Why rising rice prices probably don’t mean that China is enforcing U.N. sanctions.

Hope springs eternal.  I said recently that it wouldn’t surprise me to see China temporarily restrict trade with / aid to North Korea to mislead us into thinking that it’s really pressuring North Korea to disarm, thereby slowing the momentum here to legislate what Glyn Davies calls “national” sanctions.  This trick works so well because so many of us so desperately want to believe that China will give us an easy out.  Witness this report, via Korea Real Time, that rice prices have risen in Pyongyang, linking it to a crackdown by Chinese customs.  Does this mean that China is finally saving us from having to deal with North Korea?  Can we get back to pretending this isn’t our problem?  No?  Here are some reasons why this story could mean a lot of other things, aside from the thing we wish it meant.

1.  Grain prices always rice in North Korea at this time every year.  In the spring, North Korea’s winter stocks of food start to run out, and nothing has sprouted from the ground yet.

2.  North Korean traders who supply its jangmadang have become very sophisticated speculators who know enough to link missile and nuclear tests to temporary crackdowns on cross-border flows of merchandise.  If the traders also noticed increased scrutiny by Chinese customs, the price rises would be more speculation than a function of supply and demand.

3.  How do you measure prices at all in a place like North Korea?  In terms of North Korean currency, or in terms of the Chinese yuan, which has increasingly become the de facto currency of North Korea’s people’s economy since the Great Confiscation of 2009?  In a lengthy post, Chris Green makes the case that yuan-based rice prices have risen steadily since then, but that the rise may be more indicative of shifting exchange rates as North Korea’s “people’s economy” transitions to one based on the yuan.

4.  Recently, Yonhap reported that North Korean grain imports from China plunged between December and January, after North Korea’s latest missile test but before its nuclear test.  This wouldn’t be North Korea if we didn’t have some contradictory evidence to harmonize — in this case, a Daily NK report that North Korea recalled some of its purchasing agents from China in December, to commemorate the one-year anniversary of Kim Jong Il’s assumption of room temperature (even in death, he’s still starving them).  But rice is an elite food in North Korea, and if (presumably state-employed) traders were called off the street in December, it makes sense that there would be fewer deliveries on transactions in January.

5.  If China were really cooperating with sanctions against North Korea, I’d say food is about the last thing we should expect them to crack down on.  Although there is some evidence that food shortages are a factor in falling morale and rising defections among front-line NKPA units, the regime almost certainly sees hunger as a highly effective tool of control.  Hungry people are listless, passive, and easy to control.

Again, I don’t foreclose the possibility that China is temporarily pressuring, or will temporarily pressure, North Korea on aid and trade.  That’s in China’s interests, even if (especially if!) you view them as cynically as I do.  Still, there are several other explanations for the price rise that are functions of North Korea’s own political and economic policies, and the consequent tendency for North Korean markets to be vulnerable to supply disruption and speculation.