China: How North Korea Was Lost

[Valin]

Strategy Page:

April 17, 2016:

 

While the Chinese government apparently tried to keep this quiet, Hong Kong media have spent weeks doing stories about high quality counterfeit Chinese currency showing up in China. This began in late 2015 and experts seem to agree that the most likely source was North Korea, which has been turning out similar high-grade counterfeits of American and Japanese currency for decades. In North Korea counterfeiting currency is a government monopoly. Since 2009 foreign (mainly Chinese and American) currency has been preferred in North Korea because the local currency is seen as worthless and unpredictable. The counterfeit Chinese 100 Yuan notes (worth about $13) began showing up in North Korea earlier in 2015 and moved into China via unsuspecting merchants and tourists. Officially the North Koreans deny any responsibility for the fake currency and always have. At the same time North Korea has openly said it will strike back at China for enforcing UN economic sanctions. North Korea has long considered counterfeiting currency as a weapon. China is now blocking essential (in terms of obtaining foreign currency) North Korea exports like coal and iron ore. Imports of aviation fuel are also blocked since early April. To North Korean leaders, counterfeit Chinese currency helps balance the books.

 

The Chinese anti-corruption campaign continues, which is making a lot of senior officials nervous. That’s because no one obeys all the regulations and laws. That started in the 1980s when the senior leaders told key officials to do whatever they had to do to get the economy going under free market rules. At that time (and to a certain extent today as well) China was technically a communist command (centrally planned) economy. So many leaders who are (as far as they can tell) not corrupt are now going by the rules in all things and suddenly a lot of economic development is not happening. The government is under pressure to make it official that China is no longer a communist state (at least in terms of its economy) and revoke all the unused (since the 1980s) laws and replace them with ones that legalize a free market economy. The government is unwilling to do that because many key leaders still like the illusion that China is a communist state. Meanwhile some banking officials continue to exploit this ambiguity to make China the center of global money laundering. This sort of thing is technically legal in China as long as no Chinese laws are broken. Foreign laws don’t count, that’s the communist way.

 

(Snip)