{"id":4470,"date":"2020-02-12T10:37:22","date_gmt":"2020-02-12T01:37:22","guid":{"rendered":"http:\/\/www.01.asiapress.org\/rimjin-gang\/?p=4470"},"modified":"2022-01-24T15:32:17","modified_gmt":"2022-01-24T06:32:17","slug":"foreign-currency-prohibition","status":"publish","type":"post","link":"https:\/\/www.02.asiapress.org\/rimjin-gang\/2020\/02\/recommendations\/foreign-currency-prohibition\/","title":{"rendered":"\uff1cInside N. Korea\uff1e Won Plunges After Regime Attempts to Confiscate Foreign Cash off Merchants and Force Companies to Trade in Local Currency"},"content":{"rendered":"
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(Photo) A market supervisor, seen wearing an armband, oversees merchants. Photographed in Hyesan Market in August, 2013 by \u2018Mindeulle\u2019 (ASIAPRESS)<\/p><\/div>\n

\u201cThe North Korean won is plummeting.\u201d<\/p>\n

News was first reported on January 20 by a reporting partner in Musan County, North Hamkyung Province, that the actual exchange rate value of the RMB to North Korean won had strengthened from 1,100 N. Korean won to 1,350 N. Korean won. The value of the RMB (equivalent to roughly 0.14 USD) had jumped by 17.6 percent in North Korean markets, when compared to figures from surveys conducted late last year.<\/p>\n

On the same day, news of the yuan\u2019s sharp rise came from Chongjin, North Hamkyung Province, where it had risen to a value of 1,380 won and from Hyesan, Ryanggang Province, where it had risen to a value of 1,320 won. A reporting partner in Hyesan City said, \u201cThere is spreading anxiety in the markets from the memory of monetary reform back in the day.\u201d<\/p>\n

By the following day though, the actual exchange rate had fallen back down to 1,250 won, eventually settling at 1,280 won on January 23, before the Lunar New Year holiday.<\/p>\n

\u203b Towards the end of 2009, the Kim Jong-un regime carried out a \u201ccurrency reform,\u201d issuing new notes and denominations. The sudden reforms, reduced the won to 1\/100th of its previous value, leaving the economy in disarray.<\/p>\n

\u25c6 Severe foreign currency difficulties<\/h2>\n

North Korea, which was slapped with strong economic sanctions by the U.N. Security Council in 2017, lost nearly 90% of its exports the following year and was hit hard by the resulting lack of foreign currency. Nevertheless, food prices and exchange rates for US dollars and the RMB remained stable throughout 2018 and 2019. During that time, the exchange rate for RMB stayed roughly at 1,200 North Korean won per yuan.<\/p>\n

Except for fuel prices, inflationary trends in North Korea are largely linked to foreign currency exchange rates. In other words, despite the lack of foreign currency, inflation did not occur because the exchange rate against the U.S. dollar and RMB remained stable.<\/p>\n

The stability of prices is often referenced by those in Japan and South Korea who claim that the \u201ceconomic sanctions have had little effect.\u201d This is not the case, however. The impact of sanctions in Pyongyang as well as in provincial cities has been very significant, as documented by a 2-year investigation conducted by ASIAPRESS and its reporting partners in North Korea.<\/p>\n

Among the investigation\u2019s findings are reports of the closures of trade companies, the collapse of apartment prices, the disintegration of the wealthy class in Pyongyang, the shutdowns and production losses at mines, the slumps at markets, the deterioration of living conditions for ordinary citizens, the expanding budget gaps of the army and police, the increased numbers of homeless children, and the rise of prostitution. At the General Assembly of the Workers\u2019 Party Central Committee held late last year, Kim Jong-un described the current situation as a \u201csevere and unprecedented challenge.\u201d<\/p>\n

In spite of the conditions, how has the foreign exchange rate remained stable? This was a mystery among experts on North Korea. A South Korean researcher explained it as \u201cdollarization.\u201d The RMB and U.S. dollar are now widely circulated in North Korea as residents lack faith in the national currency- the North Korean won. By shunning the uncredited, local currency, the researcher claimed that prices have remained stable. Other experts give an alternate explanation, arguing that \u201cthe North Korean authorities are intervening at illegal foreign exchange markets to stabilize the won.\u201d
\nNext page :Foreign currency seized at markets...<\/strong><\/p>\n

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Map of North Korea (produced by ASIAPRESS)<\/p><\/div>\n

\u25c6 Foreign currency seized at markets<\/h2>\n

North Korean authorities began cracking down on the use of U.S. dollars and the RMB towards the end of last year.<\/p>\n

On January 22, a reporting partner in Hyesan City said, \u201cAs soon as Kim Jong-un\u2019s \u2018words of criticism\u2019 were released in November of last year, police officers began patrolling the markets in plain clothes. They recently created a separate \u2018foreign currency control team\u2019 which employs disguises for catching those using foreign currency and confiscates their cash without mercy.\u201d<\/p>\n

Kim Jong-un\u2019s \u201cwords of criticism\u201d lamented the fact that \u201cwe treat foreign money with great care, but neglect our own country\u2019s money.\u201d This critique came after banknotes collected by the central bank were found to be in a dilapidated state, often in tatters. Following this message, full-scale efforts were initiated to control the use of foreign currency.<\/p>\n

Merchants are now forced to use domestic currency at markets. When business hours are over, the merchants convert their earnings immediately at black market exchanges. Merchants are also said to be secretly using RMB for wholesale purchases outside of markets or for deals conducted at home. The reason for this is that they do not trust the national currency.<\/p>\n

\u25c6 Trade companies also banned from using foreign currency<\/h2>\n

This is not just the case at markets. According to another reporting partner in Ryanggang Province, the authorities have recently taken steps to ban the use of foreign currency in domestic transactions by trading companies. When purchasing medicinal herbs from local residents to be exported or smuggled to China, trading companies are now careful to use only North Korean won.<\/p>\n

By mid-January, it was said that various trade companies were displaying strange trends. To abide by the new policy, companies were having to actively convert RMB into large quantities of North Korean won or vice-versa.<\/p>\n

A reporting partner in Hyesan City said, \u201cThere were rumors that a trade company official was seen carrying hundreds of millions of North Korean won in cash to a currency exchange dealer by taxi. These rumors spread a lot of anxiety.\u201d<\/p>\n

Regarding future expectations, the reporting partner said, \u201cAs always, things are quite strict following a \u2018policy\u2019 announcement by Kim Jong-un. But soon things will blow over. Many merchants will get off through bribery or personal connections if authorities try to confiscate their foreign currency. Only those who can\u2019t afford the bribes will have their money confiscated. Kim Jong-un\u2019s \u2018policy\u2019 will only bring money to the pockets of law enforcement.\u201d<\/p>\n

It remains to be seen if the North Korean won\u2019s fall will be temporary or if the currency will collapse further and lead to inflation. Future movements will be tracked. (Kang Ji-won \/ ISHIMARU Jiro)<\/p>\n

\u203b ASIAPRESS contacts reporting partners in North Korea through smuggled Chinese mobile phones.<\/p>\n

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