North Korean textiles factories humming with Chinese orders

This eye opener throws new light on Chinese business practices.

With the United Nations imposing economic sanctions on North Korea, China, its only ally, has found a new way to circumvent the sanctions and continue doing business with its ally.

According to traders and businesses in the border city of Dandong, Chinese textiles companies are increasingly using North Korean factories to exploit the availability of cheap labor force in the region.

The clothes made in North Korea are labeled “Made in China” and exported across the world, they said.

This development highlights how China is circumventing ever-tightening U.N. sanctions which were designed to punish the dictatorial North Korean regime for its nuclear missile programs.

“We take orders from all over the world,” said one Korean-Chinese businessman in Dandong, the Chinese border city where the majority of North Korea trade passes through.

The traders spoke on the condition of anonymity given the sensitivity of the issue.

“We will ask the Chinese suppliers who work with us if they plan on being open with their client — sometimes the final buyer won’t realize their clothes are being made in North Korea. It’s extremely sensitive,” said a trader.

In 2016, Textiles were North Korea’s second-biggest export after coal and other minerals and grossed $752 million, as per the Korea Trade-Investment Promotion Agency (KOTRA).

In 2016, North Korea’s exports rose buy 4.6% to $2.82 billion.

While the latest U.N. sanctions have completely banned coal exports, it does not touch the textiles industry.

The flourishing textile trade between China and North Korea shows how the two nations have adapted to U.N sanctions.

The development also underscores the extend to which North Korea relies on China as an economic lifeline.

In the first half of this year, Chinese exports to North Korea rose nearly by 30% to $1.67 billion. This was largely driven by textile materials and other traditional labor-intensive goods not included on the United Nations embargo list, said Huang Songping, a spokesman for the Chinese customs.

Typically, Chinese suppliers send raw materials, including fabric, to North Korean factories across the border where garments are assembled and exported.

Last year, Australian sportswear brand Rip Curl had publicly apologized when it discovered that some of its ski gear, labeled “Made in China” had in fact been manufactured in North Korea’s garment factories.

Rip Curl had then laid the blame on a rogue supplier for outsourcing to “an unauthorized subcontractor”.

Traders and agents in Dandong say it’s a widespread practice.

All factories in North Korea are state-owned, and as per traders and agents, the textile ones appear to be humming.

“We’ve been trying to get some of our clothes made in North Korea but the factories are fully booked at the moment,” said a Korean-Chinese businesswoman at a factory in Dalian, a Chinese port city two hours away from Dandong by train.

“North Korean workers can produce 30 percent more clothes each day than a Chinese worker,” said the Korean-Chinese businessman.

“In North Korea, factory workers can’t just go to the toilet whenever they feel like, otherwise they think it slows down the whole assembly line.”

“They aren’t like Chinese factory workers who just work for the money. North Koreans have a different attitude — they believe they are working for their country, for their leader.”

The wages paid to North Korean workers at the Kaesong industrial zone range from $75 a month to an average of around $160. In China, average factory wages hover in the range of $450-$750 a month.

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Categories: Creativity, Economy & Finance, Entrepreneurship, Geopolitics, HR & Organization, Regulations & Legal, Strategy

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