The visit by North Korean leader Kim Jong-il to China last week was driven by the country’s acute economic crisis and the need for aid and investment. China is exploiting the opportunity to draw North Korea more closely into its orbit—propping up its strategic ally, but at the same time opening up the autarkic North Korean economy as a source of cheap labour and raw materials.
Kim’s visit was only announced after he met with Chinese leaders in Beijing. On route, he visited the northeastern Chinese port city of Dalian and the coastal city of Tianjin, both of which are held up by Chinese officials as models for encouraging foreign investment—the path that Beijing is pressing Pyongyang to follow.
Pyongyang established the Rajin-Sonbong “special economic zone” near the border with China in the early 1990s to encourage investment from China and Russia. Beijing, however, had little capital to invest abroad at the time and North Korea’s economic zone largely languished. Now the situation has changed as China has begun to use its large foreign currency reserves to secure access to raw materials and markets. Beijing is now seeking to develop Rajin as a major regional trading hub.
A Washington Post article last month predicted that Kim’s visit to China would mark “a major policy reversal”. Professor Lim Eul-chul of Seoul’s Institute for Far Eastern Studies, who was in Pyongyang talking to officials and Chinese businessmen, was told that the new State Development Bank was intended to be a “one-stop” shop for foreign investors. “The North is planning to open foreign-owned factories not just in closed-off special economic zones, but major cities like Nampo and Wonsan,” Lim explained. Until now, North Korea has largely limited foreign businesses to sealed-off zones like the Kaesong joint industrial zone with South Korea.
The North Korean International Trade Office web site promotes the country as having “the lowest labour costs in Asia” and the “lowest tax scheme in Asia”. Orienting to China in particular, it emphasises the country’s educated workforce, noting: “
t the moment the labour cost in North Korea is very low compared to China’s, especially great for corporations to save labour costs.” It added that North Korea was a vast “virgin silo” with 300 types of minerals and other untapped natural resources. It further declared that the regime was establishing a free market and laws to protect private property and foreign investors...
http://www.wsws.org/articles/2010/may2010/kore-m14.shtml