Tango in Dandong, Liaoning Dirge: Dualities of Sino-North Korean Trade

By | October 17, 2012 | No Comments

Members of the Mansudae Arts Ensemble arrive in Dandong, China, October 9, 2012 | Photo: Xinhua

Tango in Dandong, Liaoning Dirge: Dualities of Sino-North Korean Trade

by Adam Cathcart

The Chinese border entrepôt of Dandong has just completed the hosting of a major event wherein China is pulling out all the stops to promote culture, trade, and tourism of its ally, North Korea. The “China-DPRK Economic, Trade, Culture and Tourism Expo” ran from October 12 until October 16.  Short of the North Korean bon voyage staged for the Chinese People’s Volunteers on their way north from Sinuiju in 1958, it’s likely that there has never been a bigger public effort to promote North Korean friendship in the Yalu River estuary, or China more broadly.

A full two decades after the North Koreans opened Rason and a mere decade after Kim Jong-il’s alchemist’s plan to turn Sinuiju into Hong Kong went up in smoke, it seems that the China-DPRK trade tango has finally been joined in earnest.

Dandong, October 13, 2012; image via Kyodo News Agency

Particularly given the fact that the North Koreans so rarely participate in regional meetings, even when they take place in nearby Liaoning, Jilin, or Heilongjiang provinces.  This is a big deal.  Judging from the “taxi-driver index” and my own travels to Dandong and Shenyang this past August, there is hardly irrational exuberance over DPRK trade in the Northeast.  However, Dandong may be awash in more North Koreans than usual, and the city is putting its best foot forward as the point of the spear that is massive Chinese – and foreign – investment.

The DPRK has dispatched its Mansudae Arts Troupe to entertain the masses with a group that has been rather quiet of late, but the Mansudae performers have class and also happen to be closely related to Kim Jong-un’s deceased mother, meaning it’s an important gesture.

Xiyang as Thematic Undertow  Although no one in China wants to recall as much, this particular party was delayed by almost a year, not just because of the convenient excuse that Kim Jong-il died (he did), but because of North Korean recalcitrance.

Among the least positive stories emerging out of the thickets of Sino-North Korean trade in the past year is that of the Xiyang Group, a Chinese company that went public in August with a narrative of huge mining investments in North Korea having been ripped off.  As Stephan Haggard described (without dipping too deeply into the massive reserves of “told you so” he has every right to deploy), the Xiyang Group’s work in North Korea was ultimately met with smashed windows, abducted employees, torn contracts, and huge losses, and it was surely the North Korean state that threw its force behind that giant slap in the face.

The contradictions around this case have been rather intense, to the point where it appears that China’s central leadership has taken up the Xiyang cause, to a limited extent.

Just as the trade fair in Dandong was getting underway on October 12, the Beijing foreign affairs tabloid Huanqiu Shibao published an update on the Xiyang affair, which is translated below.  As you may recall, the Huanqiu, better known in English as the Global Times, operates as the profitable and nationalistic talon on the People’s Daily scaled wing, which is to say it can represent a means by which Chinese leaders vent a bit of strategic information here and there.  Should it be needed, there is more background on the Xiyang controversy here, via Curtis Melvin.

SinoNK regrets that we were unable to contract a correspondent who could be on the scene in Dandong. Our man in Yanji (Benjamin Young, who appeared in a fantastic bilingual video promoting investment in the Korean Autonomous Prefecture) has returned to university in New York state.  However, we have found some very interesting footage from the event. Interestingly enough, DPRK media appeared to be slightly muted about the event, perhaps because most of the available oxygen had consumed with the Workers’ Party birthday party on October 10, another manufactured anniversary which we have every intention of deconstructing, given its connection to the “Juche pop” phenomenon.

At any rate, now that we have talked the tango, it’s time for the Xiyang dirge, which has yet to reach its conclusion:

Coal pollution over Pyongyang; photo by Peter Parks/AFP, courtesy Epoch Times

Kuang Juan (News Intern Reporting from Shanghai), “Legal Entanglements of Xiyang Group’s North Korea Project Not Yet at an End,” [见习记者况娟上海, “西洋集团朝鲜项目纠纷未息”], Huanqiu Shibao, October 12, 2012, http://finance.huanqiu.com/world/2012-10/3181831.html. Translated by Roger Cavazos and Adam Cathcart

[1] The contract dispute of the Xiyang Group’s project in North Korea has not yet concluded.  In these past two months, a not insubstantial number of Chinese firms who are already investing, and those preparing to invest, in North Korea have been posing inquiries to the Xiyang Group with regard to related problems of investing in the DPRK. At the same time, the Xiyang Group has been suffering denunciations from the North Korean side [遭受到了朝鲜方面的指责].

[2] In August 2012, the Xiyang Group said that from 2007 to 2011, the company invested a total of 240 million yuan in North Korea to build a modern mining plant and related facilities which would result in an annual output of 500,000 tons of crushed iron ore once in operation.  However, once production began, the North Koreans raised all manner of excuses to tear up the contract [投产后, 朝鲜提出各种借口撕毁了合同].

[3] North Korea, however, refuted [反驳] the Xiyang Group’s accusations.  According to the KCNA report of September 5th, the spokesperson for the DPRK’s Joint Venture Investing Committee (JVIC) said: “If we look at the contract signed by the North Korean Ryongbong Company[1] and Xiyang Iron and Steel Group and if we look at the performance of the contract and the related disputes process from a legal analysis, Xiyang is not unculpable.  Quite the contrary — Xiyang bears serious responsibility/liability.”

[4] North Korea’s JVIC spokesman said that nearly four years after the entry into force of the contract, Xiyang had only met or provided, in kind, only about 50 percent of its capital contribution obligations. Therefore, since the parties had agreed to an investment timeline, they started re-negotiations, but did not reach an agreement. As for the the Xiyang Group, their responsibility was expressly listed in 16 terms in the contract which the parties signed. From a legal point of view [从法律上来看], the contract must be discharged as agreed.

[5] On January 22, 2012, the representative of Beijing’s office of North Korea’s “Glorious China” Bank [朝鲜华丽银行北京办事处], Gao Guizhi [高桂芝, Ko Ji-che] called Xiyang’s, chairman Zhou Furen and negotiated repayment of Xiyang’s investment in the amount of 30 million EUROS.  However, subsequently, the DPRK Ryongbong Company Chairman, Li Chengkui [李成奎, Ri Song-gyu] in a call with the Xiyang President said that the repayment to Xiyang was 30 Million DOLLARS.  [Emphasis in original Chinese.]

[6] The two sides finally reached an agreement on June 3, 2012, and determined the DPRK would repay Xiyang’s investment of 31.24 million DOLLARS, and promised to pay in 20 days in China. However, four months have passed, and the Xiyang Group states it still has not yet received any funds from the DPRK. “Although the contract allows for arbitration in a third country, it is unlikely and we have no other alternatives,” said Xiyang’s deputy general manager Wu Xisheng [吴希胜]

[7] According to the report entitled “China’s Xiyang Group Investment in North Korea Aborted,” the PRC Foreign Ministry spokesman Hong Lei stated that, regarding Chinese enterprises, “China has always supported the DPRK and efforts to invest and contribute to the economic and trade cooperation between China and the DPRK. We hope that the two sides will properly handle problems emerging in the process of cooperation of enterprises in both countries.”

[8] On the 26-27th of September 2012, an investment seminar was held, hosted by the Council for the Promotion of Chinese Cross-Border Trade [中国贸易跨国促进委员会], which included research, meeting, and discussion of investment in North Korea.  While fourteen Chinese companies were there, the Xiyang Group was not invited to participate.

[1] Now called 朝鲜岭峰联合公司, or “Ridge-Top United Corp.”, which had previously been identified by the North Koreans under a slightly different title.


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