North Korea's Trade with China in 2015: Analysis and Forecasts

Abstract

The year 2015 marked the first time North Korea's trade with China shrank since 2009. According to China Customs, North Korea's trade with China in 2015 recorded 5.4 billion, a drop by 14.7% from 6.4 billion in 2014. Exports to China recorded 2.5 billion, 12.6% lower than the 2.8 billion in 2015, and imports stood at 2.9 billion, falling 16.4% from 3.5 billion in 2014. The trade deficit recorded 459 million, dropping by 32.0% from 675 million in 2014. Although North Korea's overall imports and imports have witnessed a decline, the trade balance improved.It seems that North Korea's trade has reached a turning point due to the structural changes in the trade environment between North Korea and China. The continued slowdown of China's GDP growth rate and a sharp reduction in imports, signs of a domestic consumption-driven economy, is well expected to continue, and will further lead to a steady decline in North Korea's trade with China. Although imports from China have dropped due to a shortage of foreign currency resulting from export decline, the negative impact this may have on North Korea's economy has yet to show. Market prices have stayed stable since 2013. North Korea's trade with China in 2016 seems that the steady decline in raw materials price in international commodity markets and China's economic slowdown would negatively affect North Korea's trade with China. However, the keys are in North Korea's improved production capabilities and China's discretion of the sanction. We have also yet to see whether China will fully implement the UNSC's sanction against North Korea, as a report says that China has recently resumed economic cooperation with North Korea in infrastructure construction.