North Korean Elites: Implications for Commercial Activities with China

By | February 16, 2012 | No Comments

At an early point in his sprawling 2100+ page memoir With the Century, Kim Il Sung initiates a line of discussion of which we are sure to see more in the coming years: praise for patriotic Korean capitalist-nationalist-revolutionaries.  Recollecting his youth in Pyongyang (“a city of shacks, made of cardboard boxes and four-by-fours”), Kim turns to praise a patriotic capitalist Korean woman, Baik Sun Hyeng, for selling her coalmines to the Japanese and funding Korean nationalist schools thereby (pp. 51-55).   Kim Il Sung further recalled how, as a teenager, he was so very impressed by Kim Si Woo, an urbane northerner who moved to China and did business in Dandong; the young pre-revolutionary “admired [Si-Woo’s] masculine airs, typical of people in northern regions” — and the fact that Kim Si Woo introduced Kim Il Sung to the pleasures of alcohol (pp. 81-85).  The point being that capitalists and Kimism can be compatible, a point made rather firmly by Nicolas Levi, an experienced North Korean analyst in Warsaw, in his second essay for SinoNK. — Adam Cathcart, Editor-in-Chief

North Korean Elites: Implications for Commercial Activities with China

by Nicolas Levi

Over the past several years, and especially following Kim Jong Il’s stroke in 2008, China has substantially increased economic ties with North Korea, expanding its role as the economic lifeline of the North Korean regime and state.  As Daniel Gearin showed in his extensive report for the US-China Economic and Security Review Commission, Chinese Infrastructure and Natural Resources Investments in North Korea (20th October 2010), China is far and away the main foreign investor in North Korea. Accordingly, China has intensified its involvement with various elements of the North Korean elite structure, seeking to enlarge its base of relations and support within the regime. And, as anecdotal evidence, the last place visited by Kim Jong Il was the first Chinese supermarket in Pyongyang.

Senior and junior politicians in North Korea (politicians from the second and the third generation of elites) are actively trying to bring foreign direct investments to North Korea. The most important elites connected with Chinese businesses are directly connected to the National Defense Commission, the highest guiding organ of the military and the managing organ of military matters in North Korea. These elites are responsible for the management of huge North Korean investment groups (similar to South Korean chaebols) such as the Daepung Investment Group. These types of holdings are coordinating huge investment and commercial projects between North Korea and foreign partners (especially China). At the head of this organization are Jang Song Thaek, the uncle of Kim Jong Un Ri Kwang Nam, a former North Korean businessman who worked previously in Germany, Paek Sae Bong, an advisor to Jang Song Thaek and other people directly connected to Kim Jong Un’s family.

Artist Pete Kirill, in Miami, plays with notions of North Korean capitalism; click picture for link to his evocation of Kim Jong Il’s funeral

Another sign of a shift towards focusing on economic relations with China is the increase of official visits of North Korean prominent figures who are reform-minded. When Kim Jong Il was alive, he used to travel to China always with the same people who were keen on the Chinese economy. Among them we can quote O Su Yong (a North Korean technocrat), Kim Pyong Phae (a former advisor to Kim Jong Il), and Jon Sung Hun. Jon Sung Hun is one of the most important businessmen of North Korea. He’s the CEO of the Korea Pugang Corporation, a North Korean chaebol (a company with around $20 million in capital and an income of $150 million). Jon Sung Hun studied in Tanzania and has excellent English skills. Another important figure of exchanges between North Korea and China is the previously mentioned Ri Kwang Gun.

Ri Kwang Gun has recently been appointed as chief of the Committee of Investment and Joint Venture designed to draw foreign investments to the country. Ri Kwang Gun studied the German language, persevered and worked in the former East Germany as a commercial attaché at the North Korean embassy in Berlin. He’s now also an executive of the Daepung International Investment Group, a manager at the Rajin-Sonbong Special Economic Area, a director of the State Development Bank, director of the Daepung International Investment Group and director of the Daesong International Group. We should also mention Korean-Chinese businessmen (like for example Park Chol Su) who are participating to the development of North Korean Special Economic Zones

Many members of the North Korean elite were born, lived, and worked in China (O Kuk Ryol was born in Jilin, China),  especially in the regions of Shanghai and Beijing. Some of them are still managing branches of North Korean restaurants and of North Korean companies. Many high-ranking North Koreans are also buying properties in China. Some of them studied in China or were educated in economics in Chinese universities. This group of elites is on the central economic stage in Pyongyang and are managing the actual reforms of the North Korean economic system. These elites have to overcome, however, a number of internal constraints related especially to raw materials. This is why they favor the development of projects related to energy and infrastructure. Lifelong ties between North Korea and China still have a bright future.

Kim Jong Il Under the Red Arches of the “Little Forbidden City” in Shenyang (directly adjacent to the city’s smashing new market for luxury goods), Liaoning province, 2010; photo courtesy Naenara, via Spelunker

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  1. Adam, great point on Paek Son Haeng (백선행). The central media campaign on patriotic capitalist revolutionaries began in late 2005 as the wheels began coming off the economic reform drive begun in 2002. After a low-key introduction, they all of a sudden discovered and restored a monument to her at Mangyongdae, and quickly followed up the next year by refurbishing an old memorial hall in her honor (with a sign in Chinese characters to boot!). It seemed at the time to be aimed at addressing the growing wealth gap brought about by the reforms. Not quite “to be rich is glorious,” but, as you say, perhaps a signal that there’s a place for the wealthy in the new economy, as long as one’s ideology was sound. There was a lull in propaganda messaging on Paek for four years as the economic pendulum swung back toward orthodoxy. But just last fall a “full-length novel” (장편소설) about her life was published, one of numberous hints in state media that indicate that the pendulum has begun to swing back in the wake of the disastrous currency reforms of late 2009. The difference now is that she’s remembered as having given away “everything” for the fatherland rather than just a portion of her considerable wealth.

  2. Thanks a ton for this valuable context; this is significant info!

  3. As a more substantive follow-up to your comment, it occurred to me that the Chinese news media and foreign afairs publications had been watching rather closely the emergence of a new quasi-capitalist entrepreneurial class; but I am not aware of references to Paek Son Haeng in that literature. It would seem to be that in a culture like the PRC which has in recent era been so attuned to the arts of allegory and symbolism, the analysis could be particularly worthwhile. I’m in the process of (very slowly) translating some of the “greatest hits” from Shijie Zhishi, the PRC Foreign Ministry magazine, about topics like this and will therefore keep my eyes open. Thanks again for the tip.

    I would also reinforce the notion that there is plenty of room for the regime to run with the notion of patriotic capitalists as seen in With the Century and in Kim Il Song’s _Works_, at least as I read them. I don’t know that we will ever see a “North Korean Deng” precisely, but the Dengist tactic of finding new points of emphasis in the old orthodoxy, rather than a full-scale or frontal repudiation of that orthodoxy, would be one creative way forward (not to say out!) for the North Korean hierarchy. Perhaps that is already happening to a limited extent in textbooks, if not necessarily wholesale in the novel you mentioned.

    For the CCP, they also need to be a little bit careful. If North Korea accepts the “Chinese model,” one perfectly known side effect is that nationalism slides in and takes the place of communism as a binding mass ideology: do they really want that to happen?

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