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China Set to Deepen N. Korea Ties as Yalu River Bridge Rises

April 16, 2013

China Set to Deepen North Korea Ties as Yalu River Bridge Rises

The three-kilometer bridge, which the official Xinhua News Agency said will cost 2.2 billion yuan ($356 million), will speed commerce through a city that now handles 70 percent of the two countries’ trade. Photographer: Wang Zhao/AFP via Getty Images

Across the Yalu River dividing China and North Korea, towers that will support a sleek suspension bridge rise south of one that U.S. bombers targeted during the Korean War to prevent China from supplying its ally.

The bridge into the northeastern Chinese city of Dandong, set to open next year, is a bet that trade will swell even as the U.S. pressures Communist Party leaders to exert economic leverage on the North to abandon its nuclear program. Secretary of State John Kerry said last week China needs to “put some teeth” into restraining Kim Jong Un’s regime.

On a recent visit to Dandong, a city of 2.4 million people, Chinese traders said their biggest concern is increasingly savvy North Korean businesses driving down prices on clothing and other consumer goods, not government restrictions on commerce. They expressed little fear that United Nations sanctions targeting North Korea’s economy would limit their business or threaten a bilateral trade relationship that grew to $5.6 billion in 2012.

“The political situation hasn’t had a big impact on trade,” Yu Hao, 43, who oversees customs for Dandong Import & Export Co., said at his office, located on a narrow street lined with Korean restaurants and massage parlors. “Trade suffers because of the price. The North Koreans understand too much now about China and that pushes down profit.”

The three-kilometer bridge, which the official Xinhua News Agency said will cost 2.2 billion yuan ($356 million), will speed commerce through a city that now handles 70 percent of the two countries’ trade. The span illustrates how the North is binding itself even tighter with China as it limits economic ties with South Korea, including by temporarily suspending work at the jointly run Gaeseong industrial facility.

Infrastructure Links

The infrastructure build-out goes beyond the river, with regional planners linking Dandong more closely to the rest of China as well. A high-speed railway will connect it to the cities of Dalian and Shenyang, and a new expressway runs to Tonghua, China Daily said late last year. China has approved a new ore terminal for Dandong’s port.

The infrastructure may ease traffic jams like one on a recent morning when dozens of trucks bearing excavators, wood, coils of steel and fruit waited to cross the low-slung scaffold Friendship Bridge that the U.S. targeted during the 1950-1953 war. Cranes were erecting the new bridge’s two main towers last week, with the span and suspension cables still to be installed.

“We aren’t worried about war -- look how calm Dandong is,” Wang Weidong, a website entrepreneur, said as he sipped coffee at a hotel on the river across from the North Korean city of Sinuiju.

Miscalculation Risk

North Korean leader Kim’s inexperience raises the risk of miscalculation even though it is unlikely his regime will launch a missile that directly threatens South Korea, a U.S. military official said.

While the test of a missile or nuclear weapon remain possibilities given the hostile rhetoric from the totalitarian state over the past several weeks, there are no signs North Korean forces are mobilizing, the U.S. Forces Korea official said yesterday in Seoul, asking not to be named in line with military policy. The comments came hours after Kim’s military warned a strike on South Korea could occur any time.

China came under new pressure to exert its influence as the North’s main economic and political ally after Kim’s regime threatened nuclear war against the U.S. and South Korea and restarted processing nuclear fuel at its Yongbyon site.

New Sanctions

The United Nations Security Council imposed new sanctions against North Korea twice this year, targeting trade in luxury goods and financial transactions. Earlier curbs made the country more reliant on China as Chinese companies bought North Korean minerals, and the North imported fuel and consumer goods.

“China does hold the key to this problem,” Arizona Senator John McCain said this month on CBS’s “Face the Nation” program. “China can cut off their economy if they want to.”

So far that hasn’t happened. China fears that the sort of pressure that might have an effect on the regime would also provoke instability, Andrew Gilholm, head of Asia analysis at Control Risks Group in Singapore, said in an interview.

“When you get American senators and congressmen standing up and saying China needs to do more about this -- they’ve been saying that since the 90’s and it doesn’t make any difference,” Gilholm said.

Strict Customs

Shipments to North Korea fell 13.8 percent in the first quarter of the year to $720 million, China’s customs administration said this month. Imports from the North rose 2.5 percent to $590 million.

Many of the companies on the main trading strip in Dandong sell Chinese-brand vehicles, excavators and auto parts. Other products include solar-power systems for televisions and computers.

“Everyday household objects can go across normally, for example TVs and construction materials,” said entrepreneur Wang, general manager of Dandong Good Sea Business Ltd. His firm runs a website that helps connect Chinese companies with North Korean businesses.

Much of the trade is conducted through barter, according to traders, with minerals and coal from North Korea used as payment. Other times, North Koreans pay in China’s currency or in U.S. dollars.

Traders across the border who have access to the Internet have driven down prices, Dandong Import & Export Co.’s Yu said.

More Trade

“In the past, you could sell something worth five yuan for 10 yuan to North Korea,” Yu said. “Now they know what’s going on, so they say, ‘I’ll give you 8 yuan.’”

More trade is expected. Near the entrance of the bridge, empty pastel-colored apartment towers surround manicured parks. A commercial street full of empty offices is ready for tenants to arrive. “The new zone is the future of Dandong,” a red banner in the city center says.

“Many companies have already bought properties there,” Yu said. “When the bridge is finished we’ll have no option but to go there.”

Standing in front of a bright-green Great Wall Motor Co. (2333) Wingle pickup truck that will be driven across the Friendship Bridge, a manager at Dandong Ningshun Car Trade Co. who would only give his surname, Xia, said the company sells about 200 cars a year to North Korea.

“North Koreans like this model the most -- they have no car industry there,” Xia, 60, said. “Trade between Dandong and the North is based on our relationships with our clients. We don’t talk politics.”

To contact Bloomberg News staff for this story: Henry Sanderson in Dandong at hsanderson@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net


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