China and North Korea push development of trade zones

BEIJING — China and North Korea are speeding development of two special economic zones in a bid to shore up North Korea’s crumbling economy.

Chinese state media reported that North Korean leader Kim Jong Un’s uncle Jang Song Taek met with Chinese Commerce Minister Chen Deming this week to sign agreements over development of the trade zones, which are on the border with China.

China is North Korea’s chief ally, providing aid and anchoring a $5.7-billion trade relationship. North Korea, which is under United Nations sanctions because of its nuclear weapons program, has an economy valued at about $40 billion. By comparison, China’s stood at about $7 trillion last year.

Foreign direct investment in impoverished North Korea is hindered not only by political constraints, but also by the scarcity of adequate roads, electricity and other basics.

China said it would contribute infrastructure and power to the economic zones, known as the Hwanggumphyong and Wihwado Economic Zone and the Rason Economic Trade Zone, Chinese state media said.

The zones had been discussed for years but development had stalled. Hwanggumphyong and Wihwado — which are islands on the Yalu River — will focus on tourism, finance and technology. Rason, in a northeastern region of North Korea, will develop logistics and manufacturing.

Jang is the highest-ranking official from North Korea to visit China since late former leader Kim Jong Il visited in August 2011.

The visit is a potential precursor to the arrival of Kim Jong Un, who has been consolidating power at home and speaking openly about his desire to improve his country’s economy.

A Chinese official told the state-run China Daily that the agreements signaled the start of increased economic ties.

“The ‘two economic zones’ have not only created a new model for the economic cooperation between China and [North Korea], but also injected new energy for the two nations to further improve their bilateral trade,” China’s deputy commerce minister, Chen Jian, wrote in the People’s Daily on Tuesday.

John Park, a North Korea expert at Harvard University, cautioned that the moves by Pyongyang may have more to do with bolstering the finances of the ruling elite than economic reform.

Kim, who recently fired North Korea’s military chief, needs cash to further cement his young leadership, Park said.

“I don’t view this as economic reform at all,” Park said. “I see this as straight-up commercial deals directly aimed at shoring up the financial and commercial stability of the new regime.”

One of the simplest ways North Korea looks forward to generating cash from the economic zones is by charging rent at the facilities to the Chinese companies expected to invest in the areas, Park said.

China would prefer to see North Korea develop a viable economy rather than rely on handouts from Beijing to feed its people. To encourage that, it quietly allows tens of thousands of North Korean guest workers into China so the North benefits from the remittances.

North Korea’s refusal to abandon its nuclear program and military posturing with South Korea needles China, which is loath to see war erupt between its neighbors.

In an editorial Wednesday, the China Daily said the economic zones would boost North Korea’s battered economy.

“More importantly,” it said, “they will contribute to the overall stability of the Korean peninsula.”

david.pierson@latimes.com