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North Korea imposed ‘loyalty funds’ on trade officials in China amid missile tests

North Korea ordered trade officials stationed in China to pay U.S. $3,000 in so-called “loyalty funds” by the end of July, which some sources in China said was likely an effort to offset at least part of cost for ballistic missile tests over the weekend.

The China-based trade officials are tasked with doing business with Chinese partners to earn foreign cash for their government, in some cases for leader Kim Jong Un’s personal slush fund. Occasionally the government will demand that they pay funds in addition to what their businesses earn for the government, effectively cutting into their own earnings.

The call for loyalty funds usually coincides with important events, a North Korean trade official in the Chinese city of Dalian, in the northeastern province of Liaoning, told RFA’s Korean Service Monday on condition of anonymity for security reasons.

“This is the third time the authorities have imposed a loyalty fund on us this year. The first and second time, though, trade had been partially open, so we could at least pay half of the fund,” the source said.

“This time it is not easy because China is on complete lockdown due to the coronavirus,” said the source.”

The North Korean economy is in shambles, partially because of the closure of the Sino-Korean border and the suspension of trade for essentially the first two years of the coronavirus pandemic.

Earlier this year rail freight resumed, but it was quickly shut down due to new outbreaks of COVID-19 in China. With no trade, it is difficult for the officials sent overseas to pay their loyalty funds, and they have come to resent it, the official in Dalian said.

“Trade officials are indignant that they keep imposing loyalty funds. We know through the internet that yesterday, once again, they tested ballistic missiles, this time eight from four locations,” said the source.

“We are well aware that tens of millions of dollars are spent to launch a single missile. But how many ballistic missiles have been launched this year? I can’t quite understand the behavior of the authorities, who waste foreign currency on missile launches and forcibly impose loyalty funds on us.”

South Korea’s Joint Chiefs of Staff said that the eight missiles were fired from four locations, including the Sunan area of Pyongyang into the sea east of the Korean peninsula.

RFA sources estimate that North Korea has sent around 1,000 trade officials to China, meaning that the loyalty funds imposed this time should bring in around $3 million, far less than the estimated cost of Sunday’s missile test.

Another trade official in Donggang, a port located close to the North Korean-Chinese maritime border, told RFA that the last time the government imposed loyalty funds, it was for a military parade in Pyongyang. That event later forced the government to acknowledge the virus after fever cases began to erupt among parade participants after they returned to their homes.

“Trade officials cannot disobey orders from Pyongyang, so some of us have had to borrow money from our Chinese counterparts to contribute last time,” the second source said.

“Because of that parade they ended up blocking train and maritime trade again, leaving us in debt. The complaints are pouring in because they are asking us to pay loyalty funds again,” the second source said. “They are squeezing more money out of us and wasting it on missile launches.”

Translated by Leejin J. Chung. Written in English by Eugene Whong.