Currency, Trade, and Criminal Conspiracies in Dandong

By | September 23, 2015 | No Comments

Preparations at Guomenwan, Dandong, for the upcoming China-DPRK Trade Expo. | Image: Expo Organizing Committee.

Preparations at Guomenwan, Dandong, for the upcoming China-DPRK Trade Expo. | Image: Expo Organizing Committee.

Much attention was paid to the September 3 military parade in Beijing as a barometer for bilateral Sino-North Korean relations, but the work of assessing the state of the relationship really needs to go well beyond seating charts, personalities, and speculation about Kim Jong-un. As the main juncture for bilateral trade, the Chinese border city of Dandong should be near the top of any short list of generally verifiable factual indicators of Chinese-North Korean relations.

Synthesizing all the stuff going on in and around Dandong this autumn is in itself not a particularly easy task, but at least it has a center: A bilateral trade fair, the fourth such event since Wen Jiabao’s injection of mercantile stimulus in his 2009 trip to Pyongyang, is scheduled for October 15-18, 2015.  Due largely to North Korean state media’s own artful narrative propulsion (Exhibit A: yet another CNN “scoop” over the Associated Press in Pyongyang), journalists have shown little interest in Dandong of late, brandishing instead stories about possible missile launches, and yet another abortive attempt to jump-start the Six Party Talks.

Seen through the prism of Dandong, North Korea’s planned launch of a missile on October 10 seems unlikely to be a game-changing event. The presumptive missile launch (or even a nuclear test) is unlikely to cancel the trade fair taking place less than a week later. China has lined up a number of aspects which it would be loath to walk away from in the name of leverage against North Korea, at least that leverage which exists beyond China’s position at the UN Security Council.

The PRC has also now completed a high-speed rail line to Dandong which has cut travel times between the hulking industrial city of Shenyang and Dandong’s riviera to a mere 70 minutes, with which it presumably is eager to show off and beckon North Koreans. Moreover, North Korea may use the fair to announce further opening up of its northwest to Chinese tourism. The DPRK actually sent a representative to a recent regional tourism conference which included both China and South Korea, an encouraging sign which by no means guarantees further movement in this area, but is still not to be overlooked. And China’s publicity of a new commercial zone in Dandong has prompted some to speculate that it would “give North Koreans a chance to taste free markets,” a discussion which is rarely linked to sanctions enforcement.

The Chinese Ambassador to Pyongyang, Li Jinjun, seems likely be at the trade fair. Such an appearance would be not just de rigeur, but also of a piece with his April meeting with Ri Yong-nam, the man ostensibly coordinating for economic cooperation with foreign countries, at which the Beijing Foreign Ministry apparatchik delivered a dissertation on China’s “One Belt, One Road” policy. The ambassador also struck a recent deal to built a new bridge over the Tumen River which indicates he has not been put completely in the box, although he has yet to visit Sinuiju like his predecessor did.

Crime and Punishment in Dandong | Meanwhile, the CCP local Dandong Party structure seems to be undergoing a series small purges which may have no causal connection to cross-border trade, but which ought to be carefully monitored in North Korea.

While Xi Jinping is throwing off “House of Cards” references with Seattle’s corporate dons, the anti-corruption work continues on the North Korean frontier. Geng’s case may have no connection whatsoever to the real estate scandals on the Chinese side of the $300 million “bridge to nowhere” in Dandong’s Xinchengqu, but it has surely put other provincial and city cadre on notice.

 Earlier this summer in Dandong, a former city policeman was handed a death sentence for meth manufacturing with two accomplices, on Chinese territory. No North Korean link is mentioned in this story, but the story does suggest that pathways for drugs into the Chinese interior (particularly Inner Mongolia) from Dandong are well-honed and the profits high. As with so many law-and-order stories from the border region in the past couple of years, the outlet able to cover the story at length is Xinjinbao (新京报; incongruously rendered as “Beijing Daily” in English). A severely abbreviated version of the story was carried on 18 June in English by the erstwhile Global Timeswhose editor was, at the time of publication, waxing metaphorical on a stage in Beijing with a handful of former and current diplomats about the PRC’s new Silk Road into Central Asia.

Meanwhile in non-capital punishment-related news in Dandong, cadre in that border city are not at all as bullish about economic growth as we might expect. There is surely more than a small amount of verbal and non-verbalized frustration with the DPRK included in this report.

 

And so we arrive at our final node of analysis, a highly publicized police bust of a foreign-currency operation in Dandong. The network appears to have been operated on a kind of Dandong-Shenyang-Seoul triangle, rather than being connected to North Korea. While the DPRK has managed to accrue reputation points as a “mafia state,” there are plenty of other up-and-coming dons in their neighborhood, some of whom simply surround North Korea with their illegal activities rather than interact with it. As the trade fair goes forward and China spreads a bullish gospel of special economic zones and foreign exchange along the frontier, the emphasis on crushing illegalities may be useful to keep in mind.

Tan Yan Wu and Wu Lishuang, “Liaoning Dandong investigation reveals illegal cross-border foreign exchange transactions involving 40 billion yuan” [辽宁丹东侦破一起涉案400亿元跨境非法买卖外汇案], Chinese Police Net, August 24, 2015.

Recently, the Public Security Bureau of Dandong City, Liaoning Province, after careful investigation [缜密侦查] lasting more than nine months, uncovered an exceptionally large case of cross-border illegal trade in foreign currency and arrested two suspects. At the scene, they seized more than 200 bank cards, 130 “U” shields, 3 computers, 10 accounting books, and more than 40 billion yuan (逾400亿元).

On November 6, 2014, the Economic Investigation Detachment of the Dandong City Public Security Bureau (丹东市公安局经侦支队) began its investigation of a trail of suspicious transaction clues from “Ms. Zhang and other accounts.” The clues indicated that Ms. Zhang, from an account in Weihai in Shandong province, had set up an account in Dandong as “Zhang Moumou (i.e., Ms. Zhang, or John Doe).” In the period from February 2008 to July 2014, the two bank accounts had 6327 transactions amounting to 1.334 billion yuan.

Then, in investigating Ms. Zhang’s bank account information, the Dandong Municipal Public Security Bureau found he had a dozen or more bank accounts, and that each of these accounts had frequent transactions with huge transaction totals [交易总额巨大] with a large number of counterparties from a wide range of regions.

After further investigation, police found that Ms. Zhang’s cash flow did not tally with her [professional] identity [张某某的资金流与她的身份不符], and that her accounts and financial transactions were of a type suggesting underground banking features. According to the preliminary analysis by police, Ms. Zhang was most likely engaged in illegal trading of foreign exchange.

The Dandong Municipal Public Security Bureau Economic Investigation Detachment then alerted its Yuanbao sub-branch (元宝分局), online security detachment and other departments, ultimately composing a task force investigation of over 100 police.

The “Ms. Zhang accounting transfer” task force did a detailed check of the bank account transaction details, finding that some were online banking transactions, meaning that they had left behind an IP address.

Her bank account showed transactions to a number of relatives of Ms. Zhang, including Zhang X-Fang, Zhang X-kun, Zhang X-Wei et al. [X=a vague attempt to keep people nominally anonymous.]

The phone number and cell phone number listed for the bank accounts [of Ms. Zhang’s relatives] were all listed as the same number; it was a number in Shenyang, belonging to a Mr. Han [韩某某].

… The evening of July 29, just as Ms. Zhang was front of the computer operating her “business” at home in Dandong, she was arrested by the police task force. Meanwhile, Mr. Han in Shenyang was arrested by the police.

According to information from Ms. Zhang, and Mr. Han, their other accomplice was a Korean man with Chinese nationality named Mr. Li [李某某的韩籍华人]. Every day, Mr. Li withdrew or paid in South Korean won, US dollars and other foreign currency, and Mr. Han in Shenyang or Ms. Zhang in Dandong would call him, receiving or paying out RMB every night. According to preliminary police statistics, the case involved more than 40 billion yuan.

“In order to deceive the public [掩人耳目], Ms. Zhang used the identities of her many relatives to obtain more than 200 bank cards, for she and Mr. Han to use,” the police task force told this reporter, concluding that: “With respect to Mr. Li, who is hiding in South Korea, we will carry out work beyond our borders in pursuit of the suspect, who [should be] brought swiftly to justice.”

Source: Tan Yan Wu and Wu Lishuang, “Liaoning Dandong investigation reveals illegal cross-border foreign exchange transactions involving 40 billion yuan” [辽宁丹东侦破一起涉案400亿元跨境非法买卖外汇案], Chinese Police Net, August 24, 2015. Translation by Adam Cathcart