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C O N F I D E N T I A L SECTION 01 OF 03 SHENYANG 000067 
 
SIPDIS 
 
DEPARTMENT FOR EAP/K, EAP/CM, INR, PRM 
 
E.O. 12958: DECL: TEN YEARS AFTER KOREAN UNIFICATION 
TAGS: PREL PINR PGOV PREF EAGR KN KS CH
SUBJECT: NORTH KOREA: PRICE WOES, SQUEEZED AID GROUPS, PRC 
GRAIN-EXPORT ENFORCEMENT 
 
REF: A. (A) SHENYANG 37 
     ¶B. (B) SHENYANG 30 
     ¶C. (C) SHENYANG 14 
 
Classified By: ACTING CONSUL GENERAL ROBERT DEWITT. 
REASONS: 1.4(b)/(d). 
 
¶1. (C) SUMMARY: Recent returnees from Pyongyang, Sinuiju 
and Rason point to sharply surging food prices in the DPRK. 
North Korean laborers employed by one aid group in Rason 
have complained that food-inflation has eviscerated their 
purchasing power.  Customs officials in Yanbian are 
strictly enforcing grain-export restrictions, and anecdotal 
reports suggest possible tightening in recent weeks.  PRC 
officials and scholars assert PRC grain-export restrictions 
have had only a minimal impact on PRC-DPRK trade and on 
North Korea's internal food situation.  NGO personnel 
operating in the Rason area and near the PRC-DPRK border, 
by contrast, claim PRC export restrictions have severely 
debilitated some food-related aid projects, though 
experiences vary.  END SUMMARY. 
 
¶2. (C) Poloff traveled May 12-16 to Jilin Province and the 
northern end of the PRC-DPRK borderlands.  Sites visited 
included Changchun, capital of Jilin Province; Yanji, seat 
of the Yanbian Korean Autonomous Prefecture; Tumen, 
opposite the DPRK's Namyang; and Hunchun, near China's land 
gateway to Rajin-Sonbong (Rason).  This is the first in a 
multi-part snapshot of the PRC-DPRK border in April/May 
¶2008.  Subsequent parts examine North Korean food 
difficulties, official/unofficial PRC food assistance, the 
tightening border and North Korean border-crossers, inter 
alia. 
 
SURGING FOOD PRICES IN NORTH KOREA 
---------------------------------- 
¶3. (C) Recent returnees from Pyongyang, Sinuiju and Rason 
all pointed to surging food prices in North Korea.  A 
Yanji-based Korean-American recently returned from a two- 
week stay in Pyongyang noted May 14 that fruit prices in 
the city's markets had at least doubled compared to the 
same period last May.  The price of grains there has risen 
similarly, observed the Amcit, a monthly traveler to 
Pyongyang over the past several years.  LIU Chensheng 
(STRICTLY PROTECT), a facilitator of PRC investment in 
North Korea via the Liaoning Civilian Entrepreneur 
Association's Korean Liaison Office, told Poloff April 29 
in Shenyang that he observed rapidly increasing North 
Korean food prices during his recent business trips to 
Pyongyang and Sinuiju (opposite Dandong, in the DPRK's far 
northwest), which he makes on at least a monthly basis.  A 
Yanbian-based Western aid worker recently returned from an 
ongoing aid project in Rason reported May 16 that the price 
of certain food products--many imported from the PRC--in 
the northeastern port-city's markets had doubled, and in 
some cases tripled. 
 
¶4. (C) North Korean laborers employed in Rason by the 
Yanbian-based aid worker's NGO recently complained to their 
employers that their salaries had become effectively 
"worthless" because of sharply rising food prices.  The 
NGO's attempt earlier this month to ship rice from China to 
the project-site in Rason as a salary supplement for 
workers (and to guarantee supply for its Western staff 
there) was scuttled by PRC grain-export restrictions, 
according to the aid worker. 
 
TIGHTENING ENFORCEMENT OF PRC EXPORT RESTRICTIONS... 
--------------------------------------------- ------- 
¶5. (C) Anecdotal reports suggest an additional tightening 
of the PRC's recent export regulations on grains and other 
commodities (see refs A-C), at least in Yanbian.  Despite 
the new regulations, the Yanbian-based aid worker noted 
that in recent months she had been able to successfully 
ship grains into Rason via Quanhe Land Port (near Hunchun), 
albeit at considerable cost because of the elevated export 
taxes.  But starting "two or three weeks ago," officials at 
 
SHENYANG 00000067  002 OF 003 
 
 
Hunchun Customs suddenly informed her that no grain exports 
to the DPRK would be permitted, regardless of whether 
shippers had remaining space in their export quotas. 
Enforcement at Quanhe Land Port is strict, she reported. 
Chinese customs authorities there, for instance, recently 
confiscated a 25-kilogram bag of rice from her friend, 
another Western aid worker who had sought to bring the rice 
to Rason for personal use, though customs returned it when 
he re-entered China.  Quanhe customs officials also 
confiscated a far smaller amount from our contact without 
explanation; upon protest, they permitted her to bring in a 
token fistful, she related. 
 
...BUT PRC CONTACTS ASSERT IMPACT IS MINIMAL 
-------------------------------------------- 
¶6. (C) PRC officials and scholars generally assert that PRC 
grain-export restrictions have had a minimal impact on PRC- 
DPRK trade, as well as on North Korea's internal food 
situation.  Two respected North Korea experts at the Jilin 
Academy of Social Sciences (JASS), CHEN Longshan (STRICTLY 
PROTECT) and ZHANG Yushan (STRICTLY PROTECT), acknowledged 
May 12 in Changchun that China's grain-export policy has 
had "some impact," but asserted any effect was mitigated by 
the PRC's continued offer to supply the DPRK with 
sufficient humanitarian aid.  A frank senior official 
overseeing all Yanbian's land ports told Poloff May 15 in 
Yanji that he was unaware of any dramatic impact on PRC- 
DPRK trade, a point echoed May 16 by officials in Tumen, 
who spoke of strict enforcement of grain-export 
restrictions at Tumen Land Port.  Farther south in Dandong, 
through which the majority of PRC-DPRK trade passes, YONG 
Renzhong (STRICTLY PROTECT), Director of Dandong's Port of 
Entry Administration, told Poloff during a visit to 
Shenyang May 20 that the restrictions have had little 
"visible" impact on PRC-DPRK trade there.  Two North Korea 
experts at the Liaoning Academy of Social Science, LU Chao 
(STRICTLY PROTECT) and WU Jianhua (STRICTLY PROTECT) 
suggested that the DPRK has been suffering "a certain 
impact," but ultimately proffered conclusions similar to 
Yong Renzhong's during discussions with Poloff on April 28. 
 
 
¶7. (C) (NOTE: Some Chinese government scholars are advising 
Beijing to limit the "temporary" grain-export controls to 
no more than one year, lest they cause major distortions in 
the agricultural sector, and in incentives to producers in 
particular, according to JASS' Zhang Yushan, a specialist 
on DPRK economic issues. END NOTE.) 
 
SOME NORTH KOREAN AID PROJECTS FEELING THE SQUEEZE 
--------------------------------------------- ----- 
¶8. (C) In contrast with most PRC officials and government 
scholars, NGO personnel involved with humanitarian projects 
in the DPRK told Poloff that PRC grain-export restrictions 
have had an impact on certain projects.  Experiences, 
however, vary.  The Yanbian-based, Western aid worker, for 
instance, claimed several humanitarian bread and/or noodle 
factories run by NGO groups in the Rason area have been 
forced to cease operations because they have been unable to 
import Chinese grain (e.g., flour) into the DPRK as before. 
(The aid worker knows of at least "seven or eight" such 
operations in Rason, though it remains unclear exactly how 
many suspended operations.  Some of the larger ones employ 
up to 40 or 50 North Koreans, she said.)  A number of NGOs, 
unclear on how to proceed, are exploring ways to procure 
grain from Russia or South Korea, ultimately shipping the 
inputs to the DPRK by sea, according to the aid worker. 
 
¶9. (C) Closer to the PRC-DPRK border, other humanitarian 
food-factories have managed to muddle through, according to 
a Western administrator at Yanji's Yanbian University of 
Science and Technology involved with the school's quiet aid 
projects in North Korea.  The administrator suggested that 
pre-existing ventures with which she is familiar have 
seemed to suffer less of an impact, though she declined to 
offer specifics.  In certain cases, she said, some 
humanitarian groups have shifted aid strategies and 
 
SHENYANG 00000067  003 OF 003 
 
 
procedures in order to comply with the new export 
regulations.  One shift involves processing all their 
inputs (e.g., soy) in China--instead of the DPRK--and 
exporting only finished products (e.g., high-protein soy 
products) to the DPRK. 
 
DEWITT