Bloomberg News

Kim Killing Uncle May Limit China-Style Opening in North Korea

December 13, 2013

North Korea’s execution of the man in charge of its relationship with top ally China may reduce the chance that the isolated nation adopts the embrace of markets that has seen its neighbor build a middle class.

Jang Song Thaek, 67, a conduit to China who oversaw special economic zones on the two countries’ border, was executed for plotting against Kim Jong Un’s regime, according to a North Korean statement yesterday. Jang, who was Kim’s uncle and a top deputy, traveled to China repeatedly, meeting then-President Hu Jintao and former Premier Wen Jiabao in Beijing in August 2012 and negotiating the deal for the zones.

“Jang represented a China wing of the leadership that was very close to China and was moving the country toward Chinese-style reforms,” Charles K. Armstrong, history professor at Columbia University in New York City, said in an e-mail. “Jang’s removal suggests that there are serious differences within the North Korean leadership about economic reforms and the direction of the country.”

Failure to embrace markets risks leaving North Korea reliant on foreign aid and Chinese largess as United Nations sanctions over its nuclear program leaves it with few trade options. The country has proved an erratic partner in its joint venture with South Korea, pulling its 53,000 workers out of Gaeseong industrial complex in April, shutting the factories at the site for five months.

Jang had led efforts to open up the North’s reclusive economy, according to Cho Bong Hyun, a Seoul-based research fellow at the IBK Economic Research Institute. Before his arrest, Jang sought foreign investment for a country that lacks hard currency.

Rile Relations

The removal of Jang may rile relations with China, the country’s chief economic backer and diplomatic ally. Ties were already strained after North Korea conducted its third nuclear test in February. The test undermined China’s efforts to return to the six-nation disarmament talks that offered the Kim regime aid in return for scaling back its nuclear program. North Korea abandoned the talks and conducted a second nuclear test in 2009.

“It’s a difficult regime to deal with anyway, and when this happens it makes it more difficult to work out who to talk to and what’s going on,” said Tim Summers, a Hong Kong-based senior consulting fellow at the Chatham House analysis group. “It’s another headache for Chinese diplomats dealing with North Korea.”

Escorted Out

North Korea’s official Korean Central News Agency reported Jang’s purge Dec. 9 and state television showed soldiers escorting him out of a Politburo meeting. He was executed immediately after his trial Dec. 12, KCNA said yesterday. The charges against him included trying to overthrow the state and accumulating money “for gratifying his political greed.”

Jang’s removal also may complicate trade ties with China, which buys North Korean timber and coal and accounted for 70 percent of the country’s $8.8 billion of international trade last year, according to the Korea Development Institute, a South Korean government research center.

China sells North Korea energy and food, picking up iron ore and other commodities in return. China plans to take the lead in building a free-trade zone in the North Korean port city of Rason, a deal that Jang took a role in negotiating. Companies such as China Railway Construction Group (601186) and China State Grid Corp. are lined up to build the infrastructure at the site.

Huge Debts

Among the other charges, Jang was accused of saddling the North with huge debts by selling coal and other natural resources “at random,” and then selling off the Rason economic and trade zone land “to a foreign country for a period of five decades” to pay those debts.

Jang may have been purged for “simply getting too cozy with China and perhaps being a little bit too indiscreet in his communication with them,” said Brian Myers, professor of international studies at Dongseo University in Busan and author of the book “The Cleanest Race: How North Koreans See Themselves and Why it Matters.”

Asked about Jang’s execution, Chinese Foreign Ministry spokesman Hong Lei called it an internal affair of North Korea. “We hope and we believe that the business relations between China and the DPRK will continue to progress in a healthy and stable way,” Hong told a briefing in Beijing yesterday, referring to the North by its official name the Democratic People’s Republic of Korea.

Nuclear Test

Commerce between China and North Korea fell 2.2 percent in the first five months of this year from the same period a year earlier in the wake of North Korea’s nuclear test in February, compared with 27.9 percent gain in the same period a year earlier, the Korea Development Institute said.

While the removal may cause temporary confusion for Chinese leaders, it’s unlikely to interrupt the flow of goods to the leadership, according to Scott Harold, a Hong-Kong based analyst with the Rand Corp., a policy institute based in Santa Monica, Calif.

“In terms of trade, China is probably likely to continue to be happy to buy as much timber, ore, and port access as North Korea will sell it,” Harold said. “In terms of selling into North Korea, I suspect China will sell only that which North Korea can pay for in one form or another.”

Jang’s demise may signal factional infighting among members of the Kim family, which has ruled North Korea since its founding by Kim Jong Un’s grandfather, Kim Il Sung, according to Choung Byoung Gug, a lawmaker with South Korea’s New Frontier Party.

“The North’s traditional relations with China are put at peril after Kim Jong Un’s rise to the power,” Choung said at parliament hearing. “The family-centered leadership support system is unraveling. We don’t know who will become the leading force for Kim Jong Un. It’s apparently not China.”

To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net; Rose Kim in Seoul at rkim76@bloomberg.net

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


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