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Networks, trust, and trade : The microeconomics of China-North Korea integration

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  • Networks, trust, and trade
  • Haggard, Stephan; Noland, Marcus
  • East-West Center


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Title Networks, trust, and trade
Similar Titles
Sub Title

The microeconomics of China-North Korea integration

Material Type Reports
Author(English)

Haggard, Stephan; Noland, Marcus

Publisher

Honolulu:East-West Center

Date 2012-06
Series Title; No East-West Center Working Papers/Economics Series / 129
Pages 34
Subject Country China(Asia and Pacific)
North Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Trade
Economy < Economic Administration
Holding East-West Center

Abstract

A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although we cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.