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China Taps North Korea Resources

Chinese investors include the Tonghua Steel and Iron Group, which bought 50-year mining rights to the Musan iron mine in North Korea for $909 million.

by Lee Jong-Heon
UPI Correspondent
Seoul (UPI) May 04, 2007
China has sharply expanded its business ventures in North Korea in recent years, tapping into the country's natural resources as it seeks to boost its leverage over the communist state, South Korea's state-run think tank says. What's more, China will exploit its impoverished neighbor further in future -- Beijing sees Pyongyang as a potential part of its northeastern area, bordering Russia or Mongolia, the research institute run by the Korea Development Bank opined.

North Korea has offered China the right to develop its underground resources to win much-needed hard currency and win Chinese protection from U.S. pressures, the institute said in a recent report.

China invested a total of $14.37 million in North Korea in 2005, up $9 million from 2004 and $1.5 million from 2002. China invested only $160,000 in 1998 and $480,000 in 1994.

It is believed more Chinese capital is flowing to the North because of the opaque nature of both regimes. But it is clear that China's investment has jumped since 2002, when North Korea adopted an economic reform package which eased restrictions on foreign investment.

China's investment is focused on developing the North's natural resources with 70 percent invested in mines of iron, copper and molybdenum, the KDB report says.

Chinese investors include the Tonghua Steel and Iron Group, which bought 50-year mining rights to the Musan iron mine in North Korea for $909 million.

The mine, the largest open-air iron mine in Asia, holds 7 trillion tons of reserves, 66 percent of which is recoverable ore. China hopes to bring in 10 million tons of ore annually, the report says.

The Wookwang Group and San-doong's Guoda Gold Corp. has acquired 50-year mining rights to the Ryongdong coal mine, which produces 1 million tons of coal a year.

In January last year, Hebei-based Luanhe Industrial Group signed a $2.8 million deal under which it will have a 51 percent stake in the North's Hyesan Youth Cooper Mine. The mine is estimated to have 1.5 million tons of copper and 16,000 tons of silver.

China has already won Pyogyang's approval to build a highway in the North to carry the excavated minerals to the border. China has also agreed to spend $41 million on winning the exclusive right to develop and use the North's northeastern port of Rajin, the report says.

Furthermore, China and North Korea have agreed to jointly exploit offshore oil fields. Chinese oil authorities said they had found new oil reserves in Bohai Bay, which lies between North Korea and China; they believe reserves to be up to 5 billion barrels. North Korea said in 1997 that it had found oil reserves of around 5 billion to 40 billion barrels in the offshore area.

In addition, China has decided to spend $45 million building a hydraulic power plant in the Yalu River, which flows on the border between the two countries.

"China's brisk investment in North Korea seems part of efforts to develop its poor northeastern provinces," said Chung Ui-jun, a researcher at the KDB institute.

Under a so-called Northeast Development Project endorsed by the Communist Party, China has pushed to develop its three northeastern provinces of Heilongjiang, Jilin and Liaoning, bordering North Korea, Russia and Mongolia, he said.

The South Korean media has expressed concerns about Pyongyang's growing economic reliance on China, warning that Seoul may lose its leverage in case of political turmoil in the North.

China has long been a key supplier of food and fuel to the impoverished North, providing between 70 percent and 90 percent of North Korea's oil and more than one-third of its imports and food aid.

"The North Korean economy is being rapidly incorporated into the Chinese economic sphere. That's why there are people who say North Korea is becoming another China province," Seoul's largest newspaper, Chosun Ilbo, said in an editorial.

Source: United Press International

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