Thousands of communist laborers toil under the supervision of capitalist managers in this fenced-in special zone, South Korea's economic beachhead in North Korea just beyond the border.
The Kaesong Industrial Complex is a key part of Seoul's strategy to engage the impoverished yet militarily potent North, reduce their economic gap and prepare for the day -- South Koreans hope -- they unite as one.
But at the same time, China is carving out a bigger role in North Korea's economic life, raising concerns in South Korea that greater Chinese involvement could hinder that vision of a unified Korean Peninsula.
Chinese companies and entrepreneurs are investing in North Korean ventures including glassmaking, bicycle manufacturing and a department store, and are developing mineral and fisheries resources and even prospecting for oil.
Over the last five years, China has become North Korea's largest trading partner, providing at least 80 percent of the North's consumer goods, ranging from electronics to shoes, according to South Korean central bank economist Lee Young-hoon.
China has been an off-and-on ally of North Korea for decades. Now it wants "gradually to normalize the North's economy, with the long-term goal of a reformed, pro-Beijing state," the Brussels-based International Crisis Group wrote in an analysis.
Beijing's paramount aim, according to the conflict prevention think tank, is ensuring stability in an impoverished, unpredictable country on its border that may have nuclear weapons.
South Koreans are worried that "China's going to be economically dominant in the North," said Peter Beck, director of the group's Northeast Asia Project in Seoul.
Chinese-North Korean trade totaled US$1.6 billion last year, outpacing exchange between the two Koreas, which reached a record US$1.1 billion boosted by activity at Kaesong.
Trade with China increased an average of 30 percent annually from 2000-2004 and accounted for 40 percent of the North's total in 2004, says the Bank of Korea's Lee.
"North Korea's economy would collapse" if it weren't for China, he says.
Lee attributes the expansion in trade to China's rapid growth -- 9.9 percent last year -- and government tax breaks from Beijing for Chinese businesses operating in border areas, which have encouraged them to venture into even high-risk North Korea.
Kaesong isn't South Korea's only project. Hyundai Asan Corp, the Seoul-based company spearheading business in the North, also operates tours from the South to scenic Diamond Mountain. More than a million people have visited since 1998.
Separately, Pyeonghwa Motors Corp, with ties to the Unification Church, opened North Korea's first car-assembly plant in 2002. As of the end of last year, Pyeonghwa said it had sold about 1,000 cars, mostly to government officials.
Desperately poor and a geopolitical wild card with its nuclear programs, the North can offer China and South Korea an abundance of cheap labor and natural resources, while playing them off against each other.
China is working to extract iron ore. South Korea's state-run Korea Resources Corp says it will begin producing graphite this month, the first-ever inter-Korean joint mining development project.
North Korea and China signed an agreement in late December to jointly develop offshore oil reserves, their state-run news agencies reported, without offering details.
"The position that Pyongyang wants to be in is having two suitors," Beck said. "But if they have a choice they're going to favor Beijing because it'll be much easier to contain the contamination."
North Korea's economy is showing signs of emerging from the horrors of the 1990s, when a famine caused by bad weather and compounded by mismanagement resulted in the deaths of an estimated 2 million people.
The North's economy expanded an estimated 2.2 percent in 2004, the sixth straight year of growth, according to the Bank of Korea, which has issued an annual estimate since 1991. The North has released no official data since the 1960s.
Modest economic reforms since 2002 have encouraged some private enterprise, allowing the emergence of an entrepreneurial class with money to spend on imported goods.
Divided since the 1950-53 Korean War ended in a truce, North and South have recently engaged in a limited detente, including their first summit in 2000 in Pyongyang.
North Korean strongman Kim Jong-il, however, has declined to carry out a reciprocal visit and balked at overtures from current South Korean President Roh Moo-hyun to visit Pyongyang again.
On the contrary, summits with China have become almost a regular event.
Chinese President Hu Jintao (
In January, Kim made a secretive nine-day journey to China's booming southern regions, his third trip to the country since 2001, causing speculation he may be considering further Chinese-style economic reforms.
Still, things can change quickly with North Korea.
Just five years ago Japan was by far the North's largest trading partner. Now, amid political tensions over the North's abductions of Japanese citizens, it's fallen to No. 3, with exchange last year totaling about US$200 million far below the roughly US$1.3 billion in 2001.
A failure by the Chinese Communist Party (CCP) to respond to Israel’s brilliant 12-day (June 12-23) bombing and special operations war against Iran, topped by US President Donald Trump’s ordering the June 21 bombing of Iranian deep underground nuclear weapons fuel processing sites, has been noted by some as demonstrating a profound lack of resolve, even “impotence,” by China. However, this would be a dangerous underestimation of CCP ambitions and its broader and more profound military response to the Trump Administration — a challenge that includes an acceleration of its strategies to assist nuclear proxy states, and developing a wide array
Eating at a breakfast shop the other day, I turned to an old man sitting at the table next to mine. “Hey, did you hear that the Legislative Yuan passed a bill to give everyone NT$10,000 [US$340]?” I said, pointing to a newspaper headline. The old man cursed, then said: “Yeah, the Chinese Nationalist Party [KMT] canceled the NT$100 billion subsidy for Taiwan Power Co and announced they would give everyone NT$10,000 instead. “Nice. Now they are saying that if electricity prices go up, we can just use that cash to pay for it,” he said. “I have no time for drivel like
Twenty-four Chinese Nationalist Party (KMT) lawmakers are facing recall votes on Saturday, prompting nearly all KMT officials and lawmakers to rally their supporters over the past weekend, urging them to vote “no” in a bid to retain their seats and preserve the KMT’s majority in the Legislative Yuan. The Democratic Progressive Party (DPP), which had largely kept its distance from the civic recall campaigns, earlier this month instructed its officials and staff to support the recall groups in a final push to protect the nation. The justification for the recalls has increasingly been framed as a “resistance” movement against China and
Jaw Shaw-kong (趙少康), former chairman of Broadcasting Corp of China and leader of the “blue fighters,” recently announced that he had canned his trip to east Africa, and he would stay in Taiwan for the recall vote on Saturday. He added that he hoped “his friends in the blue camp would follow his lead.” His statement is quite interesting for a few reasons. Jaw had been criticized following media reports that he would be traveling in east Africa during the recall vote. While he decided to stay in Taiwan after drawing a lot of flak, his hesitation says it all: If
RSS