SinoInsight 1
On May 4, North Korea carried out a military “strike drill” to test “large-caliber long-range multiple rocket launchers and tactical guided weapons by defense units,” according to state mouthpiece Korean Central News Agency. North Korean leader Kim Jong Un personally directed the weapons test.
Hours after the North Korean weapons test, U.S. President Donald Trump tweeted: “Anything in this very interesting world is possible, but I believe that Kim Jong Un fully realizes the great economic potential of North Korea, & will do nothing to interfere or end it. He also knows that I am with him & does not want to break his promise to me. Deal will happen!”
OUR TAKE
1. Many analysts believe that the DPRK’s latest weapons test was Kim’s way of expressing unhappiness over stalled denuclearization talks. We believe that this is just one reason why the North Korean leader is resorting to military provocations (the third in recent weeks) again.
2. Kim has a greater need to reach a denuclearization deal with the United States soon to end sanctions and solve a growing food crisis in North Korea.
On May 3, a United Nations spokesperson noted that North Korea is facing a food crisis after the worst harvest in a decade. Four out of ten North Koreans are chronically short of food and ration cuts are expected.
In March, the UN reported that North Korea’s food production in 2018 fell 9 percent from 2017 to 4.95 million metric tons, the lowest level for over a decade. Meanwhile, attendance rates for the powerful Party committees and public security bureaus in the province of South Pyongan have dropped below 70 percent in light of serious food shortages, according to the Chinese language edition of Daily NK.
Per the characteristics of communist regimes, the DPRK has no qualms about sacrificing the masses for self-preservation. However, prolonged starvation will eventually become regime threatening when Party members are affected.
In light of North Korea’s food shortages, Kim’s recent military actions are tinged with desperation.
3. Both China and the U.S. are currently focused on trade talks. This means that both countries will have less energy to deal with North Korea. Kim may have been betting that the lull in great power attention to the DPRK would allow him to carry out weapons testing for internal propaganda purposes without being penalized.
Trump’s tweet about North Korea has confirmed that Kim can get away with small scale military provocations. We believe, however, that Kim will not dare to carry out nuclear weapons testing, including the firing of intercontinental ballistic missiles.
4. With Sino-U.S. trade talks seemingly heading into the final lap, Kim could be thinking that he is running out of leverage and opportunities to pressure both powers into giving North Korea favorable benefits in exchange for full denuclearization. Hence, Kim’s weapons testing serves to “remind” China and America that North Korea is still capable of mischief and that they should quickly “appease” the DPRK to avoid escalation.
5. We believe that Kim Jong Un was likely acting on his own accord, and not at the behest of the Chinese regime, with the latest weapons test. The Xi leadership would unlikely want to provoke the Trump administration or arouse suspicion over its intentions with the trade agreement (and the potential end of the trade conflict) nearly in sight. Thus, it would not make sense for Beijing to get Pyongyang to stir trouble at this stage.
SinoInsight 2
On April 29, China’s National Bureau of Statistics released a report on the monitoring of migrant workers in 2018.
According to the report:
- In 2018, there were 288.36 million migrant workers, an increase of 1.84 million workers (up 0.6 percent) from a year ago.
- The growth in the number of new migrant workers in 2018 was 2.97 million fewer as compared to 2017 (growth rate lower by 1.1 percent).
- Among the out-of-town migrant workers, 135.06 million went to work in the cities, or a decrease of 2.04 million (down 1.5 percent) from the previous year.
- Migrant workers aged 40 and below made up 52.1 percent of the migrant worker population, while 22.4 percent were older than 50.
OUR TAKE
1. The NBS report indicates that while the migrant worker population continues to grow, the pace of growth is slowing. Also, China’s migrant worker population is growing older and fewer are heading to the cities.
By comparison:
- There were 1.84 million new migrant workers in 2018 as compared to 9.83 million in 2012 (less 18.7 percent).
- Migrant workers over the age of 50 made up 22.4 percent of the migrant worker population in 2018 as compared to 14.3 percent in 2011.
- Migrant workers between the ages of 21 and 40 made up 49.7 percent of the migrant worker population in 2018 as compared to 55.4 percent in 2011.
- There were 2.04 million less migrant workers (down 1.5 percent) in the cities in 2018 as compared to a year ago.
This trend indicates that China’s demographic dividend has disappeared and the working population is shrinking.
2. China’s current demographic trends will eventually see middle- to low-end manufacturing jobs either move inland and away from the coastal regions or out of the mainland to countries in Southeast Asia where labor costs are lower. Over time, China’s manufacturing imports and exports will likely shrink. Meanwhile, the economies of coastal cities that are overly reliant on port activity and manufacturing will weaken in the long term, and property prices in those areas will inevitably fall.
