North Korea’s Economy Leans on China: Chinese Yuan Outpaces North Korean Won in Markets

A survey of North Korean defectors revealed that the Chinese yuan circulates more in North Korean markets than the North Korean won. Compared to before Kim Jong Un took power, the usage of yuan in the markets has surged almost five times, indicating that North Korea’s economy is increasingly dependent on China. Amid economic difficulties, negative perceptions of Kim’s power succession and the hereditary rule of the “Mt. Paektu bloodline” exceed 50%, indicating growing dissatisfaction with the regime.

The Ministry of Unification announced these findings in a report on the perception of North Korea’s economic and social conditions. The results came from one-on-one surveys of approximately 6,300 defectors conducted by professional researchers and research institutions over ten years. This information, which was previously classified as a third-degree secret, was disclosed for the first time.

According to the report, since Kim Jong Un took power in 2012, the currency used most in North Korean markets was the Chinese yuan, accounting for 57.9%. This is a significant increase from the 12.2% before 2011, indicating that more yuan is circulating in North Korean markets than the North Korean won (36.4%). The report explained that in the 2010s, following the failure of North Korea’s currency reform in 2009, trade with China became active, resulting in increased sales of Chinese products and, consequently, expanded use of the yuan.

The phenomenon of foreign currency acceptance in North Korea is more outstanding when looking at it with five-year time frames. Before 2000, the yuan accounted for 6.4%, and the North Korean won for 81.6% of the currency circulated in the markets. However, between 2011 and 2015, the yuan accounted for 50.2%, and the North Korean won for 44.2%, with the yuan surpassing the won. Between 2016 and 2020, the gap widened, with the yuan accounting for 68.4% and the North Korean won for 25.7%.

Furthermore, since the 2010s, the use of the U.S. dollar has been increasing. Before 2010, less than 1% of respondents chose the dollar as the main currency for market transactions, but this figure grew to 2.6% between 2011 and 2015 and 5.2% between 2016 and 2020. Especially in Pyongyang, where the top officials are, the share of dollars in circulation reached 32.7%. A Ministry of Unification official explained, “We understand that the border areas use yuan due to smuggling, and Pyongyang primarily uses dollars for bribes, leading to the spread of foreign currency usage.”

Negative evaluations of the regime among North Korean residents are also on the rise. Among those who escaped from North Korea between 2016 and 2020, only 29.4% believed that the “Mt. Paektu bloodline ruling system” should be maintained while living in North Korea. This is a sharp decrease compared to the 57.3% of defectors who escaped before 2000.

The number of respondents who said they were “against maintaining the Paekdu bloodline ruling system before defection” also varied by the time of defection, from 22.7% before 2000 to 53.9% in 2016-2020. The number of people who believed Kim Jong Un’s succession was not legitimate also increased from 47.9% between 2011 and 2015 to 56.3% between 2016 and 2020. The Ministry of Unification stated that while the dissatisfaction among defectors may differ from the overall public opinion in North Korea, the number of residents dissatisfied with the legitimacy of the hereditary rule is increasing.

Meanwhile, it was revealed that North Korea’s distribution system virtually collapsed after the severe economic difficulties in the mid-1990s. Among defectors after 2016, 26.8% reported receiving food rations, while 72.2% did not. Even among those who reported receiving food rations, only 39.4% received them regularly.

The chronic lack of infrastructure, such as food and electricity, was also severe. The average daily home electricity supply was recorded at 4.3 hours, and 69.7% of residents were found to be heating their homes by collecting wood themselves. The healthcare system was also effectively collapsed, with 39.6% of respondents reporting no medical treatment experience.