North Korea falls into $1.7 billion trade deficit with China -- but something mysterious is keeping it afloat

NKnewsNorth Korean leader Kim Jong Un uses a computer.
  • New economic data shows North Korea operating at a $US1.7 billion trade deficit with China.
  • It somehow always operates at deficit, suggesting some hidden commerce.
  • North Korea is under the heaviest sanctions on earth, so its trade is fiercely monitored, but it still manages to make money.
  • China may be lying about how much it trades with North Korea, or North Korea’s hacking activities in the crypto markets may be paying off.

New economic data shows North Korea buying more and selling less to its biggest trade partner, China – and it likely indicates that a US-led wave of sanctions are starting to bite.

North Korea spent $US3.3 billion on Chinese imports in 2017, an uptick from last year, but only exported $US1.6 billion in goods over the last twelve months, according to an NK News review of data from China’s General Administration of Customs.

North Korea’s 2017 exports represent a dive from 2013, when it shipped out almost $US3 billion in goods to China. The dip follows a year where the US led an international push to put “maximum pressure” on North Korea by cracking down on its trade. Besides commerce with China, the US has also persuaded a raft of African countries to cut ties with Pyongyang.

UN restrictions on the buying of coal, iron, gold, silver, titanium, vanadium, nickel, copper, zinc, and rare earth minerals from North Korea appear to account for much of the drop in trade.

But as NK News points out, North Korea has always spent more than it appears to make from trade with China, which suggests that some alternative source of funding also exists. Countries that operate consistently at trade deficits, like the US, usually have foreign investment or foreign ownership of debt. The UN prohibits both activities in regard to North Korea.

The gap in cash in and outflows suggest both that North Korea is evading sanctions and finding ways to make money that defy international law, or that China isn’t accurately reporting the numbers.

North Korea’s secret business

North KoreaUS TreasuryNorth Korea uses ship-to-ship transfers on the high seas to disguise its commerce.

China’s opaque government has long manipulated economic data to suit its narrative.

“When it comes to North Korean sanctions, Chinese behaviour is consistently designed to move a negative spotlight off of the Chinese for perceived nonseriousness for faithfully implementing sanctions,” Andrea Berger, an expert on North Korean sanctions at the James Martin Center for Nonproliferation Studies told Business Insider.

Berger characterised Chinese President Xi Jinping as “very conscious of China’s image” and hating the US’s insistence that China isn’t doing its part to restrain North Korea.

With the international community coming together to shut out Pyongyang, the spotlight increasingly focuses on China, which Berger says Xi is uncomfortable with.

But with North Korea increasing its cyber offensives and reportedly becoming adept at stealing money from the booming crypto market, it could be that just as China has looked to cut off Pyongyang’s funding, its revenues have become more diverse.

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