North Korea’s lease to China of two river islands for commercial development highlights the reclusive country’s growing dependence on its larger neighbor, but the project's success is in doubt, experts say.
Last year, China signed a multibillion dollar lease with North Korea for use of the Wihwa and Hwang-geum-pyong islands, located in the Yalu river near the Chinese city of Dandong.
The islands will be developed as processing and storage areas, according to Chinese traders working in the area.
If the project goes forward, “these areas may also become important industrial zones in the grand design of China’s industrial development,” said Kim Kwang In, director of the Seoul-based North Korea Strategy Center.
“Should that be the case, North Korea’s dependence on China’s economy will increase,” Kim said.
China is North Korea's most important ally, biggest trading partner, and main source of food, arms, and fuel.
'Nothing to lose'
Hong Ik Pyo, senior researcher at the Korea Institute for International Economic Policy, added that though the islands project may not appear profitable in the short term, China has “nothing to lose” from the deal.
“If inter-Korean relations improve, even cargo bound [from China] for South Korea may be processed through Shinuiju,” the North Korean city across the river from Dandong, he said.
“So from a Chinese perspective, there may be significant long-term benefits of the development project.”
Tensions between the two Koreas have been running high for a couple of years due to a number of deadly attacks blamed on the North and the South's decision to sever economic links to try to force Pyongyang to denuclearize.
Hong said that as North-South ties have become more strained, and as international sanctions levied against North Korea have become more strict, North Korea sees expanded economic cooperation with China as “the only possible way to cut through their impasse.”
“North Korea is facing dire food shortages,” agreed Stephan Haggard, director of the Korea-Pacific Program at the University of California, San Diego, “and in that context has been pressing to expand commercial and investment relations with China.”
“At the same time, it is wary of these ties and prefers ‘enclave’ models where commercial and investment ties are confined to particular locations,” he said.
“The ongoing question is whether the North Koreans will be adequately forward-looking to allow these experiments to flourish. The record to date is not great, but circumstances might be changing that.”
Work on the islands is scheduled to begin in May, and authorities in Dandong have been actively seeking investors, according to South Korean media reports. Ultimately, the project’s success will depend on the number of investors involved, sources say.
“My own view is that for investors from elsewhere without a strong knowledge of the country, some resolution of [North Korea’s] nuclear issue will be required as a signal that things have turned in a new direction,” Haggard said.
“But the Chinese have learned how to navigate the system.”
Reported by Jae Wan Noh for RFA’s Korean service. Translated by Grigore Scarlatoiu. Written in English with additional reporting by Richard Finney.