certain goods and a rising KPW-RMB exchange rate, Daily NK has learned.
“Many business people in Hoeryong are despairing because they’ve had to sell their goods at a loss. Even those who have worked hard every day to earn money and get by are once again seeing their livelihoods threatened,” a reporting partner in North Hamgyong Province told Daily NK on Tuesday, speaking on condition of anonymity for security reasons.
Their difficulties began when prices started to fall for imported Chinese food products like soybean oil and seasonings, as well as some manufactured products.
As the downward trend continued, many donjuLiterally "masters of money," donju refers to people who hav... More, or members of North Korea’s wealthy entrepreneurial class, were forced to take losses on items that they had previously bought in bulk.
For example, one kilogram of Chinese soybean oil was selling for about KPW 28,000 as recently as the end of March, but now the price for that same kilogram of oil has plummeted to almost half as much at KPW 15,000. The unexpected price drop surprised the donjuLiterally "masters of money," donju refers to people who hav... More who had bought soybean oil in bulk, and many now are taking losses of KPW 13,000 for each kilogram of oil they sell.
At the same time, the rising KPW-RMB exchange rate has come as a painful one-two punch to retailers.
In early April, the Chinese yuan was trading at KPW 1,200 and one kilogram of soybean oil sold for about KPW 18,000. Now, the exchange rate has risen to KPW 1,290 while soybean oil prices have fallen to KPW 15,000 per kilogram.
For North Korean market retailers who convert all of their profits into foreign currency, this means that those selling one kilogram of soybean oil in early March earned 15 RMB (KPW 18,000 at a rate of KPW 1,200:RMB 1). Those same retailers are now taking a significant loss selling each kilogram of soybean oil for RMB 11.6 (KPW 15,000 at a rate of KPW 1290:RMB 1).
On top of this, the current market structure forces retailers to conduct sales in local currency before converting profits to Chinese yuan in order to repay wholesalers, the reporting partner said.
“Market vendors have been buying from wholesalers on credit and then paying the money back later from the profits they’ve made. However, when it comes time to pay off credit, the wholesalers make retailers pay them back in North Korean won if the KPW-RMB exchange rate is low or in Chinese yuan if the exchange rate looks like it will rise.”
The reporting partner added: “The government has control over the import and distribution of goods brought into the country through trade with China, so it’s becoming harder for market vendors to make money. There’s a general consensus that current economic policies don’t align with reality, which requires people to continue to tighten their belts.”
Translated by Rose Adams. Edited by Robert Lauler.
Daily NK works with a network of reporting partners who live inside North Korea and China. 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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