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China’s Embrace of
North Korea: The Curious Case of the Hwanggumpyong Island Economic Zone
Posted By 38
North On February 19, 2012 @ 8:53 pm
Background
In early June 2011,
China and the DPRK announced an agreement to establish a free trade area on
Hwanggumpyong and Wihwa Islands, undeveloped sites adjacent to China’s
border city of Dandong where a tax-free zone will also be established. These
islands are located in the downstream area of the Yalu River on the border
between the two countries and are part of North Pyongyang Province. The
announcement underlined the North’s increasingly close ties with China;
the presence of Jang Song Thaek, Kim Jong Il’s brother-in-law and a senior DPRK
official, at the opening ceremonies symbolized direct involvement by the
North Korean leader in the project. It also highlighted the likelihood that
investment by the Chinese government and companies will drive development of
the zone. According to a decree of the Presidium of the Supreme People’s
Assembly issued on June 6, 2011, “Hwanggumphyong-ri, Sindo County; Sangdan-ri,
Hadan-ri and Taji-ri, Sinuiju City and Soho-ri, Uiju County of North Phyongan
Province shall belong to the zone.” It also noted that development of the zone
shall “start from the Hwanggumphyong district.”[1] [1]
[2]
Figure 1. Korean
peninsula and the Chinese border with the planned economic zone at the western
edge.
Planning to establish
this zone has probably been underway for a year or more. It is worth noting
that the ribbon cutting ceremony took place only weeks after Kim Jong Il’s May
trip to China, his third visit in 2011. The new zone fits into a surge of
development projects, many designed to improve infrastructure in the
area, including the construction and upgrading of several bridges along the
Yalu and Tumen Rivers, new railway service from China to North Korea
(ostensibly for tourism), and large Chinese investments in North Korean mines.
All of these developments fit into China’s plans for development of its
northeastern provinces and the view held by local officials that fulfilling
those plans will not be possible without parallel developments in the
North Korean economy. In that context, the Chinese know full well the state
of the North Korean side of the border—little existing infrastructure or
development—but probably intend to remedy that problem in order to fulfill
their economic and political goals.
Pyongyang reportedly
proposed to lease the two islands to China in order to build the “Hong
Kong of North Korea.” They would become free trade zones in order to reduce
trade barriers and bureaucratic requirements between the two countries.
Chinese nationals and foreigners would be able to enjoy visa-free status when
traveling to the islands. Incentives for investors include: tax refunds,
lifting of tariffs on imported equipment and materials used for production,
freedom to choose or establish banks for financial services, use of foreign
currencies for transactions, direct signing of labor contracts, right to hire
and fire employees, right to transfer and inherit profits and assets, right to
set prices, and unimpeded cell phone and internet access. These incentives
are a significant improvement over current practices relating to Chinese
investment in North Korea. The primary disincentive is the poor infrastructure
condition on the islands and uncertainty about plans for the financing and
management of needed infrastructure. The duration of the lease would be 50
years and could be extended up to 100 years.
The official outline
of the joint development project stated that four major industries—information,
tourism and culture, modern agriculture, and light manufacturing—would be
pursued. In that context, Dai Yulin, secretary of the Dandong Committee of the
Communist Party of China announced, “projects in sectors of marine engineering,
special steel, colored steel, and car audio will soon settle in Hwanggumpyong
Island and Dandong City.” Future construction plans include docks for passenger
and freight ships connecting Hwanggumpyong and Shinuiju, a network of roads
within the zone and two access roads linking Hwanggumpyong with the Dandong
economic zone in China. The new free trade area will be administered jointly by
the two countries and include the participation of local governments as well as
the establishment of an investment development corporation.
Major Chinese
Industrial Activity
China’s plans to build
a large industrial and residential area adjacent to Hwanggumpyong are
illustrated in this billboard entitled, “Detailed Regulatory Plan of the
Liaoning Harbor Industrial Zone” (figure 2).
[3]
Figure 2. China’s plan
for areas bordering Hwanggumpyong (the large, undeveloped light blue island
right of center). The legend (as best as can be determined) is as follows,
reading each column right to left and top to bottom: Column 1: residential
area, middle school and elementary school area, administration and offices,
culture and entertainment facilities, physical education (sports) and public
health facilities, community services and business and financial district;
Column 2: public green land (grassy area), protected green land, eco-green
land, storage materials (resources), type 1 industrial area and type 2
industrial area; Column 3: type 3 industrial area, harbor area, square area,
municipal public facilities, water area, development regulatory range; Column
4: detailed regulatory planning range, city streets, city expressway, railway,
highway, intersection (unclear from low resolution); and Column 5: high school,
middle school, elementary school, hospital, culture center, government
agencies, library, retiree residence and other items which can’t be identified
due to poor picture quality.
Satellite photography
graphically illustrates that over the past 5 years, China has made a major
investment in the adjacent area, which has been a beehive of activity with new
factories, large blocks of multi-story flats, roads, and new infrastructure
(figure 3).
[4]
Figure 3. Photos of
the Dandong industrial suburb of Zhonghecun taken in 2005 and 2010 demonstrate
huge Chinese investments. (Photos: Google Earth and Geoeye)
The Chinese are also
in the process of building a major sports complex adjacent to the border with
North Korea.
[5]
Figure 4. Graphic
illustration of the sports complex plans.
Chinese construction
activities appear to have spilled over into North Korean territory on
Hwanggumpyong Island (figure 5). The Chinese seem to be using North Korean land
as a place to dump their construction waste (e.g. soil). The second, more
substantial bridge built since late 2010 would suggest heavy loads and the
river inlet has been filled in. They may also intend to use the same area for
parking for the stadium and related facilities. On the other hand, there
appears to be plenty of land on the Chinese side of the border for that
purpose.
[6]
Figure 5. Progress on
large Chinese sports complex with construction extending across border into
North Korea (image on left from October 2010 and on right from December 2011).
(Photo left: Google Earth and GeoEye; Photo right: DigitalGlobe)
Rural North Korean
Territory
Most of Hwanggumpyong
remains a small, boggy island located on the west side of the very wide estuary
of the Yalu River. It is largely separated by muddy sloughs from the Chinese
mainland, although for several kilometers the island is part of the mainland
and divided from Chinese territory by a simple security fence and some
irrigation ditches. Hwanggumpyong is more a part of China than North Korea,
making it a convenient land area for cooperative activities between the two
countries without having to cross a wide river (figure 6). Since the island is
at the mouth of the historic river, China may see it as having some strategic
value as well.
[7]
Figure 6.
Hwanggumpyong Island with the international border between the DPRK and China
shown in yellow. The island is nestled against the Chinese industrial zone of
Donggang. (Photo:Google Earth and GeoEye)
A major Chinese
highway parallels the border, often only a few feet from a barbed wire border
fence with a large Chinese language billboard and a smaller white fence that is
probably North Korean. No roads or even tracks seem to cross the divide. While
these pictures of the border purport to be taken from the Chinese side, they
cannot be fully authenticated, although the landscape matches satellite
imagery.
[8]
Figure 7. A stretch of
the border where Hwanggumpyong is part of the Chinese mainland. (Photo:
Panoramio)
[9]
Figure 8. The
landscape of Hwanggumpyong as seen from the Chinese side of the border. The
DPRK fence is simple compared to the Chinese barrier in the previous picture.
(Photo: Panoramio)
The island itself is
similar to the countryside around Dandong, which not long ago had no industry
to speak of. It has one major village—the largest section with 200
dwellings—which is part of a cooperative farm. (Hwanggumpyong is located across
the river from a major North Korean showpiece farm.) Some sites appear to have barracks
but there are no signs of major military equipment. There is no obvious power
source on the island; power poles along the street cannot be discerned from
satellite photos. Since supplying electricity to the island would require a
two-mile or longer cable under the river, any large power connections will
probably have to come from China.
[10]
Figure 9. Although
little to no change is apparent on Hwanggumpyong Island between 2005 (top left)
and 2010 (top right), there appears to be a build-up on the Chinese side, not
far from the border (bottom photo, as of December 2011). (Photos above: Google
Earth, Digital Globe and GeoEye; Photo below: DigitalGlobe)
[11]
(Photo: DigitalGlobe)
Joint press releases
describing the new zone mention establishing ports on Hwanggumpyong Island in
order to improve marine connections to the North Korean mainland. Since the
island is largely surrounded by mud flats, it would seem to be unattractive as
a port for deep draft vessels. Sampans can be found on the Chinese side of the
slough and barges up to 175 feet long appear in Chinese stretches of the river
further north, but Hwanggumpyong only has a small boat dock near the village.
In contrast, China has
a large well-constructed, deep-water port at the town of Donggang near the
mouth of the river that is better suited for ocean connections than
Hwanggumpyong, which is shallow and frozen in winter.
Wihwa Island, located further north and across the Yalu
from Dandong city, is also part of the new free trade zone. Despite the
announcement of the new zone, it has remained poorly developed and appears to
add little to aggressive Chinese growth on the west bank of the river.
[12]
Figure 10. Undeveloped
Wihwa Island lies across the river from heavily industrialized Dandong (image
on left from April 2006; on right from December 2011). (Photos: DigitalGlobe)
Conclusion
Imagery and other
photos show a great deal of industrial expansion on the Chinese side of the
river adjacent to Hwanggumpyong and Wihwa Islands over the past five years.
In stark contrast, the North’s territory remains entirely
agricultural with little infrastructure and largely undeveloped for
industrial use. Since the announcement of the free trade zone, there has
been virtually no new activity on North Korean territory, with the exception of
a strip of land near a Chinese sports complex under construction. While it is
too soon to tell, that activity may either be the start of some related North
Korean effort or the Chinese are merely using the land as a dump for waste
(i.e. soil) from their project.
China’s willingness to
collaborate on the development of new enterprise zones is, above all else, a
strategic decision about strengthening its bilateral relationship with the
North and pushing Pyongyang towards market mechanisms. Beijing must also see an
advantage in acquiring the rights to these adjacent Korean lands, particularly
in view of the very liberal set of incentives for Chinese investors that
do not apply outside the physical bounds of the zone. These incentives may be
more important than whether the zone is on an island or the DPRK mainland. For
the North Koreans, locating the zone on these islands, aside from
potential political and economic benefits, may provide reassurance that
any potential political or economic “contagion” can be contained on the
Chinese side of the river and prevented from infecting the DPRK mainland.
In either case, the
key and still unanswered question, especially in light of the fact that little
has changed on North Korean territory since the announcement of the zone, is
who will build the infrastructure necessary to attract investors to set up
manufacturing and other facilities? It is worth remembering that the Korea
Land Corporation and Hyundai Asan provided a platform for South Korean
investors in the Kaesong Industrial Zone with ROK government subsidies.
Strategic motivations aside, the answer may lie with local Chinese governments
and businesses who will have to be motivated by the economic incentives of
cheap North Korean labor and raw materials and the potential for
preferential access to North Korean markets for their wares.
This article is a “38
North” exclusive in cooperation with DigitalGlobe’s Analysis Center, with
contributions by Robert Kelley, Michael Zagurek, and Bradley O. Babson, and
translation assistance by Nat Kretchun and Jennifer Lee.
[1] [13] “DPRK
Decides to Set up Hwanggumphyong and Wihwa Islands Economic Zone,” KCNA, June
6, 2011.
Article printed from
38 North: Informed Analysis of North Korea: http://38north.org
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