Before fleeing North Korea in 2014, Jeon Jae-hyun kept U.S. dollars as a store of value and used Chinese yuan to make everyday purchases at markets, restaurants and other places. He used the domestic currency, the won, only occasionally.
“There were not many places to use the won, and we actually had little faith in our currency,” Jeon said during a recent interview in Seoul. “Even the quality of North Korean bills was awful as they often ripped when we put them in our pockets.”
North Korea has tolerated the widespread use of more stable foreign currencies like U.S. dollars and Chinese yuan since a bungled revaluation of the won in 2009 triggered runaway inflation and public unrest.
The so-called “dollarization” helped ease inflation and stabilize exchange rates, enabling leader Kim Jong Un to establish a stable hold on power after he inherited that role in late 2011. But the trend poses a potential threat to Kim as it has undermined his government’s control over money supply and monetary policies.
The isolation of the pandemic badly hurt the North’s economy but still gave Kim a chance to solidify social controls by restricting market activities and limiting influence from capitalist, democratic South Korea. Now, observers say Kim is trying to roll back use of the dollar and yuan to tighten his grip on power as the North grapples with pandemic-related hardships, longstanding U.N. sanctions and tensions with the U.S.
“He has no other choice but to strengthen the command economy as he’s been locked in confrontations with the U.S. while maintaining a border shutdown,” said Lim Eul-chul, a professor at Kyungnam University’s Institute for Far Eastern Studies in Seoul. “The current direction of the North’s economy is controlling markets in a stronger manner so there are still limits in demands for dollars.”
It’s unclear what Kim would do, since banning use of dollars and yuan could backfire by just confusing and angering the public, experts say. North Koreans are likely resisting attempts by authorities to take their foreign currency given the low level of public trust in the government’s economic policies, said Choi Ji-young, an analyst at Seoul’s state-funded Korea Institute for National Unification.
The shift to using dollars and yuan came amid economic turmoil and a famine in the 1990s that crumbled the state rationing system, prompting the emergence of capitalist-style markets.
The 2009 revaluation of the won led to even wider use of foreign currencies. To try to reassert control over nascent markets, authorities limited the amount of old bills that citizens could exchange with new North Korean won, wiping out much of their household savings. Realizing the local currency was unreliable, many began storing their savings in dollars and yuan.
Jeon, a former official from the northern North Korean city of Hyesan, had two boxes of North Korean won notes totaling 2 million won at his house in 2009, about what it would cost then to buy 60-80 smuggled, second-hand Japanese TVs. Most of that money became worthless since the authorities only allowed residents to exchange up to 200,000 won (about $60-70 at the time) per household in old bills for new money.
“My money was all gone. I was extremely frustrated and embarrassed but couldn’t do anything in protest,” Jeon said. “I saw many people crying and heard others fled to South Korea.”
The yuan has since become the most-used and preferred currency for savings in areas near the North’s border with China. The dollar has emerged as the most saved currency and the second most-used currency after the won in southern regions, according to surveys of defectors.
Jeon said he used the yuan to buy clothes, rice and other daily necessities, eat out or pay bribes to bosses. Most of his savings were stored in yuan and dollar bills. He kept a small amount of North Korean won for occasions like donating money to village campaigns to support military units.
Paek H.O, who defected from the northeastern North Korean town of Musan in 2018, said she used the yuan to buy expensive goods and the won for cheap items such as sodas, vegetables and bread sold at markets. About 50 professional money changers operated in Musan, she said.
“Using foreign currency is officially illegal but few ran into troubles or got arrested for using it,” said Paek, 47. She asked that her first name be identified using initials, citing worries for the safety of relatives in North Korea.
There are two exchange rates for the won — an artificially high one set by the government and another set by the market that experts say more clearly reflects actual economic conditions in the country.
The won had stabilized at around 8,000 per dollar since 2012-2013 but suddenly sharply strengthened in 2020 when North Korea sealed its borders to guard against COVID-19. According to North Korea monitoring groups, the won was trading on the street at about 6,700-7,000 per dollar in late 2020; 4,600-7,200 in 2021; and 5,200-7,500 in the first half of 2022. Later in 2022 it dropped back to about 8,000 won per dollar.
The won’s value soared during the pandemic likely because demand for dollars and yuan fell due to the border closures and tighter controls on use of foreign currency. Such controls appear to have been enforced inconsistently though a lack of information from the secretive North makes it virtually impossible to get clear details.
Jeon said his relatives in Hyesan told him in phone calls that they weren’t allowed to use foreign currency in 2021 but could last year. Paek said her sisters in Musan told her last year that they were using the yuan.
Kang Mi-Jin, a defector who runs a company analyzing North Korea’s economy, said people in nearly 20 regions across North Korea voluntarily stopped using foreign currency in 2021 during a campaign against “anti-socialist elements” due to worries about possible punishment. Citing her contacts inside North Korea, Kang said the North Koreans also held onto foreign currency as a safe haven.
The return of exchange rates to pre-pandemic levels likely reflects revived demand for foreign currency amid speculation North Korea might soon lift its COVID-19 restrictions. But many experts say less foreign currency is in circulation and the government is likely intervening to control exchange rates in markets.
“Dollarization can’t be a long-term government policy as it’s like relinquishing sovereignty over monetary policy, though it’s still true that it helped the North’s economy stabilize and grow for the (earlier) years of Kim Jong Un’s rule,” said Lim Soo-ho, an analyst at the Institute for National Security Strategy, a think tank run by South Korea’s spy agency.
He said Kim’s government is likely “very carefully” examining whether to fully reopen the borders since an abrupt, full-fledged resumption of imports would push the value of the dollar against the won sharply higher, making imported goods more expensive.
Son Kwang Soo, an analyst at the Seoul-based KB Research in Seoul, said the North may be trying to keep the exchange rate in a narrow band of around 8,000 won per dollar.
Defectors say an attempt to end use of dollars and yuan would likely just cause chaos.
“Kim Jong Un will eventually leave `dollarization’ as it used to be. If he bans the use of foreign currency by ordinary citizens, the country’s monetary circulation would be disrupted,” Kang said. “My contacts in North Korea told me it’s even hard to find some North Korean bills now.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
