China border town waits for North Korea to wake

Dandong (China), Jul 22: At night, the bridge from Dandong in northeast China to neighbouring North Korea pulsates with gaudy neon lights, till it crosses from the Chinese half of the Yalu River and disappears into energy-famished darkness.

That gulf aptly reflects the two countries' economic relationship, interviews in Dandong suggested.

China has nudged North Korea to reform its rigid command economy and fanned hopes that burgeoning trade will coax the pauperised fortress state out of international confrontation, now escalating over Pyongyang's missile tests of July 5.

But businesspeople in Dandong, a key trade nexus between the two countries, spoke more of the pitfalls of dealing with North Korea, describing a brittle relationship that compounds hope with mistrust.

''There's huge potential for investment in North Korea and Chinese firms, more than anyone else, want to get in,'' said Shan Jie, whose company organises investment trips for Chinese firms.

''But it's a lot easier to do business with any other country.

North Korea is a socialist planned economy and everything is political, so nothing is easy.'' Dandong has all the trappings of a boom town. The riverfront facing North Korea a few hundred metres (yards) away is a parade of Chinese tourists, neon-lit shops and restaurants, rising luxury apartments and billboards with barely clad models.

Occasional clusters of North Koreans in white shirts appear like ghosts from China's own austere past.

TRADE TIES

Chinese President Hu Jintao and North Korea's supreme leader Kim Jong-Il have both signaled they hope to strengthen bilateral trade and investment.

China is the North's biggest trade partner and exports are growing. In 2005, North Korea shipped 1.08 billion dollars of goods from China and exported 499 million dollars, a jump in bilateral trade of 54 per cent compared to 2003, Chinese statistics show.

About half that trade passes through Dandong, often by train or truck across the Yalu River bridge, said Shan.

China and North Korea have provisionally approved a new four-lane bridge between the two sides near to Dandong, and Chinese investors are preparing to open a wholesale market for their wares in Pyongyang, the North's capital, said Wang Tingge of the Korea Peninsula Economic Consulting Centre in Dandong.

''Their own products can't meet their people's demand,'' he said of North Korea, estimating that factories there use only about 10 percent of their production capacity.

But in Dandong even hardened traders said North Korea is a tough place to eke out deals. Dandong's boom is mostly thanks to China's own economic growth rather than North Korea, many said. ''Economic reform can only go forward, but so far the results are not there,'' Wang Yonglan, a Dandong businesswoman, said of the North. ''They don't have a sense of urgency. In a lot of places they don't even have enough to eat, so how can they think of producing things for export?'' She said corruption, double-crossing on both sides, Pyongyang's export controls and pervasive uncertainty deterred Chinese investors from long-term commitments.

Indeed, North Korea's exports to China in 2005 represented a fall of 15 percent compared to the previous year.

But China is willing to be patient with North Korea, said John Park of the North Korea Analysis Group at Harvard University's Kennedy School of Government. Beijing wants Pyongyang to become a prime source of minerals, timber and other resources to fuel revival of the northeast Chinese rustbelt, he said.

Beijing is unlikely to sacrifice faith in Pyongyang's nascent economic reforms for strict sanctions against North Korea's weapons plans, despite backing a UN Security Council resolution, Park said.

''Maintaining economic stability in North Korea is an extension of domestic priorities in both Beijing and Seoul,'' he said.

''There's the view among many Chinese that North Korea is where China was in the 1970s,'' he added.

Dandong residents were dismissive of North Korea's missile tests, mostly speaking of them as either a trivial squib or the rightful act of a sovereign country.

They were much more interested in discussing prospective deals in North Korea, and the obstacle course of official barriers and corruption standing in their path.

Sun Shumin, a grizzled Dandong local who has sold used cars to North Korea's army for three years, said he now hopes to break into more lucrative molybdenum or zinc mining.

Watching the North Korean riverbank, a jumble of decaying factories, military posts and a disused amusement park, he weighed his chances.

''To do business here, you need money and friends on both sides,'' Sun said. ''The (North Korean) military are the ones who can make things happen, or get rid of you. Are you interested?''

REUTERS