Merchants in China Scramble to Collect Debts Before Beijing Expels North Korean Traders

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Goods bound for North Korea at a customs checkpoint near the border in Dandong, China, in a file photo.
Goods bound for North Korea at a customs checkpoint near the border in Dandong, China, in a file photo.

Chinese merchants are scrambling to collect massive debts from North Korean traders who bought their goods on credit ahead of the end of the year, when Beijing will force them to leave the country as part of sanctions aimed at freezing Pyongyang’s nuclear weapons program, according to sources.

North Korea recently launched missiles that flew over Japan and conducted nuclear tests in September, drawing international condemnation and prompting tough sanctions.

The latest resolution passed by the United Nations’ Security Council on Sept. 11, limits North Korean oil and petroleum product imports, banned joint ventures, textile exports, natural gas imports, and banned North Korean nationals from working abroad.

Chinese sources with knowledge of the industry told RFA’s Korean Service that the sanctions had hit North Korean trading companies particularly hard, and that their representatives in China are now in debt for goods they purchased on credit with no way to repay.

As China prepares to comply with sanctions that ban North Korean workers, the traders are now leaving the country without settling their tabs, one of the sources said, speaking on condition of anonymity.

“Recent Chinese pressure on North Korea will force North Korean trade workers to return home earlier than they are supposed to—by the end of this year—and creditors are alarmed by it,” the source said.

“It is troublesome for trading companies because some of the North Korean trade workers have just disappeared without any word as creditors rush for debt payment.”

North Korean traders regularly purchase Chinese goods on credit and don't pay for them in full until their trading company earns money selling them back in North Korea.

“The North Korean traders who are returning home in a month or two are unlikely to pay their debts,” the source said.

“The traders with tens of thousands of yuan (10,000 yuan = U.S. $1,500) in debt are simply cutting off contact, so Chinese trade merchants are having hard time,” the source said.

A second Chinese source in the trading business said North Korean traders “should be pitied” as they must bear responsibility for huge debts incurred by state-owned firms that cannot be repaid in time due to Pyongyang’s strategy of pursuing its illicit weapons program.

“They are in debt on behalf of their country’s trading firms, but their country is ignoring them, so how can they be expected to make good on the bill,” the source asked.

As the deadline for departure from China approaches, many of the North Korean traders are making “return preparations,” the source said.

“This means they borrow money from acquaintances, or buy goods with credit, and flee the country,” he said.

“But who can blame them? North Korea is a country where the government and the people don’t pay their debts. What difference can the traders make?”

Sanction effects

Earlier this month, sources told RFA that authorities in North Korea have ordered residents to modernize the roofs of all buildings in a bid to dupe the international community into thinking economic sanctions have had no effect on the cash-strapped country.

State propaganda began pressuring citizens to replace aging roofs on public and private buildings in July 2012, shortly after Kim Jong Un assumed leadership of the country, because “the images of roofs are captured on enemy satellites and are used against us by slandering our socialist system,” the sources said.

Meanwhile, reports indicate that authorities in North Korea are issuing vast numbers of travel permits to citizens with relatives in China and requiring them to pay “loyalty offerings” in Chinese yuan for the privilege, in a bid to obtain much-needed foreign currency for the sanctions-hit government.

And sources recently told RFA that North Korean traders working for army-run manufacturers are successfully dodging Chinese customs controls, moving their products across the border by unguarded routes in an effort to earn cash for Pyongyang.

Reported by Joonho Kim for RFA’s Korean Service. Translated by Leejin Jun. Written in English by Joshua Lipes.





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