China and North Korea had become blood allies since the beginning of the Cold War, in particular following the friendship built during the Korean War against US-led UN troops from 25 June 1950 to 27 July 1953 (Haruki, 2014; Seth, 2010). The physical conflict ended though the war did not. Since then, China has offered large amounts of funds and material aid to North Korea according to the Treaty of Friendship, Cooperation and Mutual Assistance between the People’s Republic of China (PRC) and the Democratic People’s Republic of Korea (DPRK) signed on 10 September 1961 (Cornell, 2002; Beal, 2005). During the Cultural Revolution from 1966 to 1976, there were harsh ideological disputes about North Korea’s orthodox schooling and China’s revisionism of socialism especially when Beijing started to get in touch with Washington, DC, in 1972 (Harrold, 2004; Adrian, 2018: 78–79). After that, China’s establishment of a diplomatic relationship with South Korea in 1992 also seriously influenced the top-level interaction between Beijing and Pyongyang (Liu Jin-zhi et al., 2006; Cha, 2013: 325–327). Yet these two issues have not halted the aid from Beijing to North Korea, which maintains the survival of China’s strategic buffer zone against the US and its allies.

In the post-Cold War era, especially since the early 2000s, the Sino-DPRK relationship has become commercialised. It started with the entry of a small number of Chinese companies into North Korea in the early 2000s and officially began with the signing in 2005 of the Agreement between the Government of the PRC and the Government of the DPRK for the Promotion and Protection of Investment. Chinese economic activities in North Korea expanded rapidly in several fields such as mineral resources, the fishing industry, physical infrastructure, tourism, and labour cooperation. The commercialisation of the Sino-DPRK relationship can be observed from three specific changes. The first change is the reduction of official economic assistance and rapid increase of investment. The number of Chinese investment projects in the DPRK increased rapidly since 2002 (Choo, 2008: 343–350; Ford and Kwan, 2008). The second change concerns multiple economic actors. The new Chinese economic activities have been implemented by not only the central government but also the sub-state-level economic actors. The latter, such as local companies and regional governments (city and province), are also more active than the central government in the huge field of investment in North Korea. Such investment includes those made in the marketplace, the construction of social infrastructure (such as roads and railways), mineral extraction, computer production, marine production, and fishing licensing. The third change relates to the measures taken to support North Korea, which has been transformed from direct official assistance to a mixture of official assistance and investment in order to help Pyongyang develop its own economic strength. The Chinese government aims to encourage Pyongyang to follow the Chinese style of economic reform and achieve integration into the international economy. This idea, however, is rejected, or at least resisted, by Pyongyang. The response from China has been to promote and encourage investment in North Korea and to use technical assistance in exchange for natural resources with a view to improving North Korea’s technological capability in the short term and building the long-term comprehensive economic self-development abilities of North Korea rather than directly aid.

In the current research on the Sino-DPRK economic relationship, there are two major research strands. The first, mainly researched by Chinese scholars, is dominated by discussions of the status quo and existing problems in Sino-North Korea trade and measures taken to address them. The main problems include huge difficulties in, and risks of, trade settlement, currency problem (use of RMB) the increase in North Korea’s outstanding payments, and the negative influences of political issues, such as the nuclear crisis in North Korea. Relevant measures include the promotion of inter-government cooperation and the institutionalisation of trade, providing aid for the construction of infrastructure, and the resolution of North Korea’s nuclear problems (Sun, 2004: 67–71; Yu, 2008: 32–34; Lin and Jin, 2009: 37–43; Wang, 2008: 48–50; Zhang, 2006: 3–8; Zhang, 2007: 38–41; Zhang et al., 2009: 36–37; Yu, 2010: 121–123; Han, 2011: 12–23; Zhang, 2011: 13–21; Xu, 2011; Li, 2012: 35–39; Piao, 2012: 44–53; Bai, 2013; Wang, 2013: 62–63; Wang and Zhang, 2014: 451–470; Du, 2014). Man (2011) uses the case of Dandong-Sinuiju economic cooperation to explain a top-down model of the Sino-DPRK economic relationship and predicts future developments. Li (2011: 58–61), Sun (2015: 64–68), Piao and Li (2012: 3–10) and Huang and Hu (2014: 3–10) also discusses the problem of North Korean escapees to Northeast China, their negative impact on China’s diplomacy and how to deal with North Korean escapees by pushing economic reform in North Korea and achieving cooperation with the UN. Lin and Hao (2011: 11–18), Zhang and Ru (2012), and Ge (2015: 111–115) also discuss the significance of Sino-DPRK economic cooperation to the access of the Sea of Japan through Tumen River. Liu (2008: 83–89) evaluates the attempt of Beijing in pushing economic reform in North Korea through economic participation.

The second research strand provides explanations for China’s economic policy regarding North Korea, especially from the general state level, and in the traditional area of security, such as the aim of maintaining regional stability and peace and avoiding the collapse of North Korea (Russell, 2000: 47–64; Shambaugh, 2003: 43–56; O’Hanlon and Mike, 2003; Fuqua, 2007; Lee, 2009; Lim, 2009; Stares and Wit Joel, 2009; Moore, 2014: 77–80). Rozman (2007), Moore (2008: 1–29), Hundt (2010: 132–142), and Nanto and Chanlett Avery (2010) claim that Beijing’s ultimate objective in pushing Chinese economic activities in North Korea is in order to sustain regional stability, thereby persuading Pyongyang to restrain itself and attempting to lower the possibility of a US attack on North Korea. Goldstein (2006), Hagstrom and Soderbeg (2006), Ikenberry and Moon (2008: 45–59, 140–150), Park and Scott (2013), Huang and Shih (2014) point out that China aims to use North Korea as a tool to increase its regional influence and ensure security by balancing the US military influence in Northeast Asia. French (2007) and Haggard and Noland (2009: 10–12) recognise that Beijing plays a key role in the encouragement of investments in North Korea because it aims to promote regional economic integration of Russia’s Far East, Northeast China, and the Korean Peninsula, in particular the Great Tumen River Initiative. Many South Korean scholars, such as Lee (2003: 1–8), Kim (2006: 898–916), Joo and Kwak (2007), Choo (2008: 360–370), and Yoon and Lee (2013: 19–31) see the rapid increase of Chinese investment as Beijing’s strategic objective of leading North Korea towards economic reform, increasing its dependence on China and finally achieving denuclearisation of North Korea. Kim (2011: 257–271) also takes the example of Sinuiju, a North Korean city on the Sino-DPRK border, as an indication that the intention of Chinese economic investment in North Korea is to develop Northeast China.

Indeed, the previous research outlined above is helpful in understanding the Sino-DPRK economic relationship. However, little work has been done on the specific activities in the field of China’s economic activities in North Korea from the non-military security drivers and actors below the state level. This research is not about the structural change of Chinese economic activities; rather, it considers Beijing as the one who controls and orchestrates the actions of the other Chinese actors and recognises traditional security as the main motivation of Beijing. Even though they contributed to the non-traditional security problems, the major impact is still discussed around the central government with two major weaknesses.

Firstly, Chinese economic activities have changed with the rapid increase of Chinese investment and the reduction of official assistance. Its role has been weakened as a result of domestic decentralisation of the economy (because Beijing has recentralised political power since Xi became President) and active engagement of actors below the state level with North Korea. Meanwhile, the requirement of developing Northeast China is both too wide and too partial for two reasons. On the one hand, compared to the northeast provinces of Jilin and Liaoning, Heilongjiang province (also in Northeast China) is almost irrelevant to the border economy with North Korea except the oil transportation from Daqing to North Korea. However, it has benefited from developing a cross-border economy with the Russian Far East. On the other hand, Chinese economic actors in the DPRK are not only from Northeast China but also from other coastal provinces. The spread of ethnic Korean businesses towards other coastal areas of China has created multiple identities for these businessmen and expanded the relationship between North Korea and different provinces outside Northeast China. For instance, Zhejiang province in Southeast China encourages ethnic Korean businesses to join the local chamber of commerce. Thus, the requirement of developing Northeast China is only one reason for Chinese economic engagement with DPRK.

Secondly, the idea of traditional security-oriented motivation could explain Beijing’s active organisation of the Six Party Talks and other mediation between North Korea and the US in order to avoid potential military invasion by the US of North Korea and protract a complete resolution of the North Korean nuclear problem through diplomatic negotiation. However, it is not appropriate to explain Beijing’s intention to implement economic activities in North Korea from both general strategic and specific details. From the general strategy and the military point of view, Beijing has avoided a potential short-term regional war on the Korean Peninsula through its mediation. It successfully sustained the regional peace and fundamental order even it was a cold peace on the brink of military conflict. Its encouragement to invest in North Korea aims to strengthen its influence over the country, to push through economic reform, and to raise expectations that the investments of actors below the state level could help the construction of independent developing abilities of North Korea in non-military areas to reduce the burden of offering economic assistance.

From the specific areas of investment, even if the official assistance could be seen as a tool for sustaining the survival of the Pyongyang regime, it could be very difficult to connect the investments motivated by resolving local socio-economic problems with the grand strategy of the central government, especially as there is divergence between local requirements and national strategy.

This book attempts to close the gaps above by answering the four questions below: