More than half of North Korea’s total exports to China in 2024 were conducted under “outward processing” trade. This indicates that a significant portion of North Korean exports consists of goods manufactured under subcontracting arrangements for Chinese companies.
This growing dependence on original equipment manufacturing (OEM) suggests that North Korea has effectively become a low-cost supplier for China as it seeks to navigate international sanctions.
According to Voice of America on February 5, which cited Chinese customs data, North Korea’s total exports to China amounted to $347.35 million in 2024, covering 153 product categories exported to 16 Chinese provinces. Among these, $195.39 million, or 56% of all exports, were classified as outward processing trade, meaning North Korea assembled finished products using Chinese raw materials or components before exporting them back to China.
This represents a sharp increase from the previous year when outward processing accounted for 49% of North Korea’s exports. The trend highlights how North Korea’s economic reliance on China is deepening amid strict international sanctions, which have cut off many of its traditional revenue streams.
One of the most striking examples of this manufacturing shift is the surge in North Korea’s exports of wigs and wristwatches. In 2024, North Korea exported 13.69 million wristwatches to China, but each watch was sold at an average price of just $0.11.
Similarly, wigs became North Korea’s largest export category, accounting for $180 million in revenue last year. However, data also revealed that North Korea imported $168.89 million worth of raw hair from China, indicating that its role in this trade is primarily processing Chinese materials into finished products and exporting them at low prices.
This increased reliance on outsourced manufacturing coincides with the gradual expansion of international sanctions on North Korea. In 2016, before full-scale UN sanctions were implemented, only 3% of North Korea’s exports to China were classified as outward processing trade. However, as restrictions tightened, the proportion rose to 5.7% in 2017, 25% in 2018, and 56% in 2024, surpassing half of all exports for the first time.
The rapid growth of this trade raises concerns about potential violations of U.S. sanctions, particularly in the case of wigs and other processed goods. Given that China imported 2,620 tons of wigs from North Korea in 2024, but has a relatively small domestic market for wigs, analysts suspect that many of these products were re-exported to global markets, including the United States.
This could mean that North Korean-made products are being labeled as “Made in China” and entering supply chains in countries that have banned imports of goods made with North Korean labor.
As North Korea continues to face restrictions on its exports, it appears to be increasingly reliant on OEM manufacturing for Chinese companies as a way to sustain its economy. This shift is turning North Korea into a low-cost production hub for China, raising questions about the broader implications for international supply chains and the enforcement of global sanctions.
BY YOUNGNAM KIM [kim.youngnam@koreadaily.com]
