North’s economic dependence on China deepening rapidly

By Kang Seung-woo

North Korea’s economic reliance on China has been deepening rapidly over the past years, with the latter accounting for more than 80 percent of the country’s international trade amid soured relations with South Korea and sanctions by the United Nations.

The change indicates that the reclusive country has been increasingly isolated from the rest of the world.

The Korea Finance Corporation (KOFC) reported Sunday that the North suffered the largest drop in its international trade in 2009 since 1998, as its trade remained at $3.41 billion, down 10.6 percent from the previous year.

Exports declined 6 percent to $1.06 billion, while imports fell 12.5 percent to $2.35 billion in 2009, bringing North Korea’s trade deficit to $1.29 billion.

In order to offset the fall in trade with foreign countries, the North increased its trade with China, its biggest ally. As a result, China accounted for 80.4 percent of its total trade in 2009, and Pyongyang’s trade deficit with Beijing amounted to $1.1 billion.

“The North’s industrial activities are not brisk as its trade with foreign countries is worsening and it suffers from deteriorating structural problems such as shortages of food, foreign reserves and raw materials,” the state-run firm said in the report. Korea’s economy cannot bounce back with temporary band-aid measures.”

The report said that in order to revive its economy, the North should open its market and diversify its industrial structure currently focused on producing weapons, while improving the overall infrastructure such as power generation facilities.

It also emphasized the need for the resumption of inter-Korean trade and an increase in international aid for the North’s survival.

“For the North Korean economy to get back on track, inter-Korean trade has to be resumed and aid from the international community should also be expanded,” the institution said.

Inter-Korean trade fell around 30 percent last year, after the Lee Myung-bak administration brought a halt to all business exchanges in May, after a North Korean torpedo sank the South’s naval ship Cheonan in waters near the inter-Korean border in March, which killed 46 sailors.

North Korea’s nominal gross domestic product stood at $28.2 billion, ranking 88th in the CIA World Factbook.