This paper aims to estimate time-series data of China's direct investments on North Korea from 2000 to 2015. In order to achieve such a goal, problems of official and unofficial reports related to the subject are presented first. Then, original estimates are drawn by utilizing firm-level overseas direct investment data and proxy variables.
The estimation process starts from aggregation of data appeared in all press releases and earlier studies. A basic analysis on collected items suggests that China's ODI on North Korea has continuously increased from 2004 to 2012, except for a brief period around Pyongyang's second nuclear test in 2009. Investments seem to enter a downturn after the third test in 2013. Such a trend matches the one suggested by China's Ministry of Commerce(MOFCOM) by and large; however, there was a big difference between the two in volume and trend of ODI from 2004 to 2005. Therefore, some revisions are needed to obtain reasonable time-series data.
This paper suggested the first stage estimates by matching former data of Chinese firms to newly obtained lists. The number of samples is almost doubled even after filtering out flawed ones. Based on a more reliable set of data, estimated amount of China's investment on North Korea after 2000 is 759.98 million dollars total. This estimate is 1.74 times larger than figures reported in MOFCOM, implying that a significant portion of ODI turns out to be unrecorded especially during 2005-2007.
In order to further include unofficial investments, the second stage estimates are presented by constructing a proxy from bilateral trade data. For example, since a large part of unreported investments take the form of barter trade, North Korea's mining facilities imports from China are likely to indicate a similar trend with Chinese ODI on DPRK mines. North Korea's own demands, deduced from government spendings data, are subtracted. The final result implied that investments not reported to MOFCOM are even more; estimated total flows are 1001.16 million USD, about 2.42 times than official figures. It is highly probable that most of the missing parts are barter-like ones, and such a type of ODI are still prevalent.
The above results offers a new insight on North Korean regime's rate of foreign exchange earnings. If the rise in DPRK's exports of natural resources after 2000 is mainly driven by barter-like investments from China, actual foreign exchange earnings are much lower than increments from the export surge. Considering that primary products induce only a minor inter-industrial effect and investments last a short term, the conclusion of this paper resulted in a slow recovery of North Korean industries despite normalization of mines after mid-2000s.