Kim Jong-il's regime in North Korea desperately needs security guarantees for economic reforms to take root, but he is unlikely to get them at six-nation talks on the Stalinist state's nuclear program starting today.
In the streets of Pyongyang small businesses have always been state-owned but the prices are now fixed by the market, and buyers use cash instead of ration coupons.
For those who have money, several hundred market salesmen on Unification Street now offer imported goods from China or Southeast Asia, such as clothing, televisions and washing machines.
"When we are in North Korea, it is like going back 20 years" to a time when economic reforms first started in China, said Cheng Peng, vice president of the Society for Friendship and Sino-Korean cultural exchange which organizes trips for Chinese businessmen.
Quoted in the Chinese economic journal Zhongguo Jingying Bao, Cheng talks of "virgin territory" and gives assurances that there are dream opportunities for small and medium-sized Chinese enterprises in the country.
But the chances of the reforms lasting depends on the regime's own chances of survival.
"In North Korea the reforms are imposed from on high. They are there to stabilize the system and to make the situation better for the elite," Ruediger Frank, a specialist on Korea at Vienna University, said.
But he said the North's leaders were yet to be convinced that "foreigners are not going to exploit internal conflict caused by the reforms to provoke a change in regime."
"For the economic situation in North Korea to improve in the long run, it must transform its military-run industries into civilian ones," said Zhao Huji, a specialist on North Korea from the Central Party School in Beijing.
"But for that to happen North Korea needs security guarantees, a requirement the United States refuses to meet since Pyongyang is only offering a compromise, and not a dismantling of its nuclear program," said Zhao.
While North Korea admits to having a plutonium-based nuclear program, which it has offered to freeze, it denies the existence of a uranium-enrichment one, which the US insists it must dismantle.
China, Russia, South Korea and perhaps Japan could for their part accept the more basic compromise, the Chinese expert suggests, but much depends on the US.
Seoul recently signed agreements to develop its economic relations with the North, while pledging a huge aid package if a solution is found to the nuclear standoff that erupted in 2002 with US claims that Pyongyang had resumed its nuclear program.
"South Korea seems determined to press ahead with engagement, regardless of the nuclear situation," said Marcus Noland, a researcher at the International Economics Institute in Washington.
Washington realizes this and, in order to prevent it becoming isolated, "the United States is likely to present more evidence regarding North Korea's second, highly enriched uranium-based, nuclear program, in an effort to keep China and others on board," Noland said.
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