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Every year, KOTRA issues a report on trends in North Korean trade and we now have the latest installment covering 2014. The headline numbers on total trade are contained in the first graph and the all-important bilateral relationship with China in the second figure. North Korea’s total trade only got back to 1990 levels in 2010, and then exploded on the back of deepening trade with China, driven largely by raw materials exports and the corresponding ability to import. What’s interesting, as Nicholas Eberstadt has also pointed out, is the sizable bilateral current account deficit, which given the lack of diversity in the country’s direction of trade almost certainly reflects Chinese capital flows into the country, probably mostly in the form of foreign direct investment. In fact, in 2014 the China-North Korea deficit grew by 64 percent.
KOTRA does not see North-South trade as foreign trade, so you cannot extract North Korean dependence on China from their data; you have to add in Ministry of Unification figures on North-South trade to get the full picture. It confirms the very high dependence of the country on China, although with some decline as a result of the fact that North-South trade suffered from the shutdown of Kaesong in 2013, boosting the Chinese share.
One mystery of the cosmos we are working on: there is a very large discrepancy between KOTRA and Comtrade data on the China-North Korea trade, in fact as much as $500 million more of imports with the KOTRA data. That is a lot of additional capital flowing in, and in a subsequent post we will be consulting with colleagues and checking recent Chinese investment data to see if we can get to the bottom of the discrepancy; it is not small.
