The Changing Structure of Economic Cooperation between China and North Korea

Abstract

The Chinese economy has been slowing down since 2007. Since the deceleration of the hyper-infrastructure building process, China’s import of raw materials worldwide has also decreased, which has led to falling raw material prices. China’s GDP growth peaked in 2007 and began to drop ever since, save a brief increase in 2010. In 2014 its GDP growth rate was 7.3 percent, still a considerable number, but obviously not as significant as its previous two-digit, rapid growth period. Such a decrease in China’s GDP growth rate has been reflected in the fall of global coal and iron ore prices (figure 1). Compounding this trend is the global financial crisis, during which global demand for iron and steel dramatically declined, causing a drop in exports of China’s iron and steel companies. This in turn has led to lower demand for overall raw materials in China, in particular iron ore, which was previously needed by growing iron and steel manufacturers. China’s economic slowdown has been both a result of and a reason for the stagnant world economy as a whole, but it especially has big ramifications for North Korea, which is highly dependent on China as its trading partner, with over 90 percent of imports and exports being traded with China in recent years. For example, North Korea’s exports to China decreased in 2014 compared to the previous year, and the items that contributed to this fall were iron ore and anthracite, traditionally the two main export items from North Korea to China. Such a trend has continued on to early 2016, and this trend has not been limited only to North Korea. For example, Vietnams’ anthracite export to China in April 2016 has seen a 30 percent decrease from that of April 2015. Australia’s iron ore export to China in April 2016 has seen a 14 percent decrease from that of April 2015.