PRC-DPRK BORDER ECONOMY: SOME EXASPERATION ON THE

S E C R E T SHENYANG 000092


DEPARTMENT FOR EAP/CM, EAP/K, INR
MOSCOW PASS TO VLADIVOSTOK


E.O. 12958: DECL: TEN YEARS AFTER KOREAN UNIFICATION
TAGS: CH ECON KN KS PGOV PREL RS
SUBJECT: PRC-DPRK BORDER ECONOMY: SOME EXASPERATION ON THE
CHINESE SIDE, ACTIVITY ON THE KOREAN SIDE

REF: SHENYANG 76

Classified By: Consul General Stephen B. Wickman. Reasons 1.4(b/d).


1. (C) SUMMARY: Chinese businessmen and government officials
may be experiencing "North Korea fatigue" and, against the
backdrop of the DPRK's April 5 missile launch, may in the
future become less enthusiastic about undertaking investment
opportunities in the DPRK. Trade at Dandong, which accounts
for the bulk of the DPRK's trade with the outside world,
appears to be ongoing but largely one-way. Along other parts
of the border, economic activity appeared to be robust in
mid-May. END SUMMARY.


2. (U) Congenoff and assistant visited Dandong May 11-12 and
the Yanbian Korean Autonomous Prefecture May 13-17 to record
developments along the North Korean border. Border sites
observed included Dandong by the Yalu River, and Nanping/Musan,
Songhak-ri, Yuseon, Sanhe/Hoeryong, Kaishantun/Sambong, and
Tumen/Namyang along the Tumen River (see paras 6-14 for details.)

SOME EXASPERATION: DPRK INVESTMENT NO LONGER AS ATTRACTIVE
-------------- --------------

3. (C) Wu Jianhua (protect) a government specialist on North
Korea and PRC-DPRK border issues at the Liaoning Academy of
Social Sciences (LASS) reported that he recently received
kudos from Liaoning Governor Chen Zhenggao for presenting a
comprehensive report detailing the risks and rewards of DPRK
investment and trade at the current juncture. Wu said that
most of the government officials he knew fell squarely into
two camps, one side believing that the historical alliance
and strategic value of the DPRK justified further support,
the other feeling the DPRK's increasingly difficult and
uncontrollable behavior was fast becoming liability to the
Chinese government. Wu cited the missile launch as a
trust-breaker and embarrassment to the Chinese government,
but he also said that the tangible reality of diminishing
returns on DPRK trade and investment played an even larger
factor in this regard. Wu also pointed to the rampant
smuggling of goods across the border as an impediment to
healthy, normalized trade (NOTE: Chinese leaders in Dongbei
have historically entertained the notion of investing in
North Korea; earlier this month, the Jilin vice governor
returned from a four-day junket in Pyongyang.)


4. (S) A similar sense of frustration was expressed recently
by Feng Yi (protect),whose nominal title is the Dandong-based
representative of the Shanghai Automotive Industries Corporation
Import/Export Division. In reality, Feng says he is in charge
of the Chinese government's aid program to North Korea, traveling
throughout the DPRK regularly and coordinating all cross-border
shipments using the Dandong Land Port (NOTE: Feng has also been a
Mission China contact for facilitating the movement of USG-related
items in and out of North Korea.) Feng recently shared with
congenoffs that the Chinese government had agreed to ship
180,000 tons of grain to North Korea in exchange for North
Korea's delaying or cancelling its April 5 missile launch.
On April 5, Feng said he was in North Korea distributing the
last grain shipment even as the missile launched.


5. (C) Sino-Korean and lifelong Dandong resident An Shengyi
(protect) has extensive experience dealing with South and
North Koreans as a businessman, trader, and as the Dandong
reporter for the Liaoning Chaoxian Wenbao. Up until recently,
An reported, many of his friends and acquaintances were tempted
by DPRK business opportunities and followed the blow-by-blow
accounts of when the "DPRK would open Sinuiju." After numerous
frustrations and failures over the last decade, however, An
said most people were fed up, summing up their attitude thusly:
"the DPRK can come along for the ride, or they can continue to
just lose the way they do; at this point, it's their choice."
An said that the only commercially-viable DPRK resource now is
coal because iron ore and many other sectors in North Korea were
a losing proposition for Chinese businessmen.

BORDER SNAPSHOTS: MACHINERY ACTIVE BETWEEN TUMEN AND MUSAN
-------------- --------------

6. (C) Mid-May trips to Dandong and the stretch of the Tumen
River between Musan and Tumen showed an increase in the
amount of vehicular traffic and machinery on the North Korean
side over the previous trips in mid-April. Dandong trade was
all one-way, however, from China to North Korea. In Yanbian,
congenoff visited sites on a weekend and was unable to
observe any cross-border activity at the land ports. He did,
however, reconfirm previous findings of an increased Chinese
security posture along the border directed at third-country
nationals (Ref A.)


7. (C) DANDONG: On the afternoon of May 11, only about 30
vehicles traveled from the DPRK to China. Almost all were
completely empty. One or two vehicles were carrying some
sort of load, but the rest, including five flatbed trucks
were seen speeding back across the bridge. One crane
returned to China and a lone North Korean locomotive returned
to North Korea. At about 1600, a closed-cab military truck
was escorted into North Korea by two black sedans bearing
military plates which were escorted by three white Customs
Service vans. The Customs vans returned minutes later, but
the sedans and truck did not. Upstream of Dandong, congenoff
observed several hundred Chinese military personnel
conducting training exercises with pontoon bridges and other
amphibious craft along the Yalu River. The taxi driver said
that the military regularly engaged in this &contingency8
training. At the narrowest point of the border between China
and North Korea, for a 20 RMB admission fare, a private
landowner escorted congenoff to the edge of the river and
said that for an additional 50 RMB she could call out a North
Korean guard for a cigarette, emphasizing only that
photography was forbidden. She added that people used to
take pictures freely but that now it was too "sensitive"
(congenoff demurred.)


8. (C) DANDONG (CONTINUED): On the morning of May 12, the
Dandong Land Port's staging lot was about half-full with
overloaded trucks, over five new minibuses and five pickup
trucks having no license plates, along with a few cranes and
other machinery. There were at least 50 DPRK citizens
waiting around the customs house, along with another roughly
50 Chinese citizens, almost all of whom sounded like
Sino-Koreans or Korean Chinese. In the parking lot, there
was a touring bus carrying North Korean passengers with a
sign showing service from Yingkou to Dandong. Congenoff
overheard one group of North Korean men talking disgustedly
about the arrest of "stupid/incompetent" Pomminnyun
activists in South Korea. No grain or foodstuffs were
observed in the cargo, but the bags and crates were full of
consumer products and clothing. Individual Chinese citizens
were carrying lots of fruit and other such foodstuffs, but
one could not tell if there was any grain. By 1000, over 50
vehicles had crossed over into the DPRK, all of which were
completely full, if not overloaded. At 1030, the regularly
scheduled train from Beijing to Pyongyang crossed over to the
DPRK with one locomotive pulling a boxcar and two passenger
cars.


9. (C) NANPING/MUSAN: Upon entry to the border region from
Helong on the morning of May 16, there was a People's Armed
Police (PAP) checkpoint that only functioned to stop vehicles
incoming from the border region. There was no traffic at
Nanping, the closest land port to the North Korean iron
mining center, Musan. There was a small excavator on the
North Korean side moving dirt underneath the bridge. In a
riverside village upstream of Nanping, there was a tractor
pulling a cart; over 10 sheep and three cows grazing in the
fields. Downstream of Nanping, there were three unattended
cows along the riverbank. In Musan, there were many signs of
activity, with tens of people walking along different
streets, washing clothes in the river, and working alongside
the riverbank.


10. (C) SONGHAK-RI: This area had a functioning lumberyard
with a fully engaged work crew and a large crane lifting and
moving logs. A dog and a cow were off to the side of the
lumber yard. Downstream of Songhak-ri, there was a group of
over 20 people wearing white hats, farming an isolated plot
halfway up a mountainside, distant from the nearest village.


11. (C) YUSON: This urbanized area featured another active
lumberyard with an operational crane and a team of workers.
Along the riverbank, there were three dump trucks and a large
excavator working together to move dirt. There were three
groups of 3-5 people engaged in agricultural work in the
fields and a considerable amount of foot traffic in this
large district just west of Hoeryong.


12. (C) SANHE/HOERYONG: Late in the afternoon of May 16, a
North Korean locomotive carrying two cars headed downstream
in the direction of Tumen with 5-7 soldiers hanging off the
back. Upon departing the Sanhe border region for Yanji,
congenoff encountered a PAP security checkpoint with four
armed soldiers carrying automatic rifles. They asked for
identification, opened the trunk, and searched through bags
in the vehicle.


13. (C) KAISHANTUN/SAMBONG: On May 17, there were over 20
bicycle riders moving along the main road on the Korean side
on a rainy and windy day. At one point, a motorcycle sped by
the bicycles. There was a group of 5-7 border guards and
people in white hats along the riverbank. Further
downstream, there was the occasional cow or dog around each
village.


14. (C) TUMEN/NAMYANG: There was no movement on the bridge on
Sunday, May 17, but there were 4 dump trucks traveling along
the upland road north of Namyang on the Korean side.
Upstream of Tumen, there was a group of 5 people in white
hats working on the railroad in a downpour.

WICKMAN