North Korea and China finally reached an agreement at the end of last year to jointly develop the Rajin-Sonbong special economic zone in the far northeastern edge of the isolated country, it emerged on Wednesday.
The zone is seven times larger than the Kaesong Industrial Complex (65.7 sq.km), the site of inter-Korean economic cooperation.
The agreement entitles China to develop three new piers and grants it the right to use them for 50 years. According to the source in China's Jilin Province, the deal was inked in the second half of last year.
The ground-breaking ceremony for the development project was held last June with North Korea's Jang Song-taek, vice chairman of the National Defense Commission, and China's Commerce Minister Chen Deming in attendance. But as the two sides disagreed over certain legal details of the investment, the agreement was not finalized until the end of last year, the source said.
China will reportedly invest US$3 billion to build infrastructure there such as railroads, power plants and other facilities by 2020.
"It is uncertain just how much Chinese companies will be interested in the special economic zone at this moment due to the poor infrastructure there," said Yoon Seung-hyun, a professor at China's Yanbian University.
"However, once construction begins following an influx of Chinese investment, investors from Hong Kong will probably head there in search of cheap labor."