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Sun, 13 Aug 2017 11:21 - Updated Sun, 13 Aug 2017 11:21

North Korea factories humming with 'Made in China' clothes, traders say

DANDONG - Chinese textile firms are increasingly using North Korean factories to take advantage of cheaper labor across the border, traders and businesses in the border city of Dandong told Reuters.

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The clothes made in North Korea are labeled "Made in China" and exported across the world, they said.

Using North Korea to produce cheap clothes for sale around the globe shows that for every door that is closed by ever-tightening U.N. sanctions another one may open. The UN sanctions, introduced to punish North Korea for its missile and nuclear programs, do not include any bans on textile exports.

"We take orders from all over the world," said one Korean-Chinese businessman in Dandong, the Chinese border city where the majority of North Korea trade passes through. Like many people Reuters interviewed for this story, he spoke on condition of anonymity because of the sensitivity of the issue.

Dozens of clothing agents operate in Dandong, acting as go-betweens for Chinese clothing suppliers and buyers from the United States, Europe, Japan, South Korea, Canada and Russia, the businessman said.

"We will ask the Chinese suppliers who work with us if they plan on being open with their client -- sometimes the final buyer won't realize their clothes are being made in North Korea. It's extremely sensitive," he said.

Textiles were North Korea's second-biggest export after coal and other minerals in 2016, totaling $752 million, according to data from the Korea Trade-Investment Promotion Agency (KOTRA). Total exports from North Korea in 2016 rose 4.6 percent to $2.82 billion.

The latest U.N. sanctions, agreed earlier this month, have completely banned coal exports now.

Its flourishing textiles industry shows how impoverished North Korea has adapted, with a limited embrace of market reforms, to sanctions since 2006 when it first tested a nuclear device. The industry also shows the extent to which North Korea relies on China as an economic lifeline, even as U.S. President Donald Trump piles pressure on Beijing to do more to rein in its neighbor's weapons programmes.

Chinese exports to North Korea rose almost 30 percent to $1.67 billion in the first half of the year, largely driven by textile materials and other traditional labour-intensive goods not included on the United Nations embargo list, Chinese customs spokesman Huang Songping told reporters.

Chinese suppliers send fabrics and other raw materials required for manufacturing clothing to North Korean factories across the border where garments are assembled and exported.

Australian sportswear brand Rip Curl publicly apologized last year when it was discovered that some of its ski gear, labeled "Made in China", had been made in one of North Korea’s garment factories. Rip Curl blamed a rogue supplier for outsourcing to "an unauthorized subcontractor".

But traders and agents in Dandong say it's a widespread practice.

Manufacturers can save up to 75 percent by making their clothes in North Korea, said a Chinese trader who has lived in Pyongyang.

Some of the North Korean factories are located in Siniuju city just across the border from Dandong. Other factories are located outside Pyongyang. Finished clothing is often directly shipped from North Korea to Chinese ports before being sent onto the rest of the world, the Chinese traders and businesses said.

North Korea has about 15 large garment exporting enterprises, each operating several factories spread around the country, and dozens of medium sized companies, according to GPI Consultancy of the Netherlands, which helps foreign companies do business in North Korea,REUTERS.

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