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N Korea at crossroads

North Korea loses access to foreign cash as China trade drops 70%

COVID shutdown devastates tourism, with travel unlikely to resume until November

North Korean leader Kim Jong Un at a military commission meeting in a photo released on July 19 by the Korean Central News Agency.   © Reuters

DALIAN, China -- Trade between North Korea and China plunged nearly 70% on the year between January and May after Pyongyang closed the border to prevent the transmission of the novel coronavirus, depriving it of a key source of foreign currency.

North Korean leader Kim Jong Un's isolated regime suspended entry of all foreign nationals traveling for business or leisure in late January. Trains coming in from China and Russia have been halted, and international flights have been grounded. Shipments of goods have also been restricted.

The impact was immediate. North Korea depends on China for 90% of its trade. During the first five months of the year, imports from China fell 68% on the year to $295 million, Chinese customs data show. Exports to China plunged 81% to $18 million.

And Chinese visitors are unlikely to return until the late fall.

"North Korea will likely start accepting travelers from China in November," the owner of a Chinese travel agency told Nikkei last month. The company, located in the border province of Liaoning, received the notice from a travel agency in Pyongyang.

The business owner was originally told in May that the travel ban would be lifted in either July or August, but the schedule has been pushed back.

"New infections have persisted in Beijing and other cities, so at this point the reopening of travel between China and North Korea will likely be difficult," said an executive at another travel agency in Liaoning. "I think it will be impossible to visit North Korea this year."

The China–North Korea Friendship Bridge, seen from the Chinese side in Dandong, crosses the Yalu River to the North Korean city of Sinuiju. (Photo by Shin Watanabe)

Chinese are said to make up 90% of the tourists that visit North Korea. There are no official statistics, but a source in Liaoning's travel industry estimates the annual traffic falls between 100,000 and 200,000 people.

The number of tourists "has grown remarkably since 2018, and it has especially jumped in 2019," said the source.

The Chinese government, which looks to support North Korea, has apparently ordered domestic travel agencies to boost the number of travelers. The policy has boosted the numbers, but North Korea's travel ban has dealt a serious blow.

North Korean authorities set the price of tour packages for Chinese customers. A train ride from Liaoning to Pyongyang, and a three-night stay, costs between 3,500 yuan and 4,000 yuan ($500-$572) per person.

In normal years, travelers to North Korea would be obligated to watch the Arirang mass games, typically held between July and October. For this event, tens of thousands of North Koreans would spend half a year rehearsing the world's biggest choreographed event, part rhythmic gymnastics and part circus event.

Chinese would be charged an extra 800 yuan to watch the spectacle from the upper decks.

But if North Korea were to reopen its borders in November, the cold winter weather would make holding the mass games in an outdoor stadium prohibitive. The regime will stand to lose a major source of foreign currency.

The United Nations sanctions levied in 2017 banned the export of minerals, textiles and other goods from North Korea. The country's gross domestic product shrank 4.1% in 2018, according to an estimate by the Bank of Korea, South Korea's central bank.

Up until last year, North Korea has increased exports to China of goods allowed under sanctions. These include wigs and timepieces made with raw materials sent from China. But January's border closing halted travel by businesspeople, placing limits on transport of goods.

Bilateral trade has started to stage a gradual recovery in May, according to an executive at a Liaoning trading company. The cap on shipments have apparently been loosened partially.

"But people can't travel to have business meetings, so it's difficult to foresee a complete recovery in trade," said the executive.

Last month, North Korea destroyed a joint liaison office shared with South Korea, the regime signaling its hardened recalcitrance toward the international community. Because of the dimmer prospects of loosened sanctions, smugglings have surged.

Illegal dealings in textiles have recently restarted, according to a trading company. Fabric and threads are shipped from China to be made into apparel in Pyongyang, and shipped back. Ship-to-ship transfers of illicit goods on are ongoing.

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