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North Korea Crisis

Border town thrives as China eases up on North Korea trade

Kim's promises of economic development fuel speculative real estate boom

North Korean seafood has become easier to find at markets in the Chinese border city of Dandong. (Photo by Oki Nagai)

DANDONG, China -- North Korean goods and workers are turning up in growing numbers on the Chinese side of the border, in defiance of United Nations sanctions, a sign that Beijing is softening its crackdown on smuggling activity.

"This shellfish is from North Korea," said a seller at a market in Dandong, Liaoning Province, the largest city on the border. "Even though it's subject to sanctions, it's been easier to get lately."

The abundance of Northern seafood at the market bore this out. Most came in through "independent channels" by big traders or was smuggled in with small vessels that are difficult for patrols to spot, according to a wholesaler.

A U.N. sanctions resolution adopted in 2017 banned North Korean seafood exports. China -- which accounts for 90% of North Korea's trade -- had cracked down on efforts to evade the measures, with seafood from the North becoming genuinely hard to come by late last year, when enforcement was strictest. But Beijing started easing up in April, shortly after a meeting the previous month between President Xi Jinping and North Korean leader Kim Jong Un.

The change suggests that China has resumed its role as Pyongyang's patron, and this could complicate U.S. plans to dial up pressure on North Korea if a meeting between President Donald Trump and Kim fails to yield results.

Trucks seen carrying goods to North Korea from Dandong, China in October 2017. (Photo by Akira Kodaka)

At least two of the North Korean restaurants in Dandong shut down since January reopened in April. U.N. sanctions bar the hiring of workers from the North, which should have kept out the singing and dancing North Korean waitresses who draw patrons to these eateries. But one new hire who just arrived in China admitted to circumventing this by entering the country on a "cultural exchange" visa.

Numerous workers were also spotted at an apparel factory outside the city known to employ North Koreans. A growing number are entering China with visas meant for short trips across the Yalu River, rather than employment visas, according to a local source familiar with the situation. These are not new workarounds, but they show that Beijing is not clamping down as tightly, the source said.

Trump, who is scheduled to meet with Kim next month, warned Beijing on Monday to do more to deal with sanctions violations. "China must continue to be strong & tight on the Border of North Korea until a deal is made," he tweeted.

"China has always strictly followed and fulfilled its due international obligations," responded Lu Kang, a spokesman for the Chinese Ministry of Foreign Affairs, in a news conference Tuesday.

But "as a friendly neighbor" to North Korea, "China has maintained normal exchange with it under the precondition of not violating its own international obligations, including in the economic and trade areas," he added.

Lax sanctions enforcement is not the only issue. Excitement is growing in Dandong over Kim's announced plans for construction aimed at building up North Korea's economy, spurring a flood of money into real estate projects.

"Prices have gone up 50% in the last month. Now's your last chance to buy!" declared a salesman at a showing of a model condominium, indicating a signboard with a "sold" sticker slapped on it. Speculative money has poured in from across China since Pyongyang declared a halt to nuclear and missile testing in April, he said.

Investors anticipate that the border area would stand to benefit handsomely if the economic push works out. "A high-speed train connecting Beijing with Dandong, Pyongyang and Seoul would have huge economic benefits," the salesman said, referring to a proposal by South Korean President Moon Jae-in at his meeting last month with Kim.

Yet much remains unclear about the North Korean leader's real intentions regarding denuclearization and economic development. The Dandong government has issued warnings about skyrocketing prices out of keeping with real market conditions, and it introduced a rule this month barring buyers from outside the city from reselling properties for five years after purchase. A senior Liaoning Province official observed a condo showing Sunday, asking around about price trends.

Meanwhile, the North's economy remains relatively stable even in the face of nearly unprecedented sanctions. Rice went for 5,100 won per kilogram -- about 63 cents at the informal exchange rate -- in Pyongyang on May 15, about the same as a year earlier, Seoul-based online outlet Daily NK reported.

The price climbed to 6,100 won in late September amid heightened economic pressure in response to the North's sixth nuclear test. But the market stabilized after Kim opened the door to dialogue in his New Year's address in January.

Standards of living seem to have improved. Experts generally believe that North Koreans have no trouble getting three meals a day. Mobile phone users more than tripled over the five years through 2016 to 3.61 million, according to the U.N.'s International Telecommunication Union. The government's tacit acceptance of black markets has helped as well.

South Korea's central bank estimates that the North's real gross domestic product grew 3.9% in 2016 on infrastructure investment, a significant improvement from the 1.1% contraction of 2015.

Pyongyang has refrained from ballistic missile tests so far this year after conducting 15 last year. With intercontinental ballistic missiles carrying price tags in the hundreds of millions of dollars each, the freeze saves money that the North may be shifting toward economic development.

An editorial posted Monday on the website of the ruling party's Rodong Sinmun newspaper stressed a "new history" of putting North Korea's economy on a "modern, IT and scientific basis" and called for investments in such areas as steel production.

But the piece hinted that the sanctions have not left the country unscathed. The paper urged the resolution of "pressing" electricity and energy issues.

Kenichi Yamada in Seoul contributed to this report.

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