The Economic Link Between China and North Korea

With the United Nations Security Council adopting the most recent round of sanctions against the Democratic People's Republic of Korea (DPRK), it was interesting to see that the People's Republic of China actually followed the majority, including the United States, voting in favour of sanctioning its own neighbour, a nation that it has stood behind for over six decades.  With the recent vote in mind, I wanted to take a look at the relationship between the two nations and that rationale between China's ongoing support of the Kim regime. 

Since the Korean War in the early 1950s, China has been North Korea's most important (and most powerful) ally, its biggest trading partner and the primary source of both energy and food for North Koreans.  Let's look at some detailed trade information for North Korea, showing how important China is to North Korea's economy.

According to the Observatory of Economic Complexity (OEC), North Korea was the 119th largest exporting economy in the world (out of 221 nations).  In 2015, the latest year for which data is available, North Korea exported $2.34 billion worth of goods and imported $3.47 billion worth of goods, resulting in a trade deficit of $640 million.  

Here are North Korea's top export destinations:

China - $2.34 billion

India - $97.8 million

Pakistan - $43.1 million

Burkina Faso - $32.8 million

Rest of Asia - $26.7 million

Here are North Korea's top import origin nations:

China - $2.95 billion

India - $108 million

Russia - $78.2 million

Thailand - $73.8 million

The Philippines - $53.2 million

As you can see, China is responsible for the lion's share of both imports and exports to and from North Korea.  While North Korea's economy is quite small by global standards, the value of its exports have grown significantly from $1.83 billion in 2010 to $2.34 billion in 2015, an annualized growth rate of 8.6 percent

Let's look at what North Korea exports, the value of the exports and where their products end up.  According to the OEC, in 2015 we find the following:

1.) coal briquettes worth an estimated $952 million (33.6 percent of total exports) with 98 percent of these briquettes ending up in China.   

2.) non-knitted men's coats worth an estimated $169 million (6 percent of total exports) with 99.6 percent of the coats ending up in China.  

3.) non-knitted men's suits worth an estimated $153 million (5.4 percent of exports) with 99 percent of the suits ending up in China.  

4.) non-knitted women's coats worth an estimated $131 million (4.6 percent of exports) with 99.4 percent of the coats ending up in China. 

5.) non-knitted women's suits worth an estimated $97.1 million (3.4 percent of exports) with 99.7 percent ending up in China.  

Other high value exports are knitted T-shirts, molluscs, non-knit active wear and silver, almost all of which end up in China with the exception of silver; 95 percent of North Korea's $57.4 million worth of silver production ends up in India.

Let's look at what North Korea imports, the value of the imports and where the imports are sourced from.  Here is a graphic showing the vast categories of items that North Korea imports:

According to the OEC, in 2015 we find the following:

1.) refined petroleum worth an estimated $186 billion (5.4 percent of total imports) with 63 percent of refined petroleum sourced from China, 24 percent from Mexico and 9.9 percent from Russia.  

2.) synthetic filament yarn woven fabric worth an estimated $138 million (4 percent of total imports) with 100 percent sourced from China.  

3.) delivery truck worth an estimated $108 million (4 percent of total imports) with 99.9 percent sourced from China.  

4.) soybean oil worth $104 million (3.0 percent of total imports) with 100 percent sourced from China.  

5.) broadcasting equipment worth an estimated $59.2 million (1.7 percent of total imports with 100 percent sourced from China.

Other high-value imports include video displays, computers, rubber tires, coal briquettes, sculptures and glazed ceramics,  almost all of which are sourced from China with the exception of computers of which 7.5 percent are sourced from the Philippines (worth $4.37 million) and coal briquettes, 85 percent of which are sourced from Russia (worth $44.45 million).

As you can see from the data in this posting, the economic link between China and North Korea is extremely strong with North Korea relying heavily on China for both its exports and imports, however, China's recent moves to ban certain items including seafood, iron ore and lead form a relatively small part of the trade between the two nations.  While exports from China to North Korea's economy comprise only 0.12 percent of China's $2.37 trillion worth of global exports, the connection between the two nations goes far beyond the economic ties that North Korea is so reliant on.  The fact that China came to North Korea's rescue during the Korean War and the possibility that a collapse of the Kim regime could lead to hundreds of thousands of migrants crossing the North Korea - China border put significant pressure on China's ongoing willingness to blindly follow the United States lead when it comes to punishing North Korea.