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Two Koreas, One Yuan? China to Play Key Role in Korean Economic Unification

© AP Photo / Ju PengIn this photo provided Wednesday, March 28, 2018, by China's Xinhua News Agency, North Korean leader Kim Jong Un, left, and Chinese President Xi Jinping shake hands in Beijing, China.
In this photo provided Wednesday, March 28, 2018, by China's Xinhua News Agency, North Korean leader Kim Jong Un, left, and Chinese President Xi Jinping shake hands in Beijing, China. - Sputnik International
On April 27, South Korean President Moon Jae In not only shared a handshake and verbal discussion with North Korean leader Kim Jong Un as they met in demilitarized zone between their two countries - he also handed his fellow leader a USB drive that held South Korea’s proposal for a “New Economic Map of the Korean Peninsula.”

An article in the "Panmunjom Declaration," the name given to last month's historic summit, proposes connecting and upgrading rail and road systems. Many of those systems will also ensure that the entire Korean Peninsula becomes more seamlessly linked with China — and Russia — according to a new report by the South China Morning Post.

Reportedly, a rail link would connect Mokpo, a southwestern town, with Seoul and Pyongyang and eventually Beijing. The first of those belts would link the west side of the Korean Peninsula with China; another would connect the east coast to Russia for the exchange of energy; and one along the demilitarized zone for tourism. 

South Korean officials have been quiet on the topic and declined to give details of the drive's contents, SCMP notes. Park Byeong Seug, a member of Moon's ruling Democratic Party of Korea, said the proposal adheres to policies Moon outlined in his seminal July 6 "Berlin Speech."

"The concept of the three belts was one of President Moon's pledges during the election last year," Park said. "The new economic map includes railway links between the two Koreas and China's northeast stretching all the way to Europe." 

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"My government will work towards drawing a new economic map on the Korean Peninsula," Moon said last year at the speech in eastern Berlin, once the Communist-aligned capital of East Germany before their reunification in 1990. The decision to hold it there was interpreted as a possible symbolic affront to previous South Korean leaders who held similar speeches in western Berlin, which remained capitalist-aligned through the Cold War. "We will freshly connect the South and the North, where it has been disconnected by the military demarcation line, with an economic belt and establish an economic community where the two Koreas prosper together," the new leader promised, if "appropriate conditions are met." 

"South and North Korea will prosper together as a bridging country connecting the Asian mainland and the Pacific… Then the world will see a new economic model of an economy of peace and co-prosperity," Moon said.

Cheng Xiaohe, deputy director at the centre for international strategic studies at Renmin University, told SCMP that Beijing could try to work the Korean plan into their own multi-billion Belt and Road Initiative, through which China seeks to establish trade routes connecting the Far East to India, Europe and East Africa. Cheng added that China's northeast "has been China's weakest link and seen poor economic development for years. A rail link could make a real difference to the region." Other experts say a rail connection would transform the region into an East Asia logistics hub attractive to overseas investors. 

The Belt and Road Initiative

But before all that, "you have to merge currencies and how you count," Thomas Hoenig, a former official at the US Federal Deposit Insurance Corp, told Yonhap News Agency, a South Korean state-funded outlet. "It may not be the first thing on the agenda. But as the financial industry develops, it almost necessarily has to be."

Tim Beal, author of "Crisis in Korea: America, China and the Risk of War," told Radio Sputnik's Loud & Clear Friday that the economic aspect of the Panmunjom Declaration is among the most interesting. "I think that economic integration has a real prospect of ensuring that peace stays in place," he said, adding, "the entire region stands to gain if this goes in that direction."

However, economic reunification, or even normalization, remains extremely difficult for North Korea, as Western sanctions that are in place deter investment in the country. The United Nations may consider lifting those sanctions, as Kim has pledged to work toward completely denuclearizing the peninsula, which Moon premised his economic plans on as early as the Berlin speech in July.

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