The Chinese yuan exchange rate has recently been rising against the North Korean won, stacking up losses for vendors at North Korean markets and endangering their livelihood, Daily NK has learned.
“Market vendors in Hyesan have recently been selling at a loss because of the rising value of the Chinese yuan. Most vendors receive products from wholesalers on credit, given their lack of capital, and then pay the wholesalers back in Chinese yuan after sale. But when the exchange rate shoots up, they end up losing money on the deal,” a source in Yanggang Province told Daily NK on Friday, speaking on condition of anonymity.
In fact, the KPW-to-RMB exchange rate at a market in Hyesan recently reached as high as KPW 1,800.
“Since product turnaround is slow, vendors have to use the higher exchange rate when paying wholesalers back for products they received at a lower exchange rate. That leaves vendors with a negative margin,” the source explained.
When the vendors are paid in Chinese yuan, they have no problem paying the wholesalers back regardless of exchange rate fluctuations. But when vendors are paid in the domestic currency, they have to apply the higher exchange rate when paying back wholesalers, which has been leading to losses.
Losses have been especially high for vendors selling sugar, condiments, and grains such as rice and corn.
“Since seasonings and grains are typically bought in small accounts using local currency, vendors don’t change money until they’ve sold a certain amount, which is when they repay the wholesalers for the product they received on credit. But if the exchange rate goes up a lot in the meantime, the vendors are left carrying the bag,” the source said.
As a result, vendors at markets in Hyesan are pushing customers to pay in Chinese yuan whether they are buying large or small portions and are charging customers who insist on paying in domestic currency KPW 1,900 per yuan, the source said. In other words, customers would have to pay KPW 38,000 for a product that would cost RMB 20 if they paid in Chinese yuan.
Customers already feeling the financial pinch are even less inclined to buy now that prices are going up. But with fewer people buying products, vendors’ very livelihood is now in danger, the source said.
Some vendors that have been using their proceeds to buy personal necessities instead of paying back their credit are getting harassed by wholesalers about their outstanding debt.
“Since business isn’t going well, some hungry vendors have been using their proceeds to buy food and other necessities and putting off their debt payments,” the source said, adding: “While they may be keeping hunger at bay, interest is accumulating and debt is piling up, which will ultimately leave them in an even worse bind.”
Translated by David Carruth. Edited by Robert Lauler.
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May 08, 2024 at 08:00AM
by DailyNK(North Korean Media)