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Just Around the River Bend

Published: 26 Sep 2009 18:38:27 PST

marketsSEEKING OPPORTUNITIES: A saleswoman introduces products from the DPRK to visitors. More than 20 DPRK enterprises attended the Fifth China Jilin Northeast Asia Investment and Trade Expo held on September 1-6 in Changchun YAO QILIN 
Rising in the Changbai Mountain of Jilin Province and flowing throughout China, the Democratic People's Republic of Korea (DPRK) and Russia into the Sea of Japan, the 525-km-long Tumen River is located at the epicenter of northeast Asia.

Comprising east Russia, northeast China, Japan, the Republic of Korea (ROK), the DPRK and Mongolia, Northeast Asia, with a population of more than 600 million, has developed into an area of interest due to its rich resources and vast markets.

As early as 1991, the United Nations Deve-lopment Program initiated a discussion among northeast Asian countries to cooperate in the economic development of the Tumen River region.

In December 1995, the governments of the DPRK, China, the ROK, Mongolia and Russia signed the Agreement on the Establishment of the Consultative Commission for the Development of the Tumen River Economic Development Area and Northeast Asia. Yet, despite various attempts and efforts, the past 18 years have seen little development in the Tumen River region. In response to the stagnant situation, China has vowed to make a breakthrough.

On August 30 this year, the State Council approved the Changchun-Jilin-Tumen Pilot Area for development and opening. The new initiative has upgraded the development of the China Tumen River region to a national strategy, said the Governor of Jilin Province Han Changfu at the Fifth China Jilin Northeast Asia Investment and Trade Expo held on September 1-6 in Changchun, the provincial capital.

Seizing the Day

Located just 15 km from the Sea of Japan, Hunchun in Jilin Province, lies 850 km west of Niigata, Japan. The city is also the nearest point in China to the east coast of the ROK, to the west coast of Japan and North America, and to parts of Northern Europe.

This May, the China-Russia-ROK-Japan joint rail-port transportation route was formally launched. With a total length of 800 nautical miles, the whole route can be completed in as little as one day and a half.

Hunchun is half the distance between the more prominent port of Dalian, in Liaoning Province, and Japan, allowing companies that utilize the new trade route to save one third of the time, as well as 30-40 percent of the shipping costs, said Deng Kai, an official of the Yanbian Korean Autonomous Prefecture.

While offering the potential for a new window for trade with Japan, Hunchun's opening lagged behind its intended development. By the end of 2008, Japanese-invested enterprises in Dalian had numbered 3,700, while Jilin Province had only registered 264 such enterprises by the first half of 2008.

The Hunchun Industrial Park for Japan, Russia and the ROK has since been established to entice businesses to bring their operations to Jilin. The launch of the joint rail-port transportation route will additionally enhance the development of the industrial parks, said Feng Yuhua, Vice Mayor of Hunchun.

Jilin Province's economy, for the most part, has been less dependent on exports than the national average. In 2008, Jilin's exports and imports amounted to $13.3 billion, accounting for 14 percent of its total GDP, much lower than the national average of 66 percent.

"This demonstrated that Jilin was not export-oriented like other provinces, so we should enhance our opening," said Bing Zheng, Director of the Jilin Academy of Social Sciences.

The six countries in northeast Asia strongly complement each other in economic development and resources supply. According to Bing, these countries can be divided into three categories: developed countries, including Japan and the ROK; developing countries, represented by China and Russia; and less developed nations, including the DPRK and Mongolia.

The less developed countries, while weak in technology and capital, are rich in resources; the developing countries have open markets and an increasing need for investment and resources; and the developed countries have strong technology and capital, but suffer from a lack of labor, new markets and resources supplies.

The Northeast Asian countries can help one another in different levels and provide economic assistance within their own developmental groups, Bing said. For local governments and enterprises, these factors are vital to making profits.

Hunchun Shengming Wood Processing Co., a state-owned Changchun-headquartered company, has invested some 100 billion yuan ($14.7 billion) in a wood roughing factory in Kraskino, a coastal city in Russia. The roughly processed wood is imported to the Sino-Russia Wood Processing Park in Hunchun for further processing and the final product is exported to the United States and Japan.

"Russia is rich in wood and its price is comparatively low, rendering our products rather competitive on the international market," said a business manager of Shengming.

While northeast China has historically been an old industrial base, it has long suffered from a shortage of resources, which has hindered its production. According to the Jilin Provincial Government, Jilin can only meet 50 percent of its total coal demands.

Neighboring Russia could answer Jilin Province's call for coal resources, as the country is home to 12 percent of the world's total coal reserves. Its Far East area alone has 40 percent of Russia's total reserves.

The number of ROK-invested enterprises is also increasing in Jilin Province, hitting 870 currently. The Yanbian Korean Autonomous Prefecture of Jilin Province has a similar historic and cultural background to the ROK, allowing ROK-funded enterprises to easily find a Korean-speaking labor force in Hunchun's vicinity, said Chen Genwei, Deputy Governor of Jilin Province.

Marching ahead

As early as 1992, Hunchun was authorized by the State Council as an A-level opening city together with Shenzhen and Zhuhai of south China's Guangdong Province. While the other two cities have become the engines of the Pearl River Delta, China's most vital area over the past 17 years, Hunchun has remained a relatively quiet border town.

Hunchun's idle state is unfortunate, since the city's proximity to the DPRK and Russia puts it within 200 km of 10 international ports, none of which, however, belongs to China. And although situated 15 km away from the Sea of Japan, Hunchun lacks estuaries to link it with the world's major sea routes.

"When we import processed materials from Russia, the formalities, transportation and customs administrations are rather complicated. In fact, our Russia-located factory is only 45 km from the processing site in Hunchun, but it has become the main handicap in the whole operational flow," said Li of Shengming.

In 2005, two Chinese-invested companies obtained the operational rights to the DPRK's Najin Port for 50 years. Najin Port, an ice-free port with a total area of 380,000 square meters, is located only 93 km away from Hunchun. The No.1 berth of Port 1 has finished construction, with preparations being made for the launch of the second phase of the project, according to China News Agency.

The Najin Port Program will provide Jilin Province, and possibly all of northeast China's logistics industry, with a new access to the sea, said Huang Denan, Director of the Trade Administration Department of the Yanbian Korean Autonomous Prefecture Bureau of Commerce. It will also contribute immeasurably to the DPRK's economic development, as well as to cooperation in the Tumen River region, he added.

As part of the regional cooperation program, the Russian Government has agreed to build a special economic zone in Hassan that borders on Hunchun. Russia will also construct a highway border port in Hassan, with a total annual capacity of 600,000 tons, according to the local government.

Hassan's primary trade advantage is its marine transportation, since almost all major Russian ports are closely connected to the Trans-Siberian Railroad.

Rail connections will also link China to other parts of Northeast Asia—a railway linking Choibalsan of Mongolia and Arxan of China is already being planned. By extending eastward to Baicheng, Changchun and Hunchun, railways will become a new thoroughfare connecting China and Mongolia, as well as Europe and Asia. The construction of a Sino-Mongolian transit line will be an important artery to promote the development of the Tumen River region and the revitalization of northeast China's old industrial bases, said Wang Shengjin, a professor of economics at Jilin University.

Another means of stimulating trade in the region is the Eastasian Border Trade Center, a 10-billion-yuan ($1.46-billion) investment project that started construction in Hunchun in August this year.

"Our confidence in the huge investment was from the border trade performance since the establishment of the Sino-Russian Border Trade Area built in 2004. In 2009, Hunchun will see more than 70,000 visitors from Russia, almost four times the number in 2005," said Wang Jinyu, Vice Mayor of Hunchun.

According to Wang, Hunchun does not have a substantial wholesale market targeting Russia. With the launch of the Eastasian Border Trade Center, Hunchun can develop into a big goods distribution center reaching all of Northeast Asia.

"With the approval of the Changchun-Jilin-Tumen Pilot Area, we try to build the Tumen River Region into a new growth engine in northeast China," said Han Changfu, Governor of Jilin Province.

The hopes are that the area's economic aggregate will double by the end of this year, Han said.

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