Xi Jinping is the first Chinese president to visit South Korea without greeting his top comrade in Pyongyang first.
In Seoul last week, Xi and South Korean President Park Geun-hye agreed to sign a free trade agreement between their two countries. And this, unavoidably, raises the question of what it all means for China’s links with the government north of the Armistice Line.
China is North Korea’s only major trading partner and thanks to their shared Communist ideologies, China has also been generous in offering aid ranging from grain and petroleum to military equipment.
The United Nations estimates that North Korea’s international trade volume was US$6.8 billion in 2012, of which 84 percent was with China. The North mainly sells coal and iron ore in exchange for chemical products and machinery from China. The same year, China’s trade with the South climbed to a new high of US$209.6 billion.
China is also South Korea’s biggest trading partner, accounting for over 20 percent of its total. In turn, South Korea is the third-largest importer of Chinese products after the United States and Japan, according to the Chinese Ministry of Commerce.
NetEase and Southern Weekend report that despite North Korea’s overwhelming dependence on trade with China, its firms are notoriously late payers and even defaulters and they seldom play by the book. It’s safe to say that there is simply no trust between the two sides.
In a survey by the US think tank, the Peterson Institute for International Economics, less than 5 percent of the 250 Chinese firms that do business with North Korean partners agree to sell goods on credit. Instead, the most common transaction is delivery upon payment. And more than half of the firms admit that they have to bribe North Korean officials to get orders.
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