North Korea is showing an unexpected economic recovery despite strong international sanctions, according to an analysis. The country has secured massive foreign currency through military cooperation with Russia, while trade with China has rapidly expanded, reviving consumption and construction activity centered on Pyongyang.
"From Taxi Apps to Electric Cars": Pyongyang's Changed Landscape
The Wall Street Journal (WSJ) reported Monday that "North Korea's economy is recovering faster than expected since the COVID-19 lockdown," drawing on testimony from foreigners who recently visited the country, satellite imagery, and reports from South Korean think tanks.
According to the WSJ, smartphone taxi-hailing services and QR code payment systems have recently appeared in Pyongyang. Chinese-made electric vehicles and imported cars have increased significantly, and pet stores, internet gaming cafes, and luxury car showrooms have also emerged.
A construction boom is also underway. North Korea supplied 10,000 new homes in Pyongyang alone last year, and construction projects for hospitals, factories, greenhouse complexes, and beach tourism resorts are reportedly in progress in provincial areas as well.
The Bank of Korea estimated that North Korea's economy grew 3.7% last year. This is the highest growth rate in eight years. Some South Korean research institutes also believe the growth has continued into this year.
The changes are also confirmed in satellite imagery. Ship movements around oil storage facilities have increased, and the number of vehicles in parking lots has risen. Nighttime lighting brightness was analyzed to be about three times brighter than five years ago.
Russia War Windfall: Estimated 15 Trillion Won in Arms Sales
The closest factor behind North Korea's economic recovery is its tight relationship with Russia. The WSJ analyzed that North Korea-Russia military cooperation rapidly expanded after Russia's invasion of Ukraine.
The Institute for National Security Strategy, affiliated with the National Intelligence Service, estimated that North Korea provided more than 15,000 troops and large quantities of ammunition to the Ukrainian front, and earned more than $10 billion (about 15.4 trillion won) by selling weapons to Russia from the summer of 2023 to the end of last year.
In addition, it is analyzed that North Korea secured more than $500 million (about 770 billion won) in additional revenue in exchange for military cooperation. There are suggestions that some of the payments may have been made in the form of advanced military technology, weapons parts, and various supplies instead of cash.
North Korea's cyber hacking activities are also cited as a major means of earning foreign currency. The WSJ introduced an analysis from the international security industry that North Korean hackers operate from bases in China and have secured billions of dollars through hacking cryptocurrency exchanges and other means.
China on the Move Again: Xi Jinping's First Visit in 7 Years
Amid this situation, China is also accelerating the restoration of relations with North Korea. President Xi Jinping visited North Korea Monday at the invitation of State Affairs Commission Chairman Kim Jong-un. Xi's visit to North Korea is the first in seven years since 2019.
The two countries, whose exchanges had effectively been suspended since COVID-19, have recently shown signs of restoring relations. Chinese Foreign Minister Wang Yi also visited Pyongyang last April and stressed that the two countries "should strengthen cooperation on international and regional issues."
The reason China is investing effort in North Korea is clear. While North Korea has recently grown rapidly closer to Russia, China remains North Korea's largest trading partner and largest patron. According to the U.S. think tank National Committee on North Korea (NCNK), North Korea depends on China for up to 95% of its total trade and 85% of its exports.
In fact, according to Chinese customs statistics, the scale of North Korea-China trade in April this year recovered to the highest level in the past eight years.
The analysis suggests that as imports of Chinese consumer goods and parts increase, this is also affecting the spread of smartphones and electric vehicles within North Korea.
Risk Factors Amid the Boom: What China Worries About Most
However, China is not entirely at ease. North Korea has recently accelerated its nuclear weapons development. The Korean Central News Agency (KCNA) reported on the 5th that Chairman Kim Jong-un instructed that the nuclear weapons stockpile must be "expanded exponentially."
Hong Min, a research fellow at the Korea Institute for National Unification, told AFP, "China is closely watching the very rapid progress of North Korea's nuclear program," adding that "if North Korea takes excessively provocative actions, it could become a burden to China's national interests as well."
Despite assessments that North Korea's economy is recovering, the limitations are clear. The WSJ pointed out that the current recovery is likely a phenomenon concentrated in Pyongyang and some strategic areas. The United Nations estimates that nearly half of North Korea's approximately 26 million people are still malnourished.
The WSJ analyzed that "North Korea is gaining greater capacity to invest more resources in construction and economic management while continuing its nuclear and missile development."
