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Thirteen Cities to Establish Economic Trade Zone with North Korea

Nation, page 10
Issue 493, November 6, 2010
Translated by Zhang Chao
Original article:

Thirteen cities in Northeast China, headed by Dandong and Tonghua, have grand plans for their joint development.

On October 26, Li Yunfeng, who heads the Office for regional cooperation in Northeast Dandong revealed that 13 cities in the Yalu River basin are planning to establish an economic cooperation zone. They hope this will drive forward the opening up of the border area in Northeast China, and, by establishing an economic zone, make the region into a key player on the national scene.

The 13 cities are Hegang, Kiamusu, Shuangyashan, Qitaihe, Jixi, Mudanjiang, Jilin, the Yanbian Korean National Minority autonomous prefecture, Tonghua, Baishan, Dandong, Benxi and Dalian. However Dalian only has the status of an "observer member" since it falls outside the region.

Li Yunfeng says they have already tasked relevant scholars from Jilin University with researching and setting out an "Overall Plan For An Economic Cooperation Zone along the Yalu River in Northeast China". The economic zone will be linked to the economically advanced area of Changchun, Jilin and Tumen River and the coastal economic belt in Liaoning. The connection will give a push to economic development in the entire coastal area.

Meanwhile, Wang Shunian, an inspector from the Department for the Promotion of Development in Northeast China at the National Development and Planning Commission said that China wants to promote the opening of new frontiers as set out in the Twelfth Five-year Plan. The easternmost part of Northeast China plays important role in opening national borders.

Collaboration Among 13 Cities

Song Guang, a member of the Party Committee of the Dandong Development and Planning Commission, is responsible for designing and planning the Yalu River economic zone.

According to Song, "Tonghua, Baishan, Benxi and Dandong will be the first four cities included in the Yalu River economic cooperative zone. The belt will connect the coastal economic belt in Liaoning with the advanced economic area of Changchun, Jilin and Tumen River. North Korea may also be connected."

According to the agreement on the regional cooperation of 12 eastern cities in Northeast China, there will be 13 cities implementing the regional policies. The cities will work together to research and develop regional strategies to accelerate economic development and investment and promote mutually beneficial economic measures.

"We'll share the work and share the benefits," Song Guang explained. The successful establishment of the regional railway in the east of Northeast China is a good example.

He also revealed that they are currently attempting to contact other cities in the northeast region to join the proposed economic zone. They hope the Yalu River cooperation economic zone will gain national attention.

Li Yunfeng also told a reporter, "13 cities line the Yalu River basin, and all trade with North Korea. So why not work together?"

Li Yunfeng said that the strategy will be discussed at the Executive Conference of the Four Northeastern Provincial Capitals and is currently the only program for interprovincial cooperation in Northeast China.

According to an official from the Department for the Promotion of Development in Northeast China, the National Development and Planning Commission has not even considered the project. There is also no concrete plan.

But he revealed that the Secretariat of Regional Cooperation in the Northeast region has already been set up. Construction on the Northeast Regional Cooperation Mansion, a building costing 500 million yuan and comprising 25 floors, will be finished next year. When it is finished, each city will send officials to the secretariat.

"If we want to build an economic cooperation zone, we must first solve the problem of transportation," Li Yunfeng said.

A road 1,380 km long, connecting Dalian, Dandong, Tonghua, Mudanjiang, and several other cities is currently under construction.

Dandong: A Pioneer in Foreign Trade

"There's no doubt that Dandong will be the biggest beneficiary. It is the only city that has a seaport. This will save lot of money," Li Yunfeng said.

High-level officials in the city are keen to transform Dandong into a second Shenzhen.

Dandong has always been a forerunner in trade with North Korea.

Dandong Port is also the closest port to the Korean Peninsula and the Japanese island chain.

Zhao Liansheng, the Mayor of Dandong City, said that about 60-70 percent of exports to North Korea pass through the Port of Dandong.

“In the first half of 2010, Dandong's total export volume amounted to 890 million US dollars, 60 percent of the total trade volume between China and North Korea," said Song Ximei, Assistant Director from Department of Propaganda of Dandong Municipal Party Committee.

Mechanical and electrical products, crude oil, textile yarn, fabric, agricultural product are exported; clothing and attire, mechanical and electrical products, iron ore and ore concentrate are imported.

Trade with North Korea was first initiated by overseas Chinese who migrated to North Korea.

In North Korea, commercial commodities are scarce and business-savvy Chinese have been reselling Chinese commodities in North Korea for a substantial profit.

There is an old tale about "getting rich from fritters": A Korean Chinese wearing a military overcoat arrived at Dandong, stuffed his overcoat with fried fritters wrapped in plastic, and resold them in North Korea. The fritters were a hot commodity over the border, and he sold his stock for more than four times their value.

Foreign traders also do business here.

Recent exchanges between the Chinese and North Korean leaders have prepared the way for international and domestic capital to flow into North Korea. More and more traders are arriving in Dandong.

The two islands, visible from the bank of Yalu River, boast only a few shabby houses. They strike a sharp contrast to the tower blocks in Dandong across the river. Four months ago, seeking to begin systematic economic reforms, North Korea opened the islands to outside investment, and they are now flooded with merchants.

The Dilemma of Trade with North Korea

Although the government is keen to promote trade with North Korea, problems with border trading are hindering Dandong's economic development. A capricious central policy and poor credit are the two biggest obstacles facing cross-border trading.

Two years ago, Jin Zhengming, a native of Fujian Province arrived in the Yalu River area. Attracted by the fantastic prospect of an overnight fortune, he came to Dandong with tens of thousands of renminbi.

He had not expected the border trade business to be difficult. "After we reached an agreement over price with the North Korean Business organization, we sent a large stock of goods, but we did not receive payment. They go back on their word all the time," Jin Zhengming said.

Jin Zhengming later opened an agency in the Sinuiju that invites North Korean Chinese to inspect the scale and credit of North Korean businesses, as well as the character of its management. But even with inspections, border trade business is highly risky.

One businessman involved with border trading explains, "North Korea has no clear-cut business policies; laws on profit distribution, travel, and visiting visas are also confused."

When Jin Zhengming began doing business with North Korea, he was surprised by the attitude of the Dandong government. They had no power and no inclination to facilitate cross-border trade. When trade companies came across problems, they had to solve them by themselves. This type of conduct would be unimaginable at other trade ports.

One Dandong official confessed that since the country issues no supporting policies and its leaders attach little importance to border trade, trade companies operating in the area face an impasse.

Gao Xinli, who worked for an import-export company in Dandong said that in 1993 the nation issued policies to encourage border trading, but these were not enforced by the local government. Since government involvement is minimal, cross border trade has developed its own set of "unwritten rules".

Gao Xinli cites compensation for middlemen, usually between 5000 to 20000 Yuan, as one of these rules.

Another unofficial practice is for the entertainment expenses of North Korean personnel traveling to China to be covered by the cost of goods.

The border traders mentioned above say that the suspension of the 24-hour customs entry system and instability in North Korea have both raised logistics costs. Arbitrary fees are also a serious problem. "For a single car to cross the border can cost 1,000 yuan. Dandong, only 200 meters long, is the most expensive port in the world."

The shortage of places to secure funding in Dandong is another problem. Local commercial banks only provide small loans to select border enterprises.

In addition, because none of China's five biggest banks have branches in Dandong, the RMB settlement plan promoted by the Central Bank has no impact.

Facing problems with the Sino-North Korean border trade at the end of last year, North Korean leaders introduced new policies on cross-border trade. Since then, it has been showing signs of improvement. 

This article was edited by Ruoji Tang and William Bland

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