North Korea Experiments, With China as Its Model

By HOWARD W. FRENCH
Copyright The New York Times – Published: March 28, 2005
DANDONG, China – At night, the view from the upper floor of a hotel looking out across the Yalu River toward the North Korean city of Sinuiju seems one of utter desolation. Three naked bulbs twinkling feebly is all that can be seen along a several-miles arc of riverfront.
By day, though, the scene at the border in this bustling Chinese city could scarcely be more different. Trucks steadily lumber across the bridge linking the countries, ferrying North Korean raw materials into China and Chinese manufactured goods to market in North Korea.
Westerners have long taken the nighttime view as the truest reflection of North Korea, a country all but frozen in time, its leaders so obsessed with control that they do not countenance contact with the outside world. The view from China, though, in cities like this, where small groups of North Koreans can be found in the downtown shops and hotels, scouring the city for bargains, is of a country already well into an experiment, however uncertain, aimed at rebuilding its economy and even opening up, ever so gingerly, to the outside world.
North Koreans who have recently arrived in China, and Chinese businessmen who have extensive experience in North Korea, speak of significant changes in the economic life in a country with a reputation as one of the most closed and regimented.
They say the changes, which were officially started in 2002 and have gradually gained momentum, have undone many of the most basic tenets of North Korea’s Communist system, where private commerce was banned, private property circumscribed, and an all-powerful state the universal employer and provider.
Now in ways that many Chinese say remind them of their own early economic reforms a quarter century ago, North Korean farmers are allowed to take over fallow land and plant it for their own profit, selling their products in markets.
“It seems they are learning from the Chinese model of the 1980’s, giving land to farmers and not allowing people to depend on the central government for everything,” said Yu Zhongde, a Chinese businessman whose company operates bus routes in North Korea. “The rate of change is speeding up, and the aspiration for wealth among the people is really growing.”
In the cities, Mr. Yu and others say, the changes have been even more noticeable, with people being allowed to trade goods for profit in newly created public markets, including 38 in the capital, Pyongyang. These days, traders sell everything from clothing and bicycles to televisions and refrigerators, mostly imported from China.
Private automobile ownership is still not permitted, but people reported seeing signs advertising used cars for sale in Pyongyang, nonetheless. Here and there, others also report the opening of small restaurants and karaoke bars.
“The standard of living is improving, not just in Pyongyang, but throughout the country,” said another Chinese businessman who has been a frequent visitor to the country since 1997. “Nowadays, if you have money you can buy whatever you want. The problem is that most people still don’t have much money.”
Similar comments about the recent availability of goods were repeated in numerous interviews with North Koreans who had illegally slipped across the porous border, taking a risk in hopes of earning some money in China and buying goods to carry back and sell.
The difference in the remarks of Chinese business people and the North Koreans is one of tone, with the North Koreans almost universally asserting that life has gotten tougher, not better, since the introduction of the economic changes.
“The government has no money, and everything has become much more expensive,” said a woman from the northeastern city of Chongjin, who sneaked into China three months ago. “Many people steal things to survive.”
People from the countryside said farmers had tended to do better than city residents under the economic changes. “You can find anything you want in the markets now, but the prices are too high for us to afford them,” said one 50-year-old woman from a village in the Musan region, near the Chinese border. “Farming for ourselves, though, made us better off than people in the towns. At least we always had enough to eat.”
Deok Ryong Yoon, an economist at the South Korean Institute for International Economic Policy, acknowledged the growing social disparity. “The market has become the main mechanism for the North Korean economy, and they are trying to use the market to rehabilitate their economy,” he said. “The changes have increased net production in North Korea. They have more goods and seem to be benefiting from the reforms, but distribution is very unequal.”
North Korean officials have used the state’s propaganda machine to spread the new market-economy gospel, including quotes from the supreme leader, Kim Jong Il. They began with an article attributed to Mr. Kim published in the state press in 2001 under the headline “Gigantic Change,” in which he called for making “constant efforts to renew the landscape to replace the one which was formed in the past, to meet the requirements of a new era.”
More recent articles have gone further, praising some aspects of capitalism and extolling “those with money using money” as a new force for social regeneration. Many analysts say this most recent language also echoes important changes in China, including most famously the quote often attributed to Deng Xiaoping: “to be rich is glorious.”
Chinese businessmen and foreign economists say North Korea’s emergent capitalist class has two disparate components: the operators of a small, clandestine private economy who have survived since their emergence during the famines of the mid-1990’s, when the state distribution system was failing, and a far larger group consisting of officials of all description, from petty and mid-level functionaries to members of the political elite and perhaps largest of all, the military.
“Pretty much everyone in business is an official of one kind or another,” said one Chinese investor who is a frequent visitor to North Korea. “Ordinary people simply don’t have the money, and if they had money, they’d be asked where they got it, and get in trouble.”
The businessman said corruption, abuse of office and the seemingly arbitrary application of rules were the biggest weaknesses in the country’s new policy drive. “Changes are declared,” he said. “They are spoken, but it’s not put into law, and this makes it very difficult for business.”
Ordinary citizens say these uncertainties hit them hard, too. A hint of this notion, of a state that gives and can also take away, was included in a sarcastic but menacing commentary by North Korea after its rejection last month of new multinational talks about its nuclear program. Washington “can just have talks with peasant market merchants, whom the United States is said to like, or with the representatives of the North Korean defectors organizations the United States is said to have formed.”
One city dweller told a story of how the government had engineered the introduction of new banknotes for the won, the currency, as part of the economic changes. With little explanation except a vague discussion of addressing social inequality, people were ordered to turn in their old won for new ones, the woman said.
“No matter how much of the old money you turned in, each family was given 4,500 new won,” she said. “You didn’t dare complain. If you did, you would be denounced as an enemy of the people.”

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