Chinese Traders in Dire Straits Over Frozen Border Trade With North Korea

China’s exporters to North Korea are struggling under mounting debts as chemicals, medicines, and metal products ordered by their neighbor decay in warehouses awaiting the reopening of border that has been closed since early 2020 to fight the coronavirus, according to sources in the main Chinese border city.

Although North Korea maintains outwardly that is untouched by COVID-19, the complete shutdown of the Sino-Korean border and the suspension of all trade with China in January 2020 were the first of a series of extensive pandemic prevention measures taken by Pyongyang.

The shutdown has damaged North Korean livelihoods across the 1,350-km (840-mile) frontier, where many residents rely on cross-border trade and smuggling from China to survive. The border closure has also contributed to food shortages in the chronically hungry nation, cutting off imports that could help cover and making it hard for the North’s farmers to get fertilizer.

Nineteen months without trade has also clobbered once-successful Chinese traders, who now are going bankrupt in the face of monthly warehouse rent or bills for goods purchased on credit but not yet delivered to North Korea, the sources told RFA this week.

“Chinese traders in the Dandong and Donggang areas, who were mainly engaged in trade with North Korea, are in the worst situation these days,” said a source based in Dandong, who requested anonymity to speak freely.

A major bridge crossing the Yalu River, called the Amnok River in North Korea, connects the Chinese city of Dandong with North Korea’s northwestern city of Sinuiju. Donggang lies 28 km (17 miles) is southwest of Dandong.

“These days, Chinese traders are struggling with their trade cargo bound for North Korea, which has been stored in their warehouses in the Dandong area during the rainy season,” said a Korean-Chinese source also in Dandong on Tuesday.

“Various materials ordered by North Korea in 2019 have been piled up in warehouses until now because of customs closures due to COVID-19,” he said.

Traders in northeastern China’s Liaoning province who serve the North Korean market have bought materials, equipment on credit from Chinese companies but are now unable to export anything, said the source, who requested anonymity to be able to speak freely.

“The traders, who couldn’t predict the sudden coronavirus outbreak early last year, are desperately waiting for the resumption of trade with North Korea because of difficulties in paying off their debts and storage fees,” he said.

RFA reported in April that North Korea had built a dedicated rail route to Sinuiju and a nearby border quarantine center designed to isolate freight in order to prevent the spread of coronavirus, a development sources at the time said pointed to the resumption of some trade.

But the opening of the border and expectations that trade would resume soon have not yet panned out, the Korean-Chinese source said.

Traders waiting to ship goods must pay monthly rent of anywhere from 500-1,000 yuan (U.S. $65-131) for warehouse space, he said.

Most warehouses in the border area with capacity for three 30-ton truckloads of cargo charge monthly rent of 800 yuan, he added.

Rainy weather hasn’t helped

Humid weather has rusted iron and steel materials in storage, while medicines and chemicals packed in warehouses have deteriorated, forcing traders to hire local laborers to move the materials to other warehouses that had dehumidifiers, the Korean-Chinese source in Dandong said.

“Most iron and steel products have been piled up in warehouses for more than a year and a half, and they are rusted so badly that they are impossible to be used as is,” he said.

But the traders cannot return them, having already purchased the material on credit, and are still unable to transport them across the border and into North Korea in the near future,” so they have no choice but to keep them in the warehouse at their own expense,” said the source.

The financial strain has caused some Chinese traders to resort to drastic measures.

A Chinese trader who stored chemicals and medicines to be sent to North Korea in a warehouse disappeared one night after the export and delivery date for the goods had been postponed indefinitely, the first source in Dandong said.

“The trader, who once made a lot of money by exporting medicines and chemicals from Dandong to North Korea, disappeared without any trace after failing to pay the warehouse rent,” he said. “It was because medicines and chemicals quickly deteriorated during the rainy season and became useless.”

The Chinese trader tried to keep and preserve all the medicines and chemicals in three warehouses by borrowing money from acquaintances to pay the rent and hiring workers to turn over the containers holding them periodically to prevent them from deteriorating, he said.

”But when there was no sign of resumption of China-North Korea trade, he couldn't hold out any longer and disappeared with some medicine that could be still used from the warehouse,” the source said.

In the meantime, some traders have taken jobs as laborers to earn money to pay their warehouse rent, he said.

In 2019, the last full year before North Korea and China stopped trading, total trade volume between the two nations amounted to just over U.S. $3 billion, according to data from the Korea Trade-Investment Promotion Agency.

China was the origin country for 96 percent of North Korea’s imports in 2019 and was the destination country for 67 percent of North Korean exports, according to data published on the website of the Observatory of Economic Complexity.

Reported by Jieun Kim for RFA’s Korean Service. Translated by Jinha Shin. Written in English by Roseanne Gerin.