PRC/DPRK: BORDER TRADE AND SOME NEW FRICTIONS (MAY

C O N F I D E N T I A L SECTION 01 OF 03 SHENYANG 000101

SIPDIS

SIPDIS

DEPARTMENT FOR INR, EAP/CM, EAP/K

E.O. 12958: DECL: TEN YEARS AFTER KOREAN UNIFICATION
TAGS: PREL PGOV PINR ECON KN KS CH
SUBJECT: PRC/DPRK: BORDER TRADE AND SOME NEW FRICTIONS (MAY
2007)

REF: A. (A) SHENYANG 69


B. (B) 06 BEIJING 23166

Classified By: ACTING CONSUL GENERAL DAVID BRIZEE. REASONS: 1.4(B)
AND (D).


1. (C) SUMMARY: There continue to be differences between
Jilin and Liaoning Provinces in the volume and scrutiny of
their trade with North Korea. PRC-DPRK frictions have
recently emerged in Ji'an, where Chinese officials have
taken the unusual step of publicly criticizing neighboring
North Korean authorities. Chinese officials farther north
in Baishan privately expressed some trade-related
frustration with the DPRK, but remain hopeful that the
North will soon agree to participate in several new barter-
trade zones recently constructed by the PRC in Linjiang and
Changbai. END SUMMARY.


2. (C) Poloff traveled May 7-11 along nearly half of the
PRC-DPRK border, which was quickly transitioning into
spring as North Koreans and Chinese busily ploughed their
fields in preparation for the imminent planting of spring
crops. Sites visited included Dandong, across from
Sinuiju, North Korea; Ji'an, which abuts Manpo; Baishan;
Linjiang, which faces Chunggang; and Changbai County,
across from Hyesan.

THE PORTS, FROM DANDONG TO CHANGBAI
--------------


3. (C) DANDONG. The level of activity at the Dandong Land
Port appeared consistent with previous visits during
Poloff's very brief observation on the morning of May 7.
Between 1000 and 1045, Poloff observed approximately 40-50
mostly large, closed-container PRC trucks pre-cleared
elsewhere cross into Sinuiju, North Korea; nearly 80
crossed during the same time interval in March (ref A).
Several light outbound vans and passenger cars--including
two late-model Mercedes with red North Korean plates--
exited China without appearing to undergo inspection.
Border officials appeared to pay more attention to traffic
entering China from North Korea. Between 1040 and 1120,
Poloff observed approximately 80-100 mostly empty container
trucks cross into China from North Korea. Upon entering,
quarantine officials sprayed tires with a disinfectant,
after which customs officers inspected the cargo holds of
incoming trucks and, unlike what appeared to be the case
during past visits, climbed into the cabs of a number of
cargo trucks to look around. The 10-15 late-model Japanese
passenger cars and SUVs with North Korean plates that
passed through the port during the same period appeared to
attract less scrutiny from customs officials. Chinese,
presumably business partners, greeted a number of North
Korean drivers at the port, often handing the latter cell
phones as soon as they cleared customs.


4. (C) Poloff finally gained access to Dandong's customs-
monitored warehouse on the outskirts of town, where customs
officials appear to inspect and "seal" many of the trucks
bound for Sinuiju. (NOTE: Police had previously refused
Poloff access to the facility--shouting at Poloff to leave-
-presumably because of PRC sensitivity in the wake of
Pyongyang's nuclear test and UNSCR 1718. The facility is
located at 40 Huayuan Road; see ref B for details. END
NOTE.) At approximately 0915 on May 8, Poloff observed a
number of Chinese container trucks being loaded from a
warehouse situated at the edge of the facility. 80-100
heavy PRC trucks sat parked in the middle of the open-air
enclosure as customs officials inspected paperwork and,
alongside drivers, peered into open cargo holds, which
contained goods ranging from fruit and furniture to
refrigerators. The facility contained no North Korean
vehicles.


5. (C) JI'AN. Several hundred kilometers north of Dandong
in Jilin Province, three official ports link Ji'an with
North Korea. At Ji'an's rail port to Manpo, a 3-car
Chinese train with one passenger car crossed into North
Korea at approximately 1740 on May 8, though People's Armed

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Police (PAP) guards refused Poloff access to the facility.
PAP guards proved far more lax 60 kilometers south of Ji'an
proper at Laohushao Port, where cargo traffic crosses the
Yalu on a small barge. Poloff on the morning of May 9
observed only two Chinese trucks--packed with consumer
electronics--slowly cross by barge into North Korea's Wiwon
Port.


6. (U) In an unusual online report last month quite
critical of neighboring North Korean authorities, Ji'an
Customs noted that heavy rain again destroyed Wiwon Port's
dock on April 18. PRC port authorities have complained
about the DPRK's inability to properly reinforce the port
on several occasions during negotiations, and the article
alleged that the DPRK's actions had "seriously affected"
PRC-DPRK border trade in Laohushao. According to another
online report by the Ji'an government in late April,
commerce has effectively (temporarily) stopped at Qingshi
Port--the city's third port--and Ji'an's overall trade with
North Korea is falling this year. The main reasons include
resource depletion in the DPRK (over-timbering has
decreased the amount available for export),as well as a
trade spat: North Korea this year raised the price of its
timber exports considerably, which has hampered Chinese
profit potential and produced "difficulties" in PRC-DPRK
trade negotiations on the issue, the report said.



7. (C) LINJIANG. Further north at Linjiang Port--across
from Chunggang, North Korea--Poloff on May 9 at 1400
observed one North Korean container truck parked on the
land bridge waiting to enter China. On the Chinese side, 3
light, open-bed Chinese trucks stuffed with fruit,
vegetables and clothing queued to enter the port, inside of
which 7 North Koreans waited, presumably to cross back into
North Korea. Several minutes after entering, PAP guards
insisted that Poloff leave the facility, which is open to
Chinese tourists, but not foreigners, they said.

NK TRADE DOWN IN CHANGBAI, NEW BARTER ZONES ON THEIR WAY?
-------------- --------------


8. (C) CHANGBAI. Several hundred kilometers north of
Linjiang in Changbai County (China's sole autonomous ethnic
Korean county),Changbai Port sits across from Hyesan--a
large, relatively lively North Korean border city with
abundant signs of life (unlike many other cities along the
border visited by Poloff). PAP authorities at the port
strenuously opposed Poloff's request for a visit--despite
the intervention of the local Foreign Affairs Office--
citing the sensitivity of the North Korean side. Local
government officials, however, proved willing to talk
unofficially.


9. (C) Trade between North Korean and Baishan City--which
formally administers Linjiang and Changbai, including their
ports--has been suffering, according to ZHAO Lina
(protect),Chief of the Baishan Trade and Economic Bureau's
Foreign Trade Section. 2006 was "not so good," and saw
total Baishan-DPRK trade of USD 180 million, of which USD
120 million was exports, Zhao told Poloff on May 10. Zhao
suggested that North Korea's missile/nuclear adventurism,
among other longer-term factors (e.g., the North's planned
economy, low efficiency, poor "credibility"),had led to
the decline in trade as Chinese customs tightened
inspections, she argued. But the Deputy Director of
Changbai Customs contradicted Zhao, asserting in a
separate, unofficial conversation with Poloff later that
day that there had effectively been no change in the
volume/value of local trade with North Korea as a result of
the nuclear test or alleged enhanced inspections pursuant
to UNSCR 1718, precisely because of the composition of
Chinese exports to North Korea in the area (which is
dominated by daily consumables, grain, clothing and the
like--all of which is not restricted by UNSCR 1718).


10. (C) Zhao noted, too, that both Changbai and Linjiang
have recently constructed barter trade zones to facilitate
more informal cross-border trade, but said somewhat

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disappointedly that Baishan is still awaiting a response
from North Korean authorities. She offered no specifics.
BRIZZEE