China signals strong support for decaying North Korea economy

BEIJING Tue Aug 14, 2012 8:59am BST

China Vice Commerce Minister Chen Jian attends a forum on cross-strait business strategies after the ECFA trade deal in Taipei September 27, 2010. The Chinese characters read, ''Taipei World Trade.'' REUTERS/Pichi Chuang

China Vice Commerce Minister Chen Jian attends a forum on cross-strait business strategies after the ECFA trade deal in Taipei September 27, 2010. The Chinese characters read, ''Taipei World Trade.''

Credit: Reuters/Pichi Chuang

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BEIJING (Reuters) - China on Tuesday promised to help major firms invest in impoverished neighbour North Korea, signalling strong support for the North's untried young leader just as he is believed to be planning reforms to his country's broken economy.

Vice Commerce Minister Chen Jian, writing in Communist Party mouthpiece the People's Daily, said priority would be given to two economic zones China and North Korea set up just over a year ago and which would represent a rare major foray by isolated Pyongyang into international commerce.

The comments coincide with this week's trip to China by Jang Song-thaek, the powerful uncle of young dictator Kim Jong-un and seen as likely to be a driving force for reforms.

"We will support big Chinese companies who are willing to invest in North Korea to broaden the economic and trade cooperation with North Korea, to push the two sides to upgrade two-way trade and investment structures and study the feasibility of cooperation on big projects," Chen wrote.

In a statement issued after a meeting between Chinese Commerce Minister Chen Deming and Jang, the ministry said the joint economic zones had "entered a substantive development phase".

Their development has "important meaning for further consolidating and developing traditional friendly relations and ... for promoting regional peace and prosperity", it added.

North Korea's official media said Jang had gone to China to discuss commercial projects between the two countries.

The trip is seen as the latest sign that Kim is looking seriously at ways to revive his reclusive country's decaying economy which has been in decline for years and is unable even in years of good harvests to feed its 24 million people.

North Korea already relies heavily on China to support its economy, dragged down by decades of mismanagement and international sanctions over its weapons programmes.

China, for its part, lives in terror of a political or economic collapse in North Korea which could send a wave of refugees into its poor northeast.

"Only North Korea's economic opening up can truly ensure peace and stability on the Korean peninsula," said Wei Zhijiang, an expert on the two Koreas at Zhongshan University in southern China.

"China wants to play an important constructive role in North Korea's economic opening up and integration into the international community," he added.

Kim's father, who died last December, flirted with reform but never really let it take root, wary of anything that might undermine his family's iron grip over the state.

But the new leader has presented a very different image to his father and is believed to want economic and agricultural reform. Jang has long advocated such reforms.

In another sign that Kim may be looking to end international isolation, he has sent the country's nominal head of state Kim Yong-nam this month to Vietnam and Laos, where he was reported to have discussed economic development.

In another tentative sign that Pyongyang is opening up, officials from Japan and North Korea will meet for the first time in four years in Beijing on August 29, Japan's top government spokesman said. They will discuss the retrieval of the remains of Japanese who died on the Korean peninsula during World War II and possibly discuss North Korea's abductions of Japanese citizens.

Vice Minister Chen said there were good opportunities to develop ties between the two nations - Beijing is Pyongyang's only major ally - and to expand fast-growing bilateral trade, which he said was up 24.7 percent in the first half of 2012 on a year earlier, worth some $3.1 billion.

Total trade between the two countries was $5.7 billion in 2011, up 62.4 percent, Chen cited data from China's Customs Administration as saying.

ECONOMIC ZONES

Chen said the first priority was to "actively and steadily push forward the development and cooperation of two economic zones" that the two had established in June 2011.

The zones are in Rason on the North's east coast, and in Hwanggumphyong, an area on the border between the two countries that is yet to be developed.

"Governments should bring existing economic and trade mechanisms into play appropriately and push forward and improve the two-way trade and investment environment," Chen said.

He called for expanding and deepening the cooperation between North Korea and China's north eastern Liaoning and Jilin provinces which border the country, and to strengthen cooperation on building infrastructure.

The two countries have planned to develop a new industrial district on the Yalu River that runs along their border, but the construction of a bridge that will be part of the project has been suspended because of disagreements on how to proceed.

(Additional reporting by Ben Blanchard, Chris Buckley and Sui-Lee Wee in Beijing, Stanley White in Tokyo and Jack Kim and David Chance in Seoul, Editing by Jonathan Thatcher)

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