The Changing Structure of Economic Cooperation between China and North Korea

Abstract

China’s shifting economic circumstances have been impacting the structure of its economic cooperation with North Korea. The Chinese economy has been slowing down since 2007 and China’s Northeastern region has been suffering from labor shortage, especially young labor. Decreasing raw material prices due to economic slowing down of China cause the growing share of textiles, decline in mineral share in trade, and increase of processing trade. This also indicates how China may be utilizing North Korea’s cheap labor in the form of outsourcing certain manufacturing procedures, especially those that are labor intensive, for instance in the garment and textile industry. The rising traffic of textile products between borders, especially in the form of processing trade, points to this trend. Intricate webs of division of labor are occurring in the service sector as well. Tourism is one of the newest industries that North Korea has been developing as a means to earn foreign currency, and China’s role in the recent growth of tourism in North Korea is evident. On the one hand, North Korea and China’s deepening economic cooperation may facilitate North Korea’s marketization and opening up. On the other hand, the intensification of economic cooperation between the two countries may also result in North Korea’s over-dependence on the Chinese economy.