"Chinese currency being circulated in North Korea is widely used as the local currency," claims a Korean-Chinese herb trader who has been to the North recently. According to him, the yuan of China is being used without any restriction not only in the border area, but also in marketplaces in the Chongjin area, North Hamgyong Province.

For foreign-goods storeowners in Pyongyang and provincial cities and black market money dealers operating in the border area, the yuan is said to have become as popular as American dollars and Japanese yen. In the border area, in particular, the yuan enjoys much wider circulation than dollars and yen, in part because its possession, in quantity, unlike American dollars, does not invite suspicions from the authorities. One holding a large sum of dollars is liable to cause a suspicion of having some links with the West.

The yuan has gained strength in the North, spiraling from NKW10 to 1 yuan in the early 1990s to the current NKW25 per yuan and its popularity is attributed to marketplaces flooded with Chinese merchandise.

In 1997 North Korea permitted the use of US dollars and Chinese yuan in the Rajin-Sonbong free trade zone, and from the following year the yuan currency was openly used at foreign-goods stores and quality restaurants across the country.

Formerly, foreign currencies themselves could not be used in the North; they had to be exchanged into foreign-exchange coupons. Currencies of the Western countries used to be exchanged into blue foreign-exchange coupons, and those of socialist countries into red ones. Red coupons were good only for purchasing food, while blue ones were required for buying quality goods.

This system designed to strictly control the flow of foreign currencies has now become little more than a mere name. Dollars, yen and yuan are freely used anywhere in the North.

This cannot but be a paradoxical phenomenon as North Korea, which has maintained an extremely closed system under the name of a self-supporting economy, appears to have turned into a country allowing the freest use of foreign currencies. There is hardly any other country in the world that permits the use of foreign currencies as freely as North Korea.

The widespread use of foreign currencies indicates that the North; a country adopting a planned socialist economy; has failed to guarantee the livelihood of its citizens, and that consequently the people themselves have begun to look to their own devices, which in turn, has resulted in expanded marketplaces. This vividly shows the contradictions of the North Korean system.

(Kim Chol Hwan, nkch@chosun.com )