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China-Japan-Koreas
More financial transactions in NK done in Yuan
2014-03-21
An exclusive Daily NK report that even low denomination transactions in North Korean markets now regularly take place in foreign currency rather than the country's own Korean People's Won (KPW) offers fresh evidence of the grave threat that hard currency usage poses to North Korea's fiscal sovereignty.
A fair bit of this is occurring right under the noses of the NK Party leadership. The time is coming when these guys are going into a common grave, and news like this suggests (to me) that that time isn't so far off.
According to internal North Korean sources, in recent times transactions have started to take place entirely in Chinese Yuan (RMB). When 100 Yuan is presented in payment, the transaction is computed at the daily black market exchange rate and change is then provided in 10 and 1 Yuan bills. This is a new development; previously, it was the absence of small denomination bills and coins that precluded completing transactions in hard currency.

According to sources nearer Pyongyang, payments for private tutoring in English and Chinese in the capital are also frequently paid for in foreign currency, notably U.S. Dollars. Back on March 11th, Daily NK also reported that payment for trips by "servi-cha" or private bus are also being done in hard currency in the modern era.

The cause of these changes is clear. Ever since the North Korean authorities implemented an economically ruinous flash currency redenomination on the morning of November 30, 2009, the public's preference for foreign currency holdings has grown all the more intense, and the value of the KPW has gone into concomitant deep decline.

Reviewing this slow but steady push for more and more hard currency transactions, South Korean experts declare it a grave threat to the fiscal sovereignty of the North Korean state. The problem is not merely the 2009 currency redenomination, they say; evidence of fiscal incompetence and widespread malfeasance on the part of the authorities becomes clearer with every economic policy that fails to take off. Popular suspicion of domestic currency increases in lockstep, and the desire of people to hold hard currency grows.
Posted by:Steve White

#1  Well, the NORKS just need to start counterfeiting the Yuan.
Posted by: Alaska Paul   2014-03-21 00:07  

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