China-DPRK Trade: What Do We Know?

Bridge over the Yalu River, the boundary river between North Korea and China.

Authors: Dr. Stephan Haggard & Liuya Zhang
July 2024

Introduction

China accounts for the overwhelming majority of North Korea’s trade – perhaps as much as 95% - and is thus unarguably the DPRK’s most important economic partner. But beyond these headline numbers, the two countries’ true economic relationship is difficult to discern. North Korea is not subject to any effective oversight with respect to data production—as, for example, members of the International Monetary Fund (IMF) or World Bank are—and the regime treats even the most basic economic statistics as state secrets. Analysts must therefore rely on Chinese customs data and so-called “mirror statistics”: trade data generated not by North Korea but with its trading partners.

Chinese trade data is assumed to be relatively accurate with respect to what it actually reports, but there are important gaps. A first problem is that studies of Korea-China trade based on official statistics typically focus only on trade in goods or merchandise trade, omitting possible trade in services such as labor exports and Chinese tourism. However, even if good data on the services trade existed, it would not capture the entirety of the China-North Korea economic relationship. These include the offsetting capital account transactions, such as direct investment or bank lending, which are largely opaque. In addition, there is the question of whether China is providing foreign aid to North Korea, and if so, in what form.

A second problem is that Beijing has periodically chosen not to report particular trade items that are strategically consequential, most notably oil exports. Finally—and most importantly—North Korea is a past-master at sanctions evasion and smuggling and much of this activity passes through China. What is known about this activity is mostly anecdotal, although open-source economic forensics has gotten better at providing insight. This research suggests that China-North Korea trade is almost certainly underestimated in official statistics, though by how much is unknown. Any research or analysis in this area is thus a game of estimation. Results should not be treated as precise point estimates, but rather capturing orders of magnitude and broad trends.

This paper is divided into three focus areas. The first situates North Korea-China trade within the context of its wider foreign economic relations, tracing the gradual opening of the economy to trade and its more rapid closure resulting from sanctions and the lockdown of the border during the COVID pandemic. The second area drills down into the trade relationship more closely, suggesting how political calculations influenced bilateral ties under Kim Jong Un. This area also highlights some recent developments, such as efforts to position North Korea as an offshore processing center for light-labor intensive manufactures. The third area suggests reservations: types of economic activity about which there are no reliable sources. Drawing on a variety of open-source accounts of sanctions evasion, researchers are reminded of how significant North Korea’s gray market trade with and through China might be. The conclusion puts these observations in a broader political context, tracking the gradual weakening of the sanctions regime as a result of the deterioration in US-China relations and the strengthening of North Korea-Russia ties since the invasion of Ukraine.

The Trade Data I: North Korea’s Foreign Economic Relations

Most efforts to dissect North Korea’s foreign economic relations begin with what can be captured by looking at data from its trading partners. These estimates of North Korea’s global trade are primarily sourced from the Korea Statistical Information Service (KOSIS), which in turn relies on the Korea Trade-Investment Promotion Agency’s (KOTRA) annual report on North Korea and the underlying national sources. Other South Korean government sources that are assumed to be reliable and Chinese customs data, with the caveats noted above, are also taken into account.

Before turning to the bilateral relationship, it is worthwhile to get some sense of North Korea’s total trade over time, its economic openness, and who its major trading partners have been. Figure 1 reports North Korea’s observed merchandise trade from 1990 through 2023; as noted, these estimates exclude any service transactions. The data matches the known economic history of the country with a fair level of accuracy. The descent into the mid-1990s famine is reflected in the decline of both observable exports and imports in the first half of the decade, followed by the North’s inability to adjust economically once the famine has subsided, with total trade reaching a nadir in 1999 at 40% of 1990 values.

Starting around 2000—resulting in part from a rapprochement with China—trade started to take off. There are several hypotheses about this economic opening, including shifts in Chinese signals of greater openness to economic engagement1 reforms in North Korea itself and the rise of global commodity prices.2 From the time of its first nuclear test in October 2006, North Korea was subject to a succession of UN Security Council (UNSC) resolutions.3 It would be remiss to say that early sanctions efforts had no effect on observed trade; trade growth could have been higher still in their absence. Yet sanctions were initially defined narrowly around weapons of mass destruction (WMD)-related goods, and a weakly-enforced ban on luxury good exports to the country. The gradual introduction of multilateral sanctions on financial flows in later resolutions was similarly tied to WMD and weapons-related activities and did not, in principle, affect the financing of commercial trade.

By 2015, total trade was more substantial than at any point in the 1990s and 2000s. However, that proved to be a peak and total trade started to contract quite rapidly in the 2010s and 2020s. The contraction correlates to the tightening of the sanctions regime, both bilateral and multilateral. Key events include the 2016 closing of the Kaesong Industrial Complex, a cooperative project with the South that generated significant foreign exchange earnings, and a gradual shift in the Chinese approach to sanctions starting in the same year. Yet, as is laid out in more detail below, this contraction may be smaller than it looks due to the rapid growth of smuggling.

Another interesting finding from Figure 1 is that North Korea manages to maintain a trade deficit with the rest of the world—most importantly China--and that deficit even widens during the period of rapid trade growth from around 2000 to 2015. First, the deficit could be made up in part by invisible or service transactions, from labor remittances to other services such as provision of shipping, tourism or cybercrime. Second, it could be financed by foreign direct investment or other capital flows. Third, it could be financed by aid. And finally, it might be that the regime is financing these deficits by running down reserves, presumably held abroad in jurisdictions willing to flout UN financial sanctions. These activities all constitute a huge informational black hole as hard data on these activities is scant to non-existent, although these efforts are reviewed more closely below.

How does this growth in trade relate to the overall size of the North Korean economy? In Figure 2, data from the Bank of Korea (BOK) is used to analyze North Korea's trade dependence--the share of total trade (both including and excluding North-South trade) compared to gross national income from 2003-2022. The data on national income is controversial for technical reasons that do not need to be elaborated upon here. Nonetheless, the data makes sense: it shows a significant increase in trade dependence from 2003 to 2013, which corresponds with the steady opening with China in the late Kim Jong Il and early Kim Jong Un years. Trade dependence peaked above 20% during 2013-2014 but then declined precipitously. It fell to less than 5% by 2020-2021 due to the intensification of UN sanctions and the effects of the country’s COVID strategy, which virtually shut down cross border trade. An important conclusion follows: for a country its size, North Korea is relatively closed in the sense of having a low level of trade dependence. To give some comparison, South Korea’s trade to GDP ratio has fluctuated significantly over the last decade with exchange rate movements but has averaged over 80%. Nonetheless, there are periods in North Korea’s recent economic history when it was moving toward greater economic openness before those trends were reversed.
Source: Korea Statistical Information Service. Note: Ten percent CIF/FOB adjustment applied to values reported from partner countries.4 Excludes Inter-Korean trade designated as “non-commercial” by the Ministry of Unification and thus seen as aid. 

Source: Korea Statistical Information Service

Figure 3 shows data on North Korea’s total trade with the so-called Five Parties (from the Six Party Talks)—China, Russia, South Korea, Japan, and the United States—as well as with the rest of the world (ROW); note that these are trade shares and thus capture the relative significance of the trading partners in question. It is striking that in 2000—prior to its first nuclear test—DPRK trade was quite diversified: China, South Korea, and Japan each accounted for about 20% of North Korea’s trade, with the rest of the world making up much of the difference. That the United States accounts for little of North Korea’s trade is hardly surprising given long-standing animosities. More noteworthy is the limited economic role that Russia plays. North Korea’s trade with the Soviet Union/Russia collapsed in 1989-93 and never really recovered. This outcome cannot be laid at the doorstep of politics; it may reflect a simple lack of natural complementarities and the limited ability or willingness for Russia to play a significant economic role with respect to North Korea. The conclusion touches briefly on how this dormant relationship may be coming to life.

The most interesting developments over time are seen in the Japan, South Korea and rest-of-the-world shares; as they all decline, China’s share rises dramatically. Japan’s trade with North Korea undergoes a long-run decline from 2000 due to a combination of conflict over the abduction issue and growing concern about the strategic challenges posed by the country’s nuclear and missile programs. South Korea’s commercial trade with North Korea has depended heavily on politics in the South. South Korea’s trade share grew during the Kim Dae-jung (1998-2003) and Roh Moo-hyun (2003-2008) presidencies, but then flattened and even declined during the presidency of Lee Myung-bak before increasing under Park Geun-hye as a result of the Kaesong Industrial Complex becoming operational. But North-South trade ultimately falls to virtually zero as a result of the combination of sanctions imposed after the sinking of the Cheonan in 2010 and the ultimate closure of the Kaesong Industrial Complex.

The steady decline in the rest-of-the-world (ROW) trade reflects a combination of factors that are difficult to disentangle: general hesitance about dealing with the country after the onset of the nuclear crisis, the sheer difficulties of doing business with the country, and the difficulty of financing North Korea trade because of the reluctance of banks to get involved with the country. However, when looking at North Korea’s trading partners focusing only on its exports (Figure 4), there is a demonstrated effort in the late 2010s to locate new markets, diversifying exports away from China. For example, the three top ROW export destinations in 2020 were Vietnam, Nigeria, and Mozambique, and in 2022, Vietnam, Nigeria, and Ethiopia (KOTRA, 2020, 2022). These destinations suggest that North Korea has some competitiveness in lower-middle income and low-income countries in both raw materials and some machinery that is appropriately priced for those markets. But for some combination of the reasons cited above, this short-lived effort at export diversification reverses in the early 2020s, probably because of COVID-related restrictions.

As all these other trade partners—Korea, Japan, the rest of the world—peeled away, China’s trade share steadily increased. As of 2022 China dominated North Korea's trade, accounting for over 95% of percent of its total trade and about 85% of exports. However, as Figure 1 suggests, these rising shares were occurring in the context of a sharp decline in total trade; in the next section dives deeper into the bilateral trade relationship. 
Source: Korea Statistical Information Service

Source: Korea Statistical Information Service

The Trade Data II: China-DPRK Trade Close Up

Figure 5 provides a more granular look at China-DPRK trade over the entire nuclear crisis period and highlights a number of important features of the bilateral relationship. The Hu Jintao years (2003-2013) were associated not only with a gradual opening to North Korea but the onset of a long cycle in commodity prices that contributed to the upswing in trade (and probably investment as well; which will be revisited below). China’s exports to North Korea consistently exceed North Korea’s exports to China suggesting a long-standing trade deficit; that deficit is isolated in Figure 6. It is possible that it is financed in part from economic relationships outside of those with China, but that is unlikely. The deficit on merchandise trade could be narrowed by offsetting earnings on services trade not captured by the merchandise trade data, particularly tourism and labor exports; that possibility is discuss in the next section. It could also suggest some form of financing: bank lending, aid or perhaps arrears to Chinese firms.

China’s aid to North Korea is a perennial point of speculation and debate. Although the Chinese government does not provide consistent data on its aid to North Korea, it often surfaces around important diplomatic meetings. These announcements complicate our reading of the trade data because they appear in the trade statistics as exports, but may not be paid for. In May 1996, for example, Chinese Premier Li Peng and North Korean Deputy Premier Hong Song Nam signed an agreement for China to supply North Korea with 500,000 tons of grain, 12 million tons of oil, and 1.5 million tons of coal annually for five years, with more than half provided for free.5 These sources suggest that China's aid may have included as much as $348 million in grants in 1997 in the aftermath of the famine before falling sharply into the low ten-millions range through the mid-2000s. In 2009, for the 60th anniversary of diplomatic relations, China provided North Korea with approximately $29 million in aid in the form of food and energy.6 More recently, following Kim Jong-un's 2018 visit to China, North Korea received 162,007 tons of fertilizer worth $55 million as well as a modest shipment of rice gratis and similar gifts were made before Xi Jinping’s state visit to Pyongyang in 2019.7  

China’s Ministry of Commerce reports on foreign direct investment (FDI) data cast doubt on this source of funding during the Kim Jong Un era. Figure 7 shows both the stocks or the total accumulated investment and flows, the amount of FDI coming into North Korea each year. The stock numbers are sizable, suggesting that during the opening of the Hu Jintao years there was significant inward investment, for example in mining. Since 2013 however, Chinese FDI has slowed to a trickle, and along with the new sanctions regime and border closure, this number basically fell to zero by 2017.

After the upswing in the late Kim Jong Il years, the trade relationship also stalls out under Kim Jong Un (from 2011). Trade remained higher than it had previously been, but did not expand significantly. This period of flattening trade corresponds to the initiation of multilateral sanctions on the country. But there are reasons to believe that sanctions were not responsible because of the limited number of items they targeted and the difficulty of closing down trade. Rather, the early Kim Jong Un years were characterized by a more arms-length political relationship between Beijing and Pyongyang that probably spilled over into the bilateral economic relationship.8  

From 2017, two crucial shocks resulted in a fundamental restructuring of bilateral trade and they are clearly visible in the official trade data. First, after a period of extensive debate about how to handle North Korea’s nuclear ambitions, China agreed with the US and its allies that sanctions on North Korea needed tightening. The details of the sanctions measures are complicated and beyond our purposes here, except to say that China never signed on to a full-scale embargo of the country. Starting from United Nations Security Council Resolution (UNSCR) 2321, passed in late November after the country’s fifth nuclear test, UNSC sanctions started to include limits on the country’s commercial trade. Several measures contained in UNSCR 2321 and three further resolutions passed in quick succession in 2017 (UNSCR 2371 [August 15, 2017]; 2375 [September 3, 2017] and 2397 [December 22, 2017]) were particularly consequential on both the import and export side of the trade ledger. On the one hand, these resolutions imposed constraints on significant exports, starting with minerals and iron ore and expanding to coal, seafood and textiles; textiles was the one sector in which North Korea could position itself as an offshore manufacturing site. On the import side, these resolutions instituted complex caps on crude oil and refined petroleum products and—in the last of these resolutions (2397)—committed to additional caps on petroleum imports if North Korea were to test again. As can be seen in Figure 5, Chinese exports to North Korea fell sharply in 2017-18, but North Korean exports to China virtually flatlined and through the end of 2023—at least according to official data—never really recovered.

The second shock was self-induced: the unusual way that North Korea responded to the COVID pandemic.9  In January 2020, North Korea fully closed its borders to all entry of people, goods, vehicles, and vessels. With extremely limited exceptions, freight trade on trains did not restart until January 2022, with erratic pauses. Not only was official trade paused; the regime took advantage of the crisis to fortify the border and to issue shoot-to-kill orders with respect to smugglers or others crossing the border illegally. In August 2023, the border was opened to North Koreans stuck outside the country and gradually over the course of early 2024 satellite imagery suggests something resembling a return to normalcy across the country’s land borders with China. Again, the data mirrors the border closure storyline closely. Chinese exports to North Korea—again, according to official data—fall sharply in early 2020 and only resume gradually starting in 2022. 

Source: China's Customs statistics (2017-2023), EPS China Data (2012-2016)10

Source: China's Customs statistics (2017-2023), EPS China Data (2012-2016)

Source: 2021 and 2022 Annual Report on China’s Foreign Direct Investment (2021 年度中国对外直接投资统计公报 & 2022年度中国对外直接投资统计公报), accessible from Ministry of Commerce, People’s Republic of China.

Another way of looking at the data is to focus on what might be considered strategic items: key commodities that are important for the regime’s survival that China exports to North Korea. Figures 8 and 9 do this by considering oil and food exports. The official data shows that Chinese exports of oil products to the DPRK have fallen dramatically with sanctions. However, there is clear historical evidence that China has obfuscated politically sensitive data with respect to oil in the past. For instance, after North Korea’s second nuclear test on May 25, 2009 and the subsequent passage of UNSCR 1874, the China Customs Bureau subsumed bilateral trade from August to November into the category “Other Asia, Not Elsewhere Specified.”11  Another example is an estimated $500 million in unreported crude oil exports in 2014 or 2015. The core question is whether the reported collapse of oil exports in 2017 is in fact credible. As seen in the next section, this is precisely the period when a succession of UN Panel of Experts (PoE) reports and other intelligence focused on ship-to-ship oil transfer and smuggling; here, the official Chinese data is likely to be highly unreliable.

Although the data is not reproduced here in detail, a number of other broad product categories that corresponded broadly to sanctions resolutions (the numbers refer to those categories) were sampled: "84- nuclear reactors, boilers, machinery and mechanical appliances" (which encompasses a broader product category and should not be taken as an indicator of nuclear-related trade), "85- machinery and electrical machinery and equipment, vehicles," and "87- vehicles and parts other than railway or tramway rolling-stock". Import shares for all these categories decline over time, especially following the announcement of new UN sanctions (UNSCR 2371, 2375, 2397) in 2017.

Food data, while potentially less sensitive, shows several intriguing trends. There was a notable surge in Chinese food exports around the time of North Korea’s leadership succession in late 2011-12. Moreover, China appears to have responded to instances of distress in 2018-19 and in 2023, exacerbated by the onset of the pandemic. 
 

Source: China's Customs statistics (2017-2023), EPS China Data (2012-2016)

Source: China's Customs statistics (2017-2023), EPS China Data (2012-2016).

Turning to North Korea’s exports, the aggregate data shows an even sharper collapse than of imports from China. It is important to underscore that the analysis of North Korean exports to China since 2017 is operating with trade volumes that are extraordinarily small, rounding errors from the perspective of a country the size of China. The data should not be overinterpreted, but three trends are worth noting. The first is a clear effort to exploit non-sanctioned loopholes, for example with respect to mineral products. According to KOTRA’s 2022 Annual Report of North Korea Trade, exports of tungsten to China surged by five-fold, while molybdenum, which was not exported at all in 2021, reached a record high of $13.6 million. This suggests that despite continued dependence on natural resource exports, North Korea has shifted towards exporting non-sanctioned minerals such as tungsten and molybdenum that it had previously exported in lower volumes. Second, there are traces of sanctions evasion in China’s own customs data. For example, exports of iron and steel saw steady growth from 2017 to 2021 albeit at extraordinary low volumes, nonetheless accounting for 46.2% of total exports in 2021.

Finally, considering both China’s and North Korea’s exports in tandem reveals some small sprouts of export processing trade that could become a strategic objective as the sanctions regime unwinds. For example, the import share of "Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles of human hair" has been steadily increasing over time. Looking at the export side, however, there is a rapid growth in this precise product category, accounting for no less than 57.3% of the country’s total reported exports in 2023. Drilling down still further, significant growth was found in imports of raw human hair products from China, which are then processed and exported back to China in the form of wigs and hair accessories.

Further evidence of the stirring of trade in processing services can be found in the establishment of the China-North Korea-Russia cross-border e-commerce platform.12 Endorsed by the North Korean government, this platform promotes North Korea's key processing services to Chinese consumers, under quite specific categories: Wig Processing, False Eyelashes Processing, Embroidery and Bead Processing, Electronic Components Processing, Clothing and Footwear Processing, Toys and Artificial Flowers Processing, as well as Accessories and Sports Goods Processing. This advertisement is in part aspirational and does not in itself demonstrate significant capabilities in these areas, but it does suggest North Korea is seeking to expand engagement in global production networks through its trade partnerships with China.
 

Part III: What Are We Missing?

The preceding section focused on the twin shocks of the 2016-2020 period: the tightening of multilateral and bilateral sanctions and the COVID border closure. Yet rapid shifts in the political winds provided an unanticipated opening for North Korea. These included the short-lived summit era, which promised a relaxation of tensions, and the downward spiral in US-China relations starting in the second half of the Trump administration. The decision by the Moon Jae-in administration to invite North Korea to the Winter Olympics hosted in Pyeongchang in February 2018 set the first of these processes in motion, followed by two significant North-South summits (April 2018 in Panmunjom and September 2018 in Pyongyang) and the US-DPRK summits (June 2018 in Singapore and February 2019 in Hanoi) bringing together President Donald Trump and Kim Jong Un.

Yet less attention is paid to a fundamental shift in Chinese policy toward North Korea during this period as well.13 In 2018 and 2019 Xi Jinping—who had shunned being on the same dais with Kim Jong Un—held no fewer than five one-on-one meetings with the North Korean leader in March, May, and June 2018 and in January and June 2019. The public readouts of these meetings provide little information, but they clearly were designed for the two leaders to assess the strategic state of play. More to our interest here, the purpose of these summits—including those involving the US and South Korea as well as China--was to consider various settlements on the Korean peninsula that would trade some concessions on the North Korean nuclear and missile programs for sanctions relief.

Chinese policy has long argued that responsibility for resolving tensions on the Korean peninsula rested primarily on the shoulders of the United States and that sanctions relief—even if partial—should be part of the overall approach. A draft UN Security Council resolution sponsored by China and Russia that was leaked in December 2019 provides a clear statement of the kinds of concessions that those two powers wanted to see, which included granting the Moon administration more leeway with respect to North-South infrastructure projects, exemptions on sanctions for products that were having unanticipated humanitarian effects, and increasing humanitarian assistance to the DPRK.

The draft resolution made reference to particular provisions of the four prior UNSC resolutions in which China finally agreed to the sanctioning of North Korea’s commercial exports. The proposed measures included lifting sanctions against statues (UNSC 2321 para. 29); seafood (2371, para. 9); textiles (2375, para. 16) and labor exports (2375 para. 17 and 2397 para. 8). Lifting the ban on seafood and textile exports would have been significant, as they consistently accounted for about 30-40% of North Korean exports.

Yet the larger question—and one with a much longer history, was the extent to which China was facilitating North Korea’s illicit trade14, 15, 16 and facilitating (or at least looking the other way) North Korean sanctions evasion efforts.17 As sanctions broadened, this question became a major preoccupation of the UN Panel of Experts (PoE) formed in 2010 to support the 1718 Sanctions Committee. In the last decade, a sprawling open-source intelligence community has emerged around North Korea’s foreign economic relations as well.

This work uses a variety of sources and novel forensic techniques to identify those sources of trade and financial flows that are not captured in official Chinese statistics. For example, the 2020 PoE report takes note of the large volume of imports of oil, exports of coal and sand, the sale of fishing rights to China and the acquisition of virtual currencies via cyberattacks (which should not necessarily be attributed to a China connection). These do not show up in Chinese trade statistics because they either constitute service transactions (in the case of fishing) or circumvent Chinese customs altogether (as seen with illicit coal and oil trade).  

Before considering specifics, two general points about this open-source information are worth making. First, the effects of these illicit transactions are to increase North Korea’s exports, imports, and likely capital flows as well. Therefore the official data should be taken as a lower-bound estimate of trade. More significant trade and financial flows imply higher national income and thus greater economic resilience in the face of external pressure. Second, the magnitudes of these transactions are not small,  particularly within the context of the apparent collapse of bilateral trade after 2019. Were these sources of income and imports factored into the official data, they would paint a somewhat different picture.  

Regarding merchandise trade, Korean researchers have provided estimates of smuggling since sanctions tightened in 2016-7, focusing on two significant items: coal exports and refined petroleum. One such set of estimates is reported below in Table 1. These items are important to zero in on, as the former expands North Korean income and the latter offsets one of the North’s most import external constraints: the lack of fuel due to sanctions. The researchers estimated that North Korea earned approximately $210 million from illicit coal exports while managing to import nearly $600 million in refined petroleum that completely circumvented reporting requirements. The majority of these transactions involved Chinese and Russian entities, probably mostly private. As Harvard’s John Park and MIT’s Jim Walsh noted as early as 2016 , these trade outcomes reflected fundamental institutional shifts in the operations of North Korean state trading companies: “hiring more capable Chinese middlemen who can more effectively handle financing, logistics, and doing business with private Chinese firms and foreign firms operating in China; taking up residence and embedding themselves on the mainland, which increases their effectiveness; expanding the use of Hong Kong and Southeast Asian regional commercial hubs; and increasing the use of embassies as a vehicle for procurement”.18   

Table 1: Magnitude of Coal and Refined Petroleum Smuggling 2017-2021 (Unit: Million USD)

Source: 임수호et al.19 

Expert analysis of the 2021 PoE report shows how technologies like ship-tracking software, satellite imagery and military intelligence can identify refined petroleum smuggling with surprising precision.20 In 2020 alone, U.S. vessels observed 32 occurrences of fuel smuggling ships in Chinese coastal waters, 555 separate occurrences of ships carrying UN prohibited goods from North Korea to China—predominantly coal—and 155 occasions where Chinese-flagged coal barges sailed into North Korea and returned to Chinese ports with illicit cargo. 

However, the most surprising data in the report concerns oil shipments. China notified the UN 1718 Committee—which oversees sanctions policies and reporting requirements—of deliveries of just over 5,000 tons of refined petroleum to the DPRK in 2020. Russia reported 12,800 tons. When converted, these shipments amounts to approximately 207,000 barrels of petroleum products, well within the 500,000-barrel cap. However, the report notes that according to a UN member state—likely the United States--121 additional shipments of refined petroleum products were delivered to the DPRK during the first nine months of 2020, none of which were reported to the Committee as required under paragraph 5 of UNSCR 2397. Further analysis parses the raw data provided by the PoE report:

“A simple graph is included in the summary of the report, based on a table providing data on these shipments included as an annex in the report... The report reproduces estimates on the size of the ships involved, and what they were carrying under different assumptions about lading. These additional unreported deliveries sum to 146,000 tons (approximately 1,700,000 barrels) if the ships were 33% laden, 221,000 tons (approximately 2,600,000 barrels) at 50%, and almost 400,000 tons (approximately 4,600,000 barrels) at 90% laden. This amounts to more than eight times the cap if the vessels were 90% laden, nearly five times if 50% laden, and over three times if only 33% laden on delivery.”21 

These estimates suggest the limits on the merchandise trade data available since the tightening of sanctions. But there is also the issue of the services trade, some of which is untouched by sanctions. One innovation in North Korea’s foreign economic relations under Kim Jong Un was his personal interest in tourism investments. North Korea experienced a significant tourism boom in 2019, with visitor numbers estimated between 130,000 and 150,000, primarily Chinese tourists. This influx of visitors is estimated to have generated approximately seven million euros in foreign currency income for North Korea.22 The growth was halted by the global pandemic. However, with the supreme leaders of the two countries announcing the launch of the "China-DPRK Friendship Year" to celebrate the 75th anniversary of their formal diplomatic relations, a resurgence in tourism is anticipated starting this year.In April 2024, Yonhap News reported that Chinese online travel agencies (OTAs) have begun offering group tours and other tour-related goods & services to North Korea, marking the reintroduction of Chinese tourism in the DPRK after a four-year hiatus.23  

Examples of prohibited service activities include the sale of fishing rights and remittances from North Korean businesses and workers, the latter organized and monitored by the state and has long been a focus of human rights concerns. Despite UNSCR 2397 explicitly prohibiting North Korea from selling fishing rights to third-country vessels from 2018 onwards, North Korea has continued to generate significant revenue from these sales, primarily to Chinese vessels. The 2017-2020 PoE reports tracked the prices of these fishing permits and found them fluctuating with supply and demand conditions. However the 2019 final report estimated that North Korea earned about $120 million from fishing rights sales in 2018 alone. Overall, between 2017 and 2021, North Korea is estimated to have earned approximately $532 million from the sale of fishing rights. These estimates are based on observed vessel numbers from sources like Global Fishing Watch, which uses satellite monitoring to track fishing activity in North Korean waters.24 

Table 2. Estimated Fishing Rights Sales Income (Unit: Million USD)

Source: 임수호 et al.25

Investment income also flows into North Korea from businesses operating in China. An extended Annex to the 2024 PoE report includes a list of 65 restaurants in China suspected of employing North Korean workers. They were identified either through corporate registry information or through social media images. The report also estimates that this network of foreign restaurants are used to launder money, are run by the security services, and could generate as much as $700 million for North Korea annually.

Recent investigative reporting has documented the extensive use of North Korean workers in labor-intensive industries, such as seafood processing on the Chinese side of the border.26 Among other activities, the 2024 PoE report highlighted that North Korean IT workers abroad could potentially generate between $250 million and $600 million annually. These workers operate in a complex underground ecosystem where they hold multiple long-term positions, supplemented by freelance jobs for global clients and a complex money-laundering infrastructure that permits remittances back to North Korea. Skilled IT workers can make between $15,000 and $60,000 per month, most of it remitted back to the government through specialized state-owned entities.

The 2024 PoE report revealed that Chinyong Information Technology Cooperation Company (Chinyong IT) conducted over $50 million in transactions from 2017 to 2022, using bank accounts in China and Russia to launder funds from North Korean IT workers abroad. Additionally, Shenyang GoldenPack Technic Development Co., Ltd. laundered over $28 million for Chinyong IT's teams in Russia and Laos between 2020 and 2022, using Chinese bank accounts. These accounts do not speak to the broader issue of these IT workers being employed to commit cybercrimes, which yield even higher returns. Although these activities can, in principle, be conducted anywhere—and therefore they are not attributed to the DPRK-China connection--it is likely that China hosts a number of actors engaged in these activities as well.

The purpose of this section is not to reestimate the official data presented above. Aggregating this data into a more consistent picture of all of North Korea’s external economic relations far exceeds the grasp of this report. The data demonstrating these processes is acquired in opportunistic ways that do not lend themselves to the construction of consistent time-series data. One point, however, is clear: North Korea has long engaged in illicit trade, from missiles to narcotics to the distribution of counterfeit currency. These activities continually evolved, shifting in response to effective—or lax—enforcement of sanctions. In the most recent period, these activities have centered on evading sanctions and generating new streams of income and many of those activities clearly involve Chinese counterparts. 

Conclusion: The New Cold War and Its Consequences

If there is a single overarching conclusion to this overview it is that economic ties are embedded in complex political understandings. DPRK-China relations soured in the early 1990s as Beijing normalized relations with Seoul but gradually thawed during the Hu Jintao-late Kim Jong Il years. North Korea did witness a de facto opening and growth of trade starting in 2000 and extending into the mid-2000s. Trade, almost certainly underpinned by direct investment, expanded sharply.

But China’s predominant position in North Korea’s foreign economic relations was also the result of its choice to pursue the nuclear option and the effect this had first on Japan, then on Korea, and ultimately with the rest of the world as well. The DPRK’s strategic choices did not intend to create an overwhelming dependency on China but they nonetheless had that effect. Moreover, China’s rapidly increasing role in North Korea’s trade by no means implied Chinese endorsement of North Korea’s strategic choices. Despite Kim Jong Un’s image as a reformer, North Korea did not follow the Chinese model: efforts in this regard stalled out under his leadership and bilateral relations in the early Xi Jinping era were frosty.

From 2016, the bilateral relationship was further strained by strategic decisions in Beijing to join multilateral sanctions efforts. COVID compounded North Korea’s isolation. But a shift occurred with the crucial failure of the Hanoi summit: China probably regretted its decision to pressure North Korea, and as US-China relations worsened, it was less forthcoming about enforcing commitments that Beijing itself had made. As a result, the conversation shifted from how to constrain North Korea to whether and how to respond to China’s role in North Korean sanctions evasion, including through secondary sanctions.

The erosion of the sanction regime is illustrated by recent actions by China and Russia. Both countries vetoed a U.S.-sponsored resolution that sought to impose new sanctions on North Korea, including restrictions on petroleum exports, following a series of ICBM launches. They contended that additional sanctions could exacerbate humanitarian crises in North Korea and instead supported their November 2021 resolution proposal  , which called for sanctions relief. Further complicating matters, in March 2024 Russia vetoed a United Nations resolution to renew the mandate of the Panel of Experts. Russia's veto effectively ended the panel’s mandate at the end of April 2024, delivering a significant blow to global efforts aimed at monitoring and curbing North Korea's nuclear and military ambitions.

Another wild card remains in play: the impact of Russia’s invasion of Ukraine. Prior to the war, Russia broadly sided with China and showed increasing frustration with the United States on its DPRK policy, though it did not appear to provide blanket support. North Korea has effectively turned its munitions production into a form of currency, allowing it to make real claims on Russia. Following up on their 2023 summit at the Vostochny Cosmodrome, Vladimir Putin made his first state visit to Pyongyang since 2000 in June 2024. Putin and Kim Jong Un signed a comprehensive strategic partnership agreement, which included a mutual defense pact and enhanced military, scientific and economic cooperation. While this agreement has yet to be ratified in either country as of time of writing (July 2024), it signals a new era of strategic alignment for these two heavily sanctioned, nuclear-armed states. By providing critical military support, North Korea can now finance its imports of food, fuel, and technology from Russia, bolstering its strategic and economic position despite international isolation. Yet even if Russia-DPRK relations deepen, China’s economic role is expected to continue to be the central one.