Orders return to North Korea’s contract manufacturing sector, but earnings lag
North Korea’s contract manufacturing sector, known as imga-gong (processing-on-commission work), is showing tentative signs of recovery in 2026 after years of near-total collapse following the COVID-19 border shutdown. But growing order volumes from Chinese partners have not translated into re
Daily NK
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North Korea’s contract manufacturing sector, known as imga-gong (processing-on-commission work), is showing tentative signs of recovery in 2026 after years of near-total collapse following the COVID-19 border shutdown. But growing order volumes from Chinese partners have not translated into real earnings gains for North Korean trading companies, according to a Daily NK source in North Pyongan province.
Orders for wigs, bead crafts, and knitted goods have increased noticeably this month, the source said Thursday, with some Chinese businesses now expanding operations by establishing production bases inside North Korea rather than simply placing cross-border orders. The uptick has raised hopes that the imga-gong market, a key source of hard currency for both state enterprises and individual traders before the pandemic, may finally be regaining momentum.
Stagnant rates squeeze trading companies
The optimism, however, runs up against a stubborn structural problem: unit prices have barely moved.
Negotiations over pricing have been ongoing between North Korean and Chinese counterparts, and some upward adjustments have been made. But the source said the increases fall well short of what trading companies need to turn a meaningful profit. “The volume is back, but the unit price is basically the same as before, so it’s hard to make money,” the source said. “Because profits aren’t growing, the burden of payments to superiors just keeps piling up.”
Shipping costs have added further pressure. Freight rates have risen from 4 Chinese yuan (roughly $0.55) to 5 yuan (roughly $0.70) per kilogram, a modest increase that nonetheless eats directly into already thin margins. Taking both factors into account, people familiar with the trade say net earnings have actually declined compared to peak pre-pandemic levels.
Trading company officials describe the situation in stark terms. Outwardly, they said, business looks active. In practice, when transport costs, operating expenses, and mandatory payments to state-affiliated superiors are factored in, real earnings have shrunk. “It looks like things are moving, but we’re actually earning less,” one official was quoted as saying.
State control seen as root cause
Within trading company circles, frustration is increasingly directed at state interference. Officials point to two specific constraints: restrictions on independent activity by private traders, and government involvement in pricing negotiations that reduces flexibility in deal-making with Chinese partners.
The prevailing view among those working in the sector is that if individual traders were allowed to deal directly with Chinese buyers and set prices according to order volume, profitability would improve. The current system, in which state entities act as intermediaries and set the terms of trade, is seen as the primary obstacle.
“If the government relaxed controls and let individuals take orders from China and run imga-gong operations on their own, the market would be a lot more active,” the source said. For now, some trading companies are finding consolation in the simple fact that work has returned. But the underlying tension between rising volumes and flat or falling earnings shows no sign of resolving without structural reform to North Korea’s trade governance.
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