North Korea’s foreign currency-earning units are scrambling for low-paying contract manufacturing work from China in October 2026. A prolonged crackdown on cross-border smuggling has wiped out one of their most important sources of hard currency.
These units are trading companies and enterprises run by state agencies, the military and the Workers’ Party of Korea. Each one must hand over an annual foreign currency quota to the Kim Jong Un regime. Many have long met those targets through a mix of official trade and under-the-table deals with China.
“Foreign currency-earning units have recently been working hard to bring in simple assembly and processing jobs from China,” a source in North Pyongan province told Daily NK on Oct. 22. “In the past, they picked and chose their work based on processing rates and contract terms. Now they are struggling to land even contract jobs that earn only about 3 yuan (roughly 40 cents) a day.”
The main driver is a long-running crackdown on informal trade along the North Korea-China border. The units once earned substantial income from smuggling on top of their official trade. Tighter enforcement by Chinese authorities has now effectively halted that business and badly disrupted their foreign currency earnings.
Chinese border patrol units have enforced a strict crackdown on cross-border smuggling since December 2025. The controls stayed in place even after U.S. President Donald Trump’s visit to China in May. Smuggling briefly resumed around March before Chinese enforcement forced another halt along the Jilin province border.
“With the money from smuggling cut off, the units that depended on that income have taken a direct hit,” the source said. “They need other ways to make money right away, but there are few options available to them. So they are turning to labor they can easily mobilize, and that means they have to cling to work orders even when rates are low.”
Under contract manufacturing, a North Korean unit signs a deal with a Chinese company and receives raw materials from it. Local workers then process the materials into finished goods, which the unit ships back to China. Wigs and false eyelashes made this way fall outside U.N. Security Council sanctions and rank among the country’s top exports to China.
Foreign currency-earning units see contract manufacturing as a quick way to generate income. Workers are relatively easy to find inside the country, and the units bear little of the cost of raw materials or equipment.
Haggling over rates now seen as a luxury
North Korean units once pushed back when Chinese companies offered low processing rates. Some trading companies even held out until Chinese manufacturers agreed to raise their rates by up to 10%. Units also flatly turned down orders they judged unprofitable, but that kind of bargaining has nearly disappeared.
“Before, they would ask for higher rates because the processing fees were too low, or they would pick and choose jobs,” the source said. “Now, even making that kind of demand is considered a luxury.”
Units that previously made relatively high profits from informal trade have also started chasing contract manufacturing work. That shift has made competition among North Korean organizations for Chinese orders increasingly fierce.
Chinese orders, however, have not grown along with demand for contract work inside North Korea. Many Chinese businesses had already grown wary of North Korean partners after missed delivery deadlines and broken contract terms. Some of the remaining work has also shifted toward prisons and state-run factories inside North Korea.
With few orders available and more units chasing them, North Korea’s foreign currency earners must now accept lower rates and worse terms from Chinese clients.
“Smuggling used to be very active in the border region, but the crackdown has shrunk it sharply,” the source said. “The units that lost that income are looking for replacement work, but it is not easy to find. With competition over contract jobs heating up as well, their profits are unlikely to improve anytime soon.”
This article was originally written in Korean and translated with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
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