A sweeping Chinese crackdown on cigarette smuggling has brought North Korean companies’ lucrative tobacco operations to a virtual standstill, forcing them to scramble for alternative sources of foreign currency.
A Daily NK source in China said recently that several companies involved in smuggling cigarettes to China, including the Korea Sinhung Trading Corporation and Amrokgang Tobacco Company, have experienced “terrible chaos, with their Chinese sales cut off or export totals drastically reduced since Aug. 3.”
The chaos is directly tied to a crackdown on illegal distribution of North Korean cigarettes by China’s State Tobacco Monopoly Administration and Chinese police. Chinese authorities have recently carried out a series of arrests of Chinese traders who distributed North Korean cigarettes through unofficial routes in China’s border regions, including the border cities of Dandong, Liaoning province, and Hunchun and Changbai, Jilin province.
According to the source, the State Tobacco Monopoly Administration — which manages cigarette production and distribution in China — had long planned intensive crackdowns and harsh punishments on unlicensed cigarette distribution, and smuggled North Korean cigarettes were no exception.
Alongside on-site busts, Chinese authorities have tracked distribution channels through delivery companies like SF Express and ZTO Express. In particular, Chinese authorities have collected personal information of people who send or receive unlicensed North Korean cigarettes and arrested them on illegal distribution charges.
For example, a Chinese trader surnamed Wong who imported contraband cigarettes to distribute to markets in Kuandian county, Dandong, has undergone questioning since his arrest late last month. He has been fined and had his illegal profits confiscated.
N. Korea seeks alternative revenue sources
Faced with such circumstances, Chinese traders involved in smuggling North Korean cigarettes have stopped dealing with North Korean companies and suspended unofficial distribution of the contraband cigarettes.
A source in North Korea familiar said that activities to earn foreign currency through cigarette smuggling “run into trouble as Chinese traders quit the business all at once whenever a single incident occurs.” He added that North Korean trading company officials are having a “really tough time because their superiors are pushing them to secure markets and prevent disruptions in their foreign currency plans.”
With the distribution of North Korean cigarettes collapsing due to the Chinese crackdown, North Korean trading companies and trade officials have begun looking for items other than cigarettes that would allow them to continue their foreign currency-earning activities.
Meanwhile, on the ground in China, merchants who used to import contraband North Korean cigarettes say the latest crackdown has been much more sweeping and prolonged than the last one in April, and that traders now view North Korean cigarettes as a risk rather than an opportunity.
The source in China said that if North Korean companies continue to depend on exports through unofficial distribution networks, “their foreign currency income through cigarettes will plummet,” and that the very basis of activities to earn foreign currency through cigarettes “could weaken in the mid-to-long term if the state doesn’t change its strategy.”
