Economy

China Eyes Big Investment Opportunities In North Korea

Industry Hamhung, North Korea
Industry Hamhung, North Korea
Chen Yong

BEIJING - Investing in North Korea is becoming a hot topic among Chinese businessmen. Over the last few weeks, a series of business events and investment conferences about North Korea have been held.

Chen Jiangfeng, a real-estate developer from Beijing was one of the 150 plus entrepreneurs who attended the investment projects fair held at the GBD Public Diplomacy & Culture Exchange Center at the end of September. For him, “North Korea’s economic opening up is on everyone's mind," he says.

Chen believes the market prospects are better across the border than in any of China’s central or western provinces. "Though," he concedes, "the high profits will be coupled with high risks.”

Still, Yin Hengzi, Director of the Joint-Venture & Investment Commission (JVIC), a platform set up by the North Korean government to attract foreign investment, told the conference that this was the first such event in China ever focused specifically on North Korean business opportunities -- with a similar gathering to be organized again together with China’s Ministry of Commerce before the end of this year.

The JVIC is responsible for drawing up preferential policies, enhancing the opportunities for seeking out investment, as well as improving the investment environment.

Yours and mines

It’s not a secret that doing business in North Korea is full of uncertainty. Even the North Korean officials do not deny this, though they also emphasize the advantages, such as cheap labor and a unique management environment.

But what most tempts Chinese businessmen about North Korea is the mining. At every event, the first question of these entrepreneurs was typically the same: “Is there gold ore?”

Chang, a Beijing miner, told the Economic Observer that though his company would certainly take great caution before investing North Korea, the particularly rich mining resources is too big a temptation to ignore.

An agreement was signed in September between the Chinese Overseas Investment Federation and the JVIC so as to jointly launch the “Special Funds for North Korea Investments,” backed by 3 billion RMB ($480 million) from China’s domestic fund institutions and consortia.

North Korea is eager to start working with more international partners, and has also signed deals with investors from Egypt, Russia and other countries to provide it with communication projects.

Kim Tiezheng, the Vice-Chairman of the JVIC pointed out that North Korea needs significant capital investment in infrastructure construction in telecommunications, transport, commodity markets, power plants, and cement factories. Not only will these investments be particularly welcome and supported by the government, the investors will also enjoy preferential treatment over the enterprise income tax, as well as tariff exemption in business equipment and raw materials import.

At the same time, the Chinese Ministry of Commerce and North Korea’s investment-seeking arm also held a joint Investment Explanation Session in Beijing to promote the Rason Special Economic Zone, as well as the Hwanggumpyong and Wihwa Islands Joint Free Trade Area, established between China and North Korea in 2010.

Chen Jian, the Chinese Vice Minister of Commerce, said that the RMB and the Korean yuan will be circulated in these two special economic zones with the establishment of the two countries’ banking institutions to meet the settlement needs of investors.

The Rason Economic Zone, located at the extreme northeast of the Korean Peninsula, near the borders of both Russia and China, will focus in developing six industries in the raw material, equipment and high-tech sectors. The Hwanggumpyong and Wihwa Islands Joint Free Trade Area will focus on IT, modern agriculture facilities, tourism, culture, creative industries, and garment processing factories.

Chen Jian pointed out that the collaboration has up to now progressed smoothly. China has also helped to train 300 North Korea managerial staff in the special zones.

Promises and incentives

Li Tieshi, the Vice Chairman of the People’s Committee of Rason, said the investment incentive measures include the duty-free import and export of goods, the free expatriation of profits from the business operation, and various corporate income tax reductions. “The investors will have the final say whatever happens,” Li said, “Whether it’s a joint-venture, a cooperation or if the business is wholly-owned by the investors, the foreign investors can choose their own mode of management and operation.”

In addition, those who invest in the state-encouraged industries can enjoy priority in leasing better land plots as well as preferential land rental.

Dr. Moustapha Saphariny, Chairman of China & Southeast Asia Investment & Economic Development Committee, who also works with the Arab Information Center in Beijing, said North Korea’s newfound eagerness to do global business is a good sign to the outside world. Not only can China benefit from this opportunity, it can also ease the economic sanctions that the international community has placed on North Korea.

“North Korea is obliged to open up. Even Kim Jong-il was already frequently visiting China to learn about its reforms. It’s an inevitable path for North Korea," said Saphariny. "This is the only way that the North Korean society can be stabilized and its people’s lives can improve."

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!

The Olympic torch is lit at the Archaeological site of Olympia in Greece.

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Asham!*

Welcome to Tuesday, where Pyongyang test fires a suspected submarine-launched missile, Colin Powell is remembered, Poland-EU tensions rise, and yay (or yeesh): it's officially Ye. Meanwhile, our latest edition of Work → In Progress takes the pulse of the new professional demands in a recovering economy.

[*Oromo - Ethiopia and Kenya]

💡  SPOTLIGHT

How China flipped from tech copycat to tech leader

Long perceived as a country chasing Western tech, China's business and technological innovations are now influencing the rest of the world. Still lagging on some fronts, the future is now up for grabs.

China's tech tycoons have fallen out of favor: Jack Ma (Alibaba), Colin Huang (Pinduoduo), Richard Liu (Tencent) and Zhang Yiming (ByteDance) have all been pressured by Beijing to leave their jobs or step back from a public role. Their time may be coming to an end, but the legacy remains exceptional. Under their reign, China has become a veritable window to the global future of technology.

TikTok is the perfect example. Launched in 2016, the video messaging app has been downloaded over two billion times worldwide. It has passed the 100-million active user mark in the United States. Thanks to TikTok's success, ByteDance, its parent company, has reached an exceptional level of influence on the internet.

For a long time, the West viewed China's digital ecosystem as a cheap imitation of Silicon Valley. The European and American media described the giants of the Asian superpower as the "Chinese Google" or "Chinese Amazon." But the tables have turned.

The Asian superpower has forged cutting-edge business models that do not exist elsewhere. It is impossible to find a Western equivalent to the WeChat super-app (1.2 billion users), which is used for shopping as much as for making a medical appointment or obtaining credit.

The roles have actually reversed: In a recent article, Les Echos describes the California-based social network IRL, as a "WeChat of the Western world."

Grégory Boutté, digital and customer relations director at the multinational luxury group Kering, explains, "The Chinese digital ecosystem is incredibly different, and its speed of evolution is impressive. Above all, the flow of innovation is now changing direction."

This is illustrated by the recent creation of "live shopping" events in France, which are hosted by celebrities and taken from a concept already popular in China.

There is an explosion of this phenomenon in the digital sphere. Rachel Daydou, Partner & China General Manager of the consulting firm Fabernovel in Shanghai, says, "With Libra, Facebook is trying to create a financial entity based on social media, just as WeChat did with WeChat Pay. Facebook Shop looks suspiciously like WeChat's mini-programs. Amazon Live is inspired by Taobao Live and YouTube Shopping by Douyin, the Chinese equivalent of TikTok."

In China, it is possible to go to fully robotized restaurants or to give a panhandler some change via mobile payment. Your wallet is destined to be obsolete because your phone can read restaurant menus and pay for your meal via a QR Code.

The country uses shared mobile chargers the way Europeans use bicycles, and is already testing electric car battery swap stations to avoid 30 minutes of recharging time.

Michael David, chief omnichannel director at LVMH, says, "The Chinese ecosystem is permanently bubbling with innovation. About 10,000 start-ups are created every day in the country."

China is also the most advanced country in the electric car market. With 370 models at the end of 2020, it had an offering that was almost twice as large as Europe's, according to the International Energy Agency.

Luca de Meo, CEO of French automaker Renault, said in June that China is "ahead of Europe in many areas, whether it's electric cars, connectivity or autonomous driving. You have to be there to know what's going on."

As a market, China is also a source of technological inspiration for Western companies, a world leader in e-commerce, solar, mobile payments, digital currency and facial recognition. It has the largest 5G network, with more than one million antennas up and running, compared to 400,000 in Europe.

Just take the number of connected devices (1.1 billion), the time spent on mobile (six hours per day) and, above all, the magnitude of data collected to deploy and improve artificial intelligence algorithms faster than in Europe or the United States.

The groundbreaking field of self-driving cars offers an interesting point of divergence between China and the West. Artificial intelligence guru Kai-Fu Lee explains that China believes that we should teach the highway to speak to the car, imagining new services and rethinking cities to avoid cars crossing pedestrians, while the West does not intend to go that far.

There are areas where China is still struggling, such as semiconductors. Despite a production increase of nearly 50% per year, the country produces less than 40% of the chips it consumes, according to official data. This dependence threatens its ambitions in artificial intelligence, telecoms and autonomous vehicles. Chinese manufacturers work with an engraving fineness of 28 nm or more, far from those of Intel, Samsung or TSMC. They are unable to produce processors for high-performance PCs.

China's aerospace industry is also lagging behind the West. There are also no Chinese players among the top 20 life science companies on the stock market and there are doubts surrounding the efficacy of Sinovac and Sinopharm's COVID-19 vaccines. As of 2019, the country files more patents per year than the U.S., but far fewer are converted into marketable products.

Beijing knows its weaknesses and is working to eliminate them. Adopted in March, the nation's 14th five-year plan calls for a 7% annual increase in R&D spending between now and 2025, compared with 12% under the previous plan. Big data aside, that is basic math anyone can understand.

Emmanuel Grasland / Les Echos

🌎  7 THINGS TO KNOW RIGHT NOW

• North Korea fires missile off Japan coast: South Korea military reports that North Korea has fired a ballistic missile into the waters off the coast of Japan. The rocket, thought to have been launched from a submarine, is the latest test in a series of provocations in recent weeks.

• Poland/EU tensions: Polish Prime Minister Mateusz Morawiecki has accused the EU of "blackmail" and said the European Union is overstepping its powers, in a heated debate with EU Commission President Ursula von der Leyen over the rule of law. The escalation comes in the wake of a controversial ruling by Poland's Constitutional Tribunal that puts national laws over EU principles.

• Colin Powell remembered: Tributes are pouring for former U.S. Secretary of State Colin Powell, after his death yesterday at age 84. Although fully vaccinated, Powell died from complications from COVID-19 as he was battling blood cancer. A trailblazing soldier, he then helped shape U.S. foreign policy, as national security adviser to President Ronald Reagan, then chairman of the Joint Chiefs under Presidents George H.W. Bush and Bill Clinton, and served as the nation's top diplomat for George W. Bush. Powell's legacy is, by his own admission, "blotted" by his faulty claims of weapons of mass destruction to justify the U.S. war in Iraq.

• Russia to suspend NATO diplomatic mission amid tension: Russia is suspending its diplomatic mission to NATO and closing the alliance's offices in Moscow as relations with the Western military block have plunged to a new low. Foreign Minister Sergei Lavrov announced the move after NATO expelled eight diplomats from Russia's mission for alleged spying. Relations between NATO and Russia have been strained since Moscow annexed Ukraine's Crimean Peninsula in 2014.

• Ecuador state of emergency to battle drug crime: President Guillermo Lasso declared a state of emergency amid Ecuador's surge in drug-related violence. He announced the mobilization of police and the military to patrol the streets, provide security, and confront drug trafficking and other crimes.

• Taliban agrees to house-to-house polio vaccine drive: The WHO and Unicef campaign will resume nationwide polio vaccinations after more than three years, as the new Taliban government agreed to support the campaign and to allow women to participate as frontline health workers. Afghanistan and neighboring Pakistan are the last countries in the world with endemic polio, an incurable and infectious disease

• Kanye West officially changes name: Some say yay, some say yeesh, but it's official: The-artist-formerly-known-as-Kanye-West has legally changed his name to Ye, citing "personal reasons."

🗞️  FRONT PAGE

The Washington Post pays tribute to Colin Powell, the first Black U.S. Secretary of State, who died at 84 years old from complications from COVID-19.


💬  LEXICON

Jashn-e Riwaaz

Indian retailer Fabindia's naming its new collection Jashn-e Riwaaz, an Urdu term meaning "celebration of tradition," has been met with severe backlash and calls for boycott from right-wing Hindu groups. They are accusing the brand of false appropriation by promoting a collection of clothes designed for Diwali, the Hindu festival of lights, but giving it a name in Urdu, a language spoken by many Muslims.

📰  STORY OF THE DAY

Work → In Progress: Where have all the workers gone?

After the economic slowdown brought on by the coronavirus pandemic, companies all over the world are taking advantage of loosened lockdowns and progress on the vaccine front to ramp up operations and make up for lost productivity. But the frenetic spurts of the recovery are getting serious pushback. This edition of Work → In Progress looks not only at the coming changes in our post-COVID economy, but also the ways our world is re-evaluating professional obligations.

🗓️ Hail the 4-day week Across the planet, the shorter work week trend is spreading like wildfire. Four is the new five. Spain began experimenting with the concept earlier this year. New Zealand launched a similar trial run in 2020. And in Iceland, efforts to curb working hours date all the way back to 2015, with significant results: 86% of the country's workforce gained the right to reduce work hours with no change in pay.

🚚 Empty seats In the United States, meanwhile, a severe lack of truck drivers has the country's transportation industry looking to hire from abroad. The only problem is … the shortage is happening worldwide, in part because of the e-commerce boom in the wake of worldwide quarantines. The Italian daily Il Fatto Quotidiano reports that companies will be scrambling to fill the jobs of 17,000 truck drivers in the next two years. The article blames low wages and the dangerous nature of the job, stating that Italian companies are making moves to employ foreign workers.

💼 Key help wanted It's all well and good to question current working conditions. But what about 20 years from now? Will we be working at all? A recent article in the French daily Les Echos posed just that question, and posits that by 2041 — and with the exception of a few select jobs — automation and digitalization will decimate employment. The piece refers to the lucky few as "essential workers," a concept that originated with COVID lockdowns when almost all labor halted and only a minority of workers capable of performing society's most crucial in-person tasks were allowed to carry on.

➡️ Read more on Worldcrunch.com

📣 VERBATIM

"I'm worried for my Afghan sisters."

— Nobel Peace Prize recipient Malala Yousafzai Nobel Prize tells the BBC that despite the Taliban's announcement that they would soon lift the ban on girls' education in Afghanistan, she worries it "might last for years."

📸  PHOTO DU JOUR

The Olympic torch is lit at the Archaeological site of Olympia in Greece. The flame will be transported by relay to Beijing, China, which will host the 2022 Winter Olympics next February — Photo: Eurokinissi/ZUMA

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

Are you more yay or yeesh about the artist currently known as Ye? Let us know how the news look in your corner of the world — drop us a note at info@worldcrunch.com!

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ