A vendor pushes a cart with Democratic People’s Republic of Korea (DPRK) souvenirs in Dandong, China, on August 13

North Korean trade with China has slumped since recent sanctions took hold, merchants said in the Chinese border town of Dandong, where 40 percent of all commerce between the two countries takes place.

United Nations sanctions that followed the nuclear test in May have put pressure on the North’s economy, which may help explain recent conciliatory actions by the government in Pyongyang, said Zhu Feng, a Beijing University professor specializing in North Korea.

“The shrinking of trade has put serious pressure on North Korea to show its flexibility,” said Zhu. “Trade is an important source of leverage for us over the North,” he said, adding that even though the UN sanctions were narrow, the effect on bilateral trade has been broad because it has crimped the flow of money between the two countries.

After months in which tensions on the Korean peninsula intensified, former US President Bill Clinton traveled to Pyongyang last month and returned home with two detained US journalists, pardoned from a 12-year prison sentence for charges including entering the country illegally. North Korea this week agreed to free a South Korean worker and remove some restrictions on cross-border travel.

Clinton met President Barack Obama Tuesday at the White House to discuss his meeting with the country’s leader, Kim Jong Il.

China has stepped up pressure on North Korea, which pulled out of talks in April aimed at ending its nuclear weapons program. In June, China agreed to UN sanctions imposing a travel ban and asset freeze on five government officials and five entities. Last month, Dandong border officials seized a shipment of vanadium, a metal used in missiles, smuggled in fruit boxes, the regional customs office said.

Trade aid

China is the North’s biggest trading partner. Its support for the North can be gauged by the trade surplus it runs with the country, according to Nicholas Eberstadt, a Korea specialist at the American Enterprise Institute in Washington. That fell to $386 million in the first half of this year from $1.27 billion in all of 2008, as China’s imports of coal from North Korea hit the highest level in at least five years, data from China’s Ministry of Commerce show.

“If net transfers from China continue to shrink, it will be ‘back to the 1990s’ for North Korea. That can only be an alarming prospect [for the North Korean government],” said Eberstadt.

Official trade statistics, incomplete and not including goods smuggled by sea or across the 1,415-kilometer border, show two-way trade between China and North Korea fell 2.5 percent in the first six months of this year to $1.12 billion, according to China’s Commerce Ministry. Trade between China and South Korea during the same period was $67.6 billion.

At the Tesco store, Zhao said fewer North Koreans are coming in, and they’re spending less.

Spending less

“Before this year, they would buy over 10,000 yuan in goods, now they typically only spend thousands,” she said. (10,000 yuan is about $1,460.)

Shopkeepers working within sight of the Sino-Korean Friendship Bridge spanning the Yalu River that separates the two countries said traffic is down by as much as half since May.

Fan Bo said he sells about 10 generators a month to North Korea, all to Chinese companies doing business there.

Mao Yifeng, a tire seller, blames the global financial crisis for the slowdown.

Over the course of half an hour on August 12, two empty blue Chinese trucks crossed the bridge into Dandong. One diesel freight train, also Chinese, crossed to China from North Korea. The open door on one of its two cars revealed there was nothing inside.

Over 45 minutes the next morning, two empty trucks and three empty North Korean buses crossed into China. No trucks were seen heading into the North.

A souvenir salesman who only gave his surname, Huang, said he’s seen road and rail traffic on the Friendship Bridge fall by about half since North Korea’s nuclear test in May. “It was never busy, now it’s even less,” Huang said.

Running parallel to the Friendship Bridge is the Broken Bridge, whose North Korean side was bombed by the US in 1950 during the Korean War and never reconstructed. Tourists pay 20 yuan to make the walk to the end of the bridge.

Source: Bloomberg