Shenyang, China — Partly due to a crackdown on the use of foreign currency, especially Chinese Yuan, food and product prices in North Korean markets are higher than ever.
As of now, the market price of rice in Hamkyung Province is around 1,500 won per kilo, with ground corn at 800 won and unprocessed corn kernels selling for 600 won per kilo.
The primary cause of the current situation is the limit on the amount of old denominations people were permitted to exchange at the time of the redenomination. Seeing their savings disappear, the remnants of popular trust in the North Korean won which had existed evaporated.
Additionally, rumors of another redenomination being implemented have circulated since then, making citizens yet more obsessed with obtaining stable foreign currencies.
But the authorities are endeavoring to regulate supplies of Yuan. A Daily NK source explained, “Lately, cadres have been claiming that the Chosun (North Korea) economy could be occupied by China, so dealing in Yuan is banned.” He added that he does not know whether this is just a pretext, or whether the North’s officials really are worried.
Additionally, of course, the amount of foreign currency in the country cannot meet the overall demand. This is stoking inflation.
There are three measures the authorities are employing to block the inflow of Yuan.
First and most obviously, they are blocking the channels of direct Yuan inflow. Since the redenomination, North Korean border guards have been cracking down on smuggling and drug dealing.
One unintended result of the crackdown is that currency smuggling and drug dealing are now being led by border guards, but supplies of Yuan are still dropping as a result of the measure.
Secondly, due to regulations against the use of cell phones for reasons, nominally, of national security, dealings between North Korean traders and Chinese wholesalers have been seriously circumscribed. Now, less than half the previous amount of cross-border trading is being initiated via mobile phone.
Lastly, in the market, a ban on the circulation of foreign currency is still in force. As foreign currency dealing is more risky now, the costs associated with that risk are being added into the exchange rate while, simultaneously, the value of the North Korean won is deteriorating for a number of reasons.
Of course, these causes and effects are all linked, and North Korean residents have come to believe that it is now impossible to break the inflationary spiral for the time being, according to the source.
Either way, measures prohibiting the inflow of Yuan are fueling the flames. Experts on North Korea’s economy agree that allowing North Koreans citizens to trade freely with Chinese traders and lifting the regulations against foreign currency usage would be good means by which to partially curb inflation, but it appears that the authorities are committed, for the time being, to doing the opposite.