News / Asia

    China Nudges North Korea to Reform With Limited Success

    A Chinese man rides his bicycle past the North Korean embassy in Beijing, November 5, 2010.
    A Chinese man rides his bicycle past the North Korean embassy in Beijing, November 5, 2010.

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    Three months after North Korea shelled a South Korean island and threatened a wider conflict, military envoys from both sides sat down for rare talks this week.

    Determining North Korea's motives is always difficult, but many observers say that behind the scenes, China is nudging its communist ally back to diplomacy.

    Listen to Kate Woodsome's report

    Beijing is Pyongyang's only constant friend, and its aid and oil keep the lights on in North Korea. Beijing has tried to use this sway to keep the state stable, but even China has its limits.

    North Korean leader Kim Jong Il rarely leaves the country. But when he does, he travels in style. Last year, his personal armored train wound its way across the border into China to meet with senior officials. Twice, in three months.

    “Those two visits were both closely bound to the succession, which was revealed to the world last September and October," says John Everard, who served as Britain’s ambassador to Pyongyang from 2006 to 2008.

    Everard says the aging Kim was seeking China’s support for his youngest son to replace him. But, he adds, each time the North Korean leader leaves his isolated corner of the world, it is an opportunity for China to show him what life could be like in the Democratic People’s Republic of Korea, or DPRK, with a few reforms.

    “The Chinese have said repeatedly that the DPRK has to open up," he says. "Remember that in Kim Jong Il’s visit to China, where he was shown around the special economic areas, we’re quite clear the Chinese were trying to ram home a message.”

    For North Korea, China is an example of authoritarian capitalism done well: a Communist party that has maintained its grip on power while making market-orientated reforms.

    And while Washington and Seoul are using sanctions to try to force nuclear-armed North Korea to make similar political reforms, Scott Snyder of the Asia Foundation’s Center for U.S. Korea Policy says Beijing worries that pressuring the regime too much could lead to collapse.

    “I think the dilemma that the Chinese face is that North Korea on its current path may be inherently unstable," says Snyder. "And so investments might be a potential way of trying to, in the long-term, achieve a kind of reform that would support the objective of maintaining stability.”

    One Chinese company says it is planning one of the biggest-ever private investments in North Korea, a two billion dollar stake in a key port. A “letter of intent” obtained by VOA’s Korean service outlines plans by China’s Shangdi Guanqun Investment Company to develop the Rason special economic zone, a sliver of land in North Korea’s far northeast that borders Russia and China.

    If the proposal inked in December is carried out as planned in the next five to 10 years, the firm would build a road, a refinery, a steel mill and a port.

    In return, China would get rights to North Korea’s Musan iron ore mine and greater access to the Sea of Japan, a key entryway to disputed islands claimed by Beijing and Tokyo, and a warm-water port accessible year-round.

    Snyder says deals like this are hard for North Korea to refuse.

    “North Korea needs a certain amount of hard currency in order to be able to survive and to sustain itself, and so it is a point of potential leverage and weakness especially for a state that has thrived on isolation.” he says.

    Despite China’s economic might, its leverage has limits. Even for politically-connected Chinese businesses, North Korean business ventures are risky investments, says Drew Thompson, the director of China Studies at the research group the Nixon Center in Washington.

    “They have basically sold these projects again and again and again to interested Chinese. And in February 2010, the Indians were looking at the same iron plant,” he says.

    Thompson adds that North Korean’s arbitrary, capricious approach to business has hampered growth at the Rason zone, which has only attracted about $100 million in foreign investment since it was created 20 years ago.  He has counted fewer than 200 Chinese businesses that have invested in relatively small projects throughout the whole country. But he points out those companies, and Beijing, are thinking long-term.

    “The desire amongst many Chinese companies is to get a foothold in the market so that they’re well positioned in the event that reform and opening takes place in North Korea,” says Thompson.

    For now, Kim Jong Il desperately needs Beijing’s oil, aid and cash to reinforce his isolated government.

    But despite the regime’s desperation for hard currency, Marcus Noland of the Peterson Institute for International Economics in Washington, says that opening up the economy even more would be considered political suicide in Pyongyang.

    “So what the North Koreans seem to be trying to achieve is economic integration with China, but essentially on the North Korean government’s terms," says Noland. "This integration is to be run through government-controlled entities where the state will play a central role in determining the nature, pace and scale of these developments.”

    North Korea is taking the same approach to its unsanctioned markets.

    After a deadly famine nearly crumbled the Pyongyang government in the 1990s, unregulated markets and informal cross-border trade with China met North Koreans’ needs where the state failed. But the markets also threaten the regime.

    Ambassador Everard says it is not the freely traded illegal goods the authorities are concerned about. It is the ideas.

    “Constant gossip. You walk into a North Korean market and everyone is chattering," he says. "Now, clearly some of those conversations will be about the price of apples. But if you put lots of North Koreans together in an environment where they can talk pretty freely, they are going to serve as foci for information exchange, gossip exchange and exchange of opinions on what’s going on, which is just the kind of thing the regime doesn’t want.”

    North Korea has since cracked down on the informal markets. That tension between North Korea’s drive to survive on its own terms, and its drive to survive at all, is what defines its relationship with China.

    But as Pyongyang careens from one crisis to the next, Everard says a debate is growing in Beijing between those who want to support a fellow socialist state at all costs, and critics who consider North Korea more trouble than it is worth.

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