The textile factories of Dandong China, just across the Yalu River from North Korea, producing “made in China” goods offer a glimpse into a hidden world that is helping North Korea’s economy to thrive. Operated by North Koreans, the factories produce clothes and other goods that are exported under foreign-company labels, making it impossible to tell that they have been made with North Korean hands and contribute to North Korean profits.
The thriving operations belie the perception in Washington that U.S. and international sanctions are working to strangle North Korea’s ability to make money. An estimate by South Korea’s Hyundai Research Institute forecasts that the North’s economy will grow this year by a whopping 7 percent.
A lot of that growth comes through Dandong, a hive of North Korean and Chinese managers and traders, with middlemen helping them all cover their tracks. One local Chinese businessman estimates that one-quarter of this city’s population of 800,000 is involved in doing business with North Korea in some way.
In a typical clothing factory, the women work 13 hours a day, 28 or 29 days a month, and are paid $300 each a month—one-third of which they keep. The rest goes back to the government in Pyongyang. North Korea is thought to have at least 50,000 workers outside the country earning money for the regime, with 13,000 of them working in Dandong.
North Korea’s economy is still a basket case, barely more than one-fiftieth the size of South Korea’s. But in talking about the changes underway, the businessmen described a North Korean economy that is increasingly run according to market principles, where people want to be in business, not the bureaucracy, and where money talks.
Reports from inside North Korea suggest that even state-run companies are increasingly operated according to market principles, with managers empowered to hire and fire workers—previously unimaginable in the communist nation—and conduct businesses the way they see best.
Nevertheless, there are frustrations in China. A huge development project is on ice, partly because of the demise of Jang Song Thaek, the businessman and uncle of Kim Jong Un who was executed at the end of 2013, because of his “decadent capitalist lifestyle.” Since then, Jang’s colleagues have been recalled to Pyongyang or have disappeared—sometimes with millions of dollars in Chinese money, according to businessmen in Dandong. Beijing is clearly none too happy about this.