James Reilly on China-DPRK Relations I

February 26, 2015 7:00 AM

James Reilly (University of Sydney) has written two pieces that appeared last year in Asian Survey and The China Quarterly that deserve a close read by those interested in the Sino-DPRK relationship; we take up each in turn. The Asian Survey piece looks at an issue near-and-dear to our hearts: the question of whether interaction with China will propel reformist impulses in North Korea or have wider transformative effect. Reilly parses these effects into three types of changes—institutional isomorphism, deepening cooperation, and behavioral and ideational change—and draws on a wide range of qualitative sources to instantiate his claims, including interviews on the border and full exploitation of the Chinese press.

Like us, Reilly characterizes the Chinese policy as a variant of the sunshine approach and walks through the range of actions the government has taken to facilitate commercial trade and investment, particularly through support for infrastructure links. (An interesting tidbit: according to Reilly, the China Overseas Investment Federation announced a new RMB 3 billion ($470 million) “Fund for Investment into North Korea” in September 2012; we’ll see.)

Reilly argues that some institutional isomorphism is taking place, citing developments such as the formation of the Taepung Group in 2010—although subsequently folded into the Joint Venture and Investment Committee—and institutions such as State Development Bank and an Industrial Development Bank. Reilly walks through the numerous cooperative projects emanating from the border provinces, rather than Beijing; clearly, these decentralized developments are important.

De facto decentralization will matter in North Korea as well. Rason is unquestionably the most significant example. According to Reilly, the number of Chinese on the ground at Rason at any given time ranges from 4,000 to 10,000. There has clearly been some delegation from the center, as the local political structure reflects some coalition that is quite different from that governing the country as a whole. The paper also has an interesting section on the important cross-border networks developing at Dandong—including North Koreans working in China—as well as the tourism industry.

Finally, Reilly traces these developments down to the individual-level mindsets of those engaged in the China trade at the wholesale and retail levels; clearly, greater knowledge of doing business is seeping in, consumerism is on the rise and even officials are being exposed to the Chinese model.

In sum, Reilly makes the case that we have made for the domestic economy: that something is bubbling up below the surface as a result of marketization, trans-border in this case. But Reilly’s account sidesteps the one piece of transformation that is still in doubt: the policy component. We do not expect big bang reforms, and since the backsliding from the mid-2000s we have clearly seen greater tolerance for markets. Experiments like Rason may be real this time. But when and how this will spill over into broader policy changes remains a little opaque to us. Will this really move in a Chinese direction, or will a continued penchant for control limit the ability of the central government to permit Rasons to proliferate? Is the government really willing to allow private actors to profit, or are we witnessing something like a state-capitalist hybrid? In any case, Reilly’s account brings us up-to-date on what is known about the Chinese side of the equation.


Denny Roy

Whether or not the central government allows more Rasons would seem to depend a lot on Pyongyang's perception of whether or not Rason is, on balance, successful/beneficial. What would make them feel that way? Attracting a lot of foreign investment? Should Western governments therefore encourage their business communities to jump in, even if the environment is not perfect? Or is it better for outsiders to hold back as a way of pressuring Pyongyang to make further reforms?


The big question at the moment is South Korean involvement in Rason. Yonhap here: http://english.yonhapnews.co.kr/northkorea/2014/12/01/77/0401000000AEN20.... This would seem to require a de facto--if not de jure--lifting of post-Cheonan sanctions. Interestingly, Chinese efforts on the showpiece Hwanggumpyong Island project appear to have gone nowhere. Marc Noland and links to earlier posts on these issues: https://piie.com/blogs/north-korea-witness-transformation/sino-russian-rivalry-over-north-korea
. In the meantime, smaller European companies are going on organized trips to the North but to date we have no indication of much investment outside of Chinese and Russian efforts except for the Egyptian Orascom deal, which also faces trouble: https://piie.com/blogs/north-korea-witness-transformation/orascom-north-korea-dont-leave-me-hanging. I am not against foreign investment; it could help open North Korea up at the margin. But is North Korea willing to allow foreign firms to make money?