The Peninsula

Dr. Strangelove and the Special Economic Zone: Balance and Imbalance in China's Long-Range North Korea Strategy

By Adam Cathcart, Roger Cavazos, and Nathan Beauchamp-Mustafaga

No one knows if Kim Jong-un’s favorite films extend into the acerbic oeuvre of Peter Sellers, but the young North Korean dictator’s behavior indicates that he might indeed be taking one such film as inspiration. At various key moments at the end of 2012 and into the new year, the North Korean leadership has seemed determined to imitate the behavior of Slim Pickens at the madcap conclusion of the Cold War film classic Dr. Strangelove, shutting off two-way communications and launching an unexpectedly quick display of armed technological prowess and threatening to do even more.

The Chinese leadership generally fails to appreciate satire, but they have surely noted the wild and Strangelove-esque behavior of their erstwhile socialist ally. Whether it was the North Korean rocket being launched into outer space under the pretext of a “satellite,” or the more recent threat of unbridled nuclear testing and firing successive missiles, hides were chapping in Beijing.

It is still probably too soon to speak of an irrevocable transformation of China’s relationship with the DPRK, but things are clearly not going in the right direction. Chinese scholars are musing to anyone who will listen about the need to cut off the DPRK and prepare for reunification.

Amid all of this tit-for-tat, Chinese leaders are probably most frustrated by some lingering and unavoidable facts: North Korean leaders are missing the real endgame, the DPRK is failing in its charge to keep alive the flame of Beijing’s longer-term plan for the DPRK, and the plan for “reform and opening up” of the border region shared with China is not being focused upon in Pyongyang. The North Koreans are delaying uncomfortable discussions of further economic measures along the border, and failing to engage in meaningful internal economic reforms – China’s real goal.

PERSONALITIES AND DELEGATIONS

What makes us say that the North Koreans are not discussing economic measures with the PRC?  When a high-level Chinese delegation went to Pyongyang on November 29, Jang Song-taek, the co-chairman of the Sinuiju Special Economic Zone (SEZ) (新义州特别经济区 /신의주 특별경제구 ) and the head of a large August delegation to China, was kept studiously away. Instead, Kim Jong-un was accompanied by Kim Ki-nam 金己男 (#3), the aged propagandist, and two less senior but frequent Sino-DPRK interlocutor officials, Kim Yang-gon  金养建 (#15; Jang Song-taek is #19) of the United Front Department and  Kim Song-nam / 金成男 who is a Vice Director  of the International Department (lower than 233). During their meetings, Jang Song-taek maintained a profile as high as Xi Jinping’s during early September 2012.  Jang even missed Li Jianguo making an unfortunate bow to the Kim Il-sung and Kim Jong-il statues.

But this relationship is more than personalities, and it is certainly more important than Kim Jong-un’s “hug diplomacy” with the CCP.  Recent work indicates that Chinese discussions about reform have not emerged from a vacuum; Chinese doubts about the SEZs and the North Korean reform project more generally are deeply rooted in more than a decade of analysis and Chinese domestic policy discussion.

The pre-Kim Jong-un era is an important baseline from which to evaluate China’s North Korea strategy. After all, each element of the Chinese bureaucracy has been brought into closer understanding of the DPRK over a series of years and has an imperfect but indisputably institutional feel for the DPRK. This is distinctly not just about politics and relations of personalities, but more a fabric of bureaucratic (and somewhat predictable) ties and patterns. One of those patterns is North Korea’s recalcitrant acceptance and sometimes outright rejection of Chinese economic ideas and influence—the marketization of the border region.

BEYOND KIM JONG-UN: CHINA’S ECONOMIC STRATEGY FOR THE DPRK

Chinese hopes for reform in North Korea are not so much rooted in a desire for Kim Jong-un to start things, but for Kim Jong-un to merely follow through on positive initiatives which had begun back in 2010, or, in some cases, 2002. Indeed, Chinese analysts have been trying to understand and use DPRK’s Joint Venture Law (合营法) to create the basis for more Foreign Direct Investment.

China has pumped about RMB 2.2 billion ($354 million) into just one supporting project, a new bridge to handle what is expected to be new and heavy traffic flows – which also helps out should China ever need to move into North Korea – with businesses that make both sides of the Yalu richer.

Both sides have nominally discussed and agreed to the Economic Zone Act.  The documents and agreements in the act cover the basic economic zone development and economic zone management.  There are also procedures for establishing, registering and operating enterprises, as well as protecting economic activity (but it is unclear who or what they are protecting it from), encouraging preferential policies and outlining complaint and dispute resolution. The law covers basic economic zone investment related matters, and outlines even more detailed, specific requirements.

The preferred industries for the 16.6 square kilometer zones include industry garment processing, producing consumer electronics, modern and efficient agriculture, culture, creativity and even financial services.  The Chinese side in particular hopes major banks will set up branch offices in the zone in order to transfer currencies and allow for foreign remittances of legitimate profits. China even hopes to employ 10-20,000 North Koreans!

However, even in glowing reviews of the SEZs in Sinuiju, there is much left to do. In a long December 3 article focusing on those SEZs, China Economic Weekly called them “an innovative model of international cooperation [that] still needs much work, thought and human talent.” The article went on to catalogue a laundry list of items that had yet to be resolved, including visa issues, banking regulations, and communications.  It’s further worth noting that North Korea’s lifting of the ban on foreign cell phones in Pyongyang was pointedly not extended into Sinuiju and surrounding areas, a virtual necessity if North Korea wants Chinese business partners to be functional in the zone. As with so many things, the grand gesture in the capital obscures recalcitrance toward and distrust of the periphery.

Visits to Dandong and Shenyang by the authors, along with conversations with experts in China, all confirm China’s searing desire to get economic activity geared up in the Liaoning-Korean frontier zone. The moves to set up SEZs in Sinuiju area, it bears recalling, are not Kim Jong-un’s brainchild in the least. He has not associated himself with them in any way, either through juxtaposition in the state media or through on-site inspections.  In the recent Chinese trip to Pyongyang, the SEZs were conspicuously absent in public pronouncements, even after the big October 2012 trade fair in Dandong. Chinese media stories indicate that the silence on this matter was no indication that relevant problems had been solved by Jang Song-taek when he sojourned to the PRC in August 2012.

Looking back at the past decade of Chinese efforts to stimulate and support North Korean economic reforms reveals few success stories. The Chinese Communist Party was not in the least pleased with Pyongyang’s efforts in 2009 to reform its currency. Cui Yan, a scholar from Heilongjiang University saw the move as a radical re-centralization, when an unleashed decentralization and marketization at the small level was precisely what was needed instead. China saw the economics of the situation, but North Korea took the action as a political measure. Small wonder, then, that the CCP media responded to the currency reform by showing off North Korea’s worst side by passing along South Korean media reports about executions in Sinuiju.

CONCLUSION

China wants a strong and stable border and a peaceful peninsula. A North Korea focused on economic development means more security for China and an ally that does not drain so many spoils from China’s coffers. A richer North Korea also helps revitalize China’s Northeast by engaging in two-way trade.  There are any number of areas China would like to see improvement on: building out Sinuiju SEZs, completing the bridge to North Pyong’an, more infrastructure investment in the Rason SEZ, a slight downturn in the monument-building frenzy, strengthening legal and procedural guarantees for foreign investors, a nod to small-market activity, greater regional connectivity, etc. So long as the North Korea discussion continues to rotate around the launching pad and an outstretched empty DPRK hand, China’s border remains unsettled and China’s economic strategy for the DPRK remains gathering dust in Zhongnanhai’s top-shelf and on the banks of the Yalu River.

In Peter Sellers’ black-and-white film, the lone bomber continues over the Arctic toward its enemy, unaware that its mission has been canceled and that a volte-face is in fact possible. Likewise, the men at the cockpit of the North Korean state burgeoning with arms of a military-first policy continue to barrel forward, following the directives of a dead leader. Perhaps China’s pragmatic and self-interested calls for North Korea to return to the unglamorous work of economic construction and reform will be sufficient for them to finally call the mission off.

Adam Cathcart is a Lecturer in Asian history at Queen’s University, Belfast. Roger Cavazos is an Associate at the Nautilus Institute for Security and Sustainability. Nathan Beauchamp-Mustafaga is a dual-degree master’s student at the London School of Economics and Political Science and Peking University.The views expressed here are the authors’ opinions alone.

Image from the photo stream of the United Nation’s Photo on flickr Creative Commons.