China's Investment in North Korea

China's investment trend toward North Korea

China is the number one trade partner and investor to North Korea and is the most influential country to its economy. China invests about 70% of total investment on North Korea's natural resources. China also invests on manufacturing industry including cigarette, computer, slate, glass, tractor, consumer goods, bicycle, and zinc. China and North Korea agreed to establish a commodities exchange markets combined with having distribution ability in Sinuiju and Onsong. Besides this, China plans to expand investment to distribution and transportation industry. China also agreed to invest on building economic special zone in Onsong, Hamkyungbuk-do.

China's recent trend of investment on North Korea is concentrating on natural resources. China promotes strategy which preoccupies North Korea's domestic market by launching into manufacture industry. This is assumed that China intends to raise influence on Korea Peninsula through investment on North. From 2001, China have increased an amount invested toward North Korea, especially, from 2005, it shows sharply increased investment in terms of involving companies and amount of investment. Since North Korea introduced economy reform in July 1, 2002, North Korea expanded the independent profit system and investor relation following China's investment re-increased. China concluded a protection agreement and an investment promotion with North Korea in March 2005(Table 1). China already set for institutional tools to magnify economy cooperation. China's investment towards North Korea have reached from USD $9m in 2004 to USD $14m in 2005, which account for 30.3% of North Korea's total foreign investment.

1. Natural resource development

China put 70% of investment toward North Korea on natural resource. The total investment sharply increased from USD $50,000 in 1991 to USD $15m in 2005. South Korea imported USD $58m of natural resources from North Korea in 2006, which only account for 21.8% of China's. China's major investment region is Dancheon, Pyungbuk, and Yanggang-do where under ground resources are abundant.

2. Manufacturing industry

China Tobacco established Pyongyang Baeksan limited public corporation with China Jilin Tobacco limited public corporation and North Korea's Joseon Tobacco imports and exports company. As Jilin Tobacco limited public corporation established three tobacco production companies in North Korea, China would accelerate to push into the domestic market.

China's Nanjing Panda Electronics Co. and North Korea's Daedonggang Computer Co. entered into partnership, investment amount to USD 1.3m, and established Morning-Panda Computer Co.

Besides these, China invested slate production factory, glass factory, tractor production in partnership with North Korea.

3. Distribution and transportation industry

China and North Korea agreed to establish a commodities exchange markets combined with having distribution ability in Sinuiju and Onsong. China decided to promote a program of economic build up in Northeast including North Korea in August 2007 and cooperate with North Korea to promote establishing the distribution center. At the same time, China plans to develop international business complex inside Dandong industry development site along the Aprok-river. China is expanding investment on distribution and transportation industry. For instance, China decided to invest on road, the tourist facilities, an industrial complex, and Invested USD $7m on Pyungyang the first department store and acquired the right of lease for 10 years.

4. Economy special zone

North Korea's Trade Department Central Import and Export Co. signed bilateral agreement on free trade zone between Hamkyungbuk-Do Onsung-Gun People's committee and China Daomen provincial government on November 2007. China would provide construction material to North Korea and will get refund from the profit of operating free trade zone.

China plans to construct Hunchun-Lasun road connection and build a bonded area and an industrial complex in Lajin port. This is meaningful for china which can connect Vladivostok in Russia, Chungjin-municipality, and Lasun free trade zone.

China's investment scale toward North Korea

|Year |Amount invested |The number of company |Market share |

|Before 1990 |790 |2 |1.7 |

|1991 |48 |1 |0.1