Understanding China's Economic Engagement with North Korea: Realities and Problems

There has not only been an escalation in Sino-North Korean economic relations of late, but a qualitative shift has also taken place in the nature of China's involvement in the North Korean economy, as evinced by the rapid growth in bilateral trade, and Chinese investment in North Korean natural resources and cross-border infrastructure. In examining the recent trend in trade and investment flows, this study sheds light on the high degree of North Korea's economic reliance on China, and the effects that the growth of the latter and its strong demand for low-cost resources and labor have had on North Korea. The principal finding of the article is the contradictory nature of current Sino-North Korean economic ties as China expands its dominance in the midst of North Korea's greater international isolation following its nuclear standoff. This contradiction is a reflection of China's renewed economic interest in North Korea as the cornerstone of its grand policy of reaching out to secure access to natural resources, transport infrastructure and markets. China's economic engagement carries with it benefits for North Korean regime survival, but also contains a potential development risk for the country associated with its economic dependency. In this regard, the emerging challenge to North Korea is the question of how to manage the adverse consequences of deepening economic relations with China.