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China, North Korea to open border trade zone in October

BEIJING (Reuters) - China and North Korea will open a border trade zone in October, Chinese state media said on Tuesday, the latest effort to boost economic ties despite tension between the countries.

The Guomenwan trade zone in the northeastern Chinese city of Dandong, in Liaoning province, will be opened during a trade and tourism expo, the official Xinhua news agency reported, citing city officials.

Xinhua said the zone has a “total investment” of 1 billion yuan ($156 million), though it was not clear exactly what that figure referred to, and would enable residents living within 20 km of the border to trade with each other and get certain tax free benefits.

Previous attempts to set up free trade zones, part of Chinese efforts to coax North Korea into economic reforms, have mostly foundered due to lack of investor interest and fears over doing business with a country under United Nations sanctions.

North Korea’s isolated and small economy has few links with the outside world apart from China, which has been a key partner for decades and remains the North’s main trading partner and sole influential diplomatic ally.

But ties have been strained by North Korea’s banned nuclear programme, which has triggered the U.N. sanctions on the North.

As relations between China and North Korea have become strained in recent years, China has grown closer to South Korea, Asia’s fourth-largest economy and the North’s main rival.

Reporting by Ben Blanchard; Editing by Jacqueline Wong