VZCZCXRO2398
RR RUEHCN RUEHGH RUEHVC
DE RUEHSH #0221/01 3552338
ZNY CCCCC ZZH
R 212338Z DEC 09
FM AMCONSUL SHENYANG
TO RUEHC/SECSTATE WASHDC 8943
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAIIA/CIA WASHDC 0240
RHMFISS/COMUSKOREA J2 SEOUL KOR
RUEKJCS/DIA WASHDC 0189
RHHJJAA/JICPAC PEARL HARBOR HI 0090
RUCGEVC/JOINT STAFF WASHDC 0135
RHEHAAA/NSC WASHDC
RUEKJCS/SECDEF WASHDC 0193

C O N F I D E N T I A L SECTION 01 OF 02 SHENYANG 000221 
 
SIPDIS 
 
DEPARTMENT FOR EAP/K, EAP/CM, INR 
MOSCOW PASS TO VLADIVOSTOK 
 
E.O. 12958: DECL: TEN YEARS AFTER KOREAN UNIFICATION 
TAGS: CH ECON EFIN KN KS PGOV PINS PREL RS SOCI
SUBJECT: PRC-DPRK BORDER: TRADERS DISCUSS CURRENCY REFORM 
 
REF: A. SHENYANG 170 
     ¶B. SEOUL 1921 
     ¶C. SEOUL 1956 
 
Classified By: Consul General Stephen B. Wickman.  Reasons 1.4(b/d). 
 
¶1. (C) SUMMARY: Contacts in Northeast China along the PRC- 
DPRK border say that North Korea's latest currency reform 
will not have any short-term implications for social 
stability.  Sources agreed that this was a move by the DPRK 
government to wrest back control of income streams from 
those who had made money outside of legal channels over the 
last decade.  Markets remained closed as of December 9 and 
while the victims of this reform were limited, the tiny 
North Korean middle class was the biggest loser.  END 
SUMMARY. 
 
¶2. (U) ConGenOff traveled to Jilin Province's Yanbian Korean 
Autonomous Prefecture and Mudanjiang City in Heilongjiang 
Province December 6-15 to meet local contacts. 
 
CURRENCY REFORM: ELITES AND MOST PEOPLE KEEP WEALTH 
--------------------------------------------- ------ 
 
¶3. (C) A Yanji-based Sino-Korean trader said that the DPRK's 
latest currency reform targeted the emerging middle class 
(Ref A) and others who earned their modest fortunes outside 
of DPRK government-accepted channels, such as the informal 
markets.  While currency reform was deadly for this small 
group, he said the policy affected neither the elites nor 
the vast majority of people who were too poor to have 
substantial amounts of currency to lose.  One of 
Heilongjiang Province's ten wealthiest businessmen, a 
Mudanjiang Sino-Korean who proudly displays a picture of 
himself next to Korean Workers' Party Secretary Kim 
Ki-nam, said the impact of the revaluation on DPRK 
elites, bureaucrats, and overseas business representatives 
was non-existent because they all hold their wealth in 
foreign currency. 
 
¶4. (C) A Tumen-based Sino-Korean businessman said on 
December 9 that a surprising, yet limited number of Chinese 
traders were victims of this currency exchange, as some 
occasionally received North Korean currency as temporary 
barter chits while waiting for the real barter items to come 
through.  This businessman said that from his vantage point 
on the Tumen River, the effect on the North Korean people 
appeared minimal.  Even though some people might be angry, he 
didn't see any evidence of social unrest in North Korea (Ref 
B outlines such concerns.) 
 
MARKETS CLOSED DUE TO UNCERTAINTY, DPRK REACTING FLEXIBLY 
--------------------------------------------- ------------ 
 
¶5. (C) A Sino-Korean trader from Longjing who shuttles to 
North Korea several times a week told us on December 9 that 
as of December 8, markets in North Hamgyong Province were 
still closed as traders were unwilling to unload product in 
an atmosphere where there were no established prices.  She 
noted that prices were skyrocketing (Ref B).  The president 
of the Yanbian University of Science and Technology, Amcit 
James Chinkyung Kim, subsequently said that the North 
Hamgyong Workers' Party Deputy Secretary had visited him in 
Yanji on December 11, telling him that each North Korean 
household was simply given 500 New Korean won (NKW) outright 
and then allowed to exchange up to 1,000 NKW (Ref C). 
According to this source, the North Korean authorities 
realized the need for some flexibility amidst the reality of 
numbed traders and shuttered markets. 
 
¶6. (C) A Yanji Sino-Korean pastor previously involved in 
assisting DPRK refugees said he recently hosted a cousin 
from the DPRK's South Pyongan Province for almost a month 
(until early December).  His cousin spent all his remaining 
currency and re-entered North Korea at Dandong on December 8 
only carrying consumer goods.  The pastor said his cousin 
had been trained by the authorities and ordered to ask his 
Sino-Korean relatives for as much money and donations as 
possible and before he was granted an exit visa and that 
this training was mandatory.  His cousin was initially 
issued a two-month North Korean exit visa but upon exiting 
at Sinuiju, the North Korean border officers reduced this to 
 
SHENYANG 00000221  002 OF 002 
 
 
one month. 
 
REASONS FOR CURRENCY REFORM: LOCALS SPECULATE 
--------------------------------------------- 
 
¶7. (C) Our Yanji-based trader said that it was rash to 
speculate about the reasons for the reform, saying that 
there could be many.  He surmised that though this reform 
would go over successfully in the short-term and not affect 
social stability now, it could have long-term consequences 
for the people since they could chalk this up to their 
government appearing to be out of control.  Our Mudanjiang 
contact said that while it was clear that the DPRK 
government wanted to reassert control of the economy and 
redistribute resources - with the added political benefit of 
penalizing those who profited from the informal economy - 
the policy also fit North Korea's ongoing campaign to reach 
the goal of being an economically strong nation by 2012. 
Another contact, the Amcit director of the Tumen River 
Vocational School, said he thought the currency exchange 
might portend a DPRK move to interfere with existing foreign 
investments or stave off potential calls for reform. 
 
WICKMAN