North confirms currency reform

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North confirms currency reform

North Korea officially confirmed yesterday that it has revalued its currency.

The Choson Sinbo, the North’s foreign media outlet, reported that the North’s government began exchanging old bills for new ones on Monday.

The Choson Sinbo is a Japan-based newspaper published by the pro-Pyongyang General Association of Korean Residents.

While news stories have abounded this week that the North Korean regime had revalued its currency to curb unofficial economic activity and suppress inflation, the Chosun Sinbo’s report was the North’s first acknowledgement of the action.

Rumors of North Korean currency reform have been circulating for three years, and wealthy North Koreans had already dumped their country’s won before two zeroes were shaved off late last month, North Korean sources said Thursday in Dandong, northeastern China.

About 2,000 North Korean traders and laborers live in Dandong, which borders North Korea. There are also some 2,000 Chinese who used to live in North Korea and who now trade with North Koreans.

The currency revaluation was first reported on Dec. 1, but it has been difficult to get a clear sense of the move’s impact on North Korea. Because Dandong is closely linked with North Korea geographically and economically, residents there have been keeping a close eye on major changes in their neighboring country.

A source privy to North Korean affairs said so-called “big hands,” including North Korean government officials in Pyongyang, had long been aware of the possible currency revaluation and had already traded their North Korean won for U.S. dollars or Chinese yuan.

“The impact of the currency reform on wiping out underground economic activities may not be so significant,” the source said. “But the common people will be dealt a big blow. And that will lead to some major social disorder.”

Another source said there had been speculation since late November that the value of the dollar and yuan was soaring and that “it is highly likely that high-ranking bureaucrats knew the currency reform was coming and took some steps ahead of time.”

An employee at a hotel in Dandong said even North Koreans have been paying in yuan or euros to stay there.

“It’s been a while since the North Korean money was used around here,” the employee said.

After the news of the currency revaluation emerged, traders in Dandong noticed little change in their dealings with North Korea.

A South Korean trader there said his North Korean counterparts have mostly been dealing in yuan. Another South Korean entrepreneur said his trading partners have been paying in U.S. dollars.

The volume of China-North Korea trade in Dandong appeared to have trailed off early in the year, said another South Korean. Since Premier Wen Jiabao’s visit to Pyongyang in early October, trading has gradually recovered to its usual levels, the South Korean said.

“We have to wait and see whether the currency reform will have any major impact on trade,” he said.

An expert on North Korea said the success of the currency move will hinge on how the North Korean public reacts.

“The hard-earned money has mostly gone for naught, and the people could go berserk at the regime,” he said.

A source from Beijing said, “We can’t rule out the possibility that the number of defectors will shoot up after this currency decision.”

But for now, the effect of the revaluation appears to be minimal, at least in the Chinese capital. The North Korean Embassy in Beijing was as tightly guarded as usual, with no signs of revolt. Merchants along the nearby street said they don’t take North Korean won and only accept yuan.

A waitress at a North Korean restaurant in Beijing said since her wage had always come in yuan, the currency reform wouldn’t have an immediate impact on her.

When asked about what her family is going through back in Pyongyang, she murmured, “I don’t know yet.”


By Ser Myo-ja, Chang Se-jung [jeeho@joongang.co.kr]
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