China and North Korea, traditionally have been maintaining a close cooperative relationship in the political and economic realms. The dominant view is that North Korea has become increasingly dependent on China recently due to international sanctions on North Korea and the contraction in the inter-Korean economic cooperation. In actuality, the North's ever-growing dependency on China seems to be the inevitable choice for the isolated North Korea to resolve its economic difficulties and maintain the current regime.
Even so, unlike other East Asian countries, North Korea has remained isolated from the regional division of labor in Northeast Asia despite its heavily increasing trade dependency on China in turn not being able to take sufficient advantage of China’s strong growth. Therefore, the process of North Korea's growing economic and trade dependency on China resulted in the minimal provisions for stability and survival of the existing regime without any contributions to the North’s economic recovery and growth.
In this context, it is highly possible that if this one-sided, dependent trade relationship between China and North Korea deepens in the long term, it would later serve as a critical determinant in setting up the position of the North Korean economy in the regional division of labor in Northeast Asia. This, therefore, must be a very significant factor to consider when deciding on a long-term direction of the inter-Korean economic cooperation.
Moreover, it would be meaningful to analyze the development progress and characteristics of China-North Korea economic cooperation under the structure of the Northeast regional division of labor and based on this, to draw out policy implications on a desirable direction of inter-Korean economic cooperation in the long term.
This study analyzes the structure of the regional division of labor in Northeast Asia and then based on the analysis it roughly evaluates the structure and characteristics of China-North Korea economic cooperation from the perspective of Northeast Asia's regional division of labor. It also conducts an in-depth analysis on the China-North Korea trade and economic cooperation, particularly investment. According to the result, from the North’s perspective, the current trade structure between North Korea and China, where North Korea mainly exports primary products such as minerals and marine products and imports strategic materials including food, energy and most industrial products from China, seems to have restrained the expansion of North Korea's growth potential. Moreover, in terms of China's investment for which North Korea has high expectations, China has mainly focused on seaports that would help China advance toward the East Sea and on minerals abundant in North Korea, meaning that China's investment has little impact on North Korea's domestic economy. Accordingly, when the current structure of China-North Korea trade and labor of division grows stronger, it is highly likely that this would not bring any measurable advantage to North Korea's economic recovery and growth in the long term and eventually serve as a huge obstacle to the formation of the inter-Korean economic cooperation and community.
Therefore, in order to guarantee North Korea's economic recovery and growth in the long term and also to achieve win-win progress for both Koreas, it is necessary to make the right strategic decision on North Korea's long-term positioning under the structure of regional division of labor in Northeast Asia. In this sense, it would be 'labor-intensive production process,' which shows certain opportunities under the current structure of division of labor and could produce large impacts on the North Korean economy. In other words, it would be a wise choice for North Korea to promote the transfer of 'labor-intensive production process' and then to stimulate and expand it so as to guarantee North Korea's economic recovery and growth under the current structure of labor of division in Northeast Asia.
To that end, North Korea should be actively engaged in attracting foreign direct investment in the 'labor-intensive production process,' which of course requires the reform, openness, and institutional improvement of North Korea. If North Korea clearly demonstrates changes in its policy stance on the reform, openness and sincere efforts, South Korea, which has served as a sure supplier of intermediate and capital goods in the regional labor of division in Northeast Asia, could be a true and most helpful partner to North Korea. This could eventually provide both Koreas with opportunities to win and grow together.