The Unexpected Rise of North Korea’s Economy

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1:41Bloomberg Audio Studios, podcasts, radio, news. North Korea's economy is one of the smallest and most isolated in the world. But right now, it's growing fast. South Korea's central bank estimates North Korea's economy grew for a third straight year in 2025. That's despite international sanctions aimed at limiting the regime's access to money. And signs of North Korea's newfound prosperity are all over the country's capital. The transformation on Pyongyang streets is remarkable. The city's skyline has been transformed. The streets used to be empty, and now you have traffic jams. There are more privately owned Chinese vehicles.

2:27Kat Barton is Bloomberg's Seoul bureau chief. She covers the Korean peninsula and says it's not just the economy that's booming. North Korean leader Kim Jong-un is also having a moment. Kim Jong-un's presence is particularly notable. It is his first foray into international diplomacy since it came into power. Last year, he was invited by Chinese President Xi Jinping to attend a military parade in Beijing to mark the 80th anniversary of the end of World War II. You've got Kim Jong-un and Vladimir Putin front and center on the right and left-hand side of President Xi. The imagery is very, very striking.

3:05It's all part of a remarkable turnaround for North Korea. And for Kim, who spent much of his 15 years in power grappling with challenges from international sanctions to global isolation. Then there were the failed talks with President Donald Trump over Kim's nuclear weapons program in 2019. Kim was broke. Kim was humiliated domestically because he'd staked political capital on this deal and this meeting with U.S. President Trump. The North Korean economy had been completely hammered by sanctions. The Western powers had come together to block North Korea's ability to export. They didn't want Kim Jong-un to be developing his nuclear weapons program.

3:47And then you had the COVID-19 pandemic. And at that point, they sealed their own borders. And so all the trade that they had had with China just ground to a halt. At the time, it looked like the sanctions were doing exactly what they were supposed to do, keeping North Korea weak and dependent on outside help. Today, Kim is anything but that. Over the weekend, President Donald Trump posted a throwback photo of him with Kim in 2019 and alluded to their bromance. I understand him. He understands me. You're doing war games. I get along with him. You know, he didn't like Biden. And in a win for Kim, Trump directed the Pentagon to substantially reduce joint military exercises with South Korea.

4:33Trump's been frustrated with Seoul for not providing more support for the Iran war. He said the drills were costly and sent an inappropriate signal to North Korea. In the last few years, Kim's also gotten cozy with Russia and China. Now he's got tens of billions of dollars in new cash flow and little reason to compromise with any of his enemies. Kim doesn't have any incentive at the moment to come back to the negotiating table. He has money. He has diplomatic backing from Russia. He's had Xi Jinping visit him in Pyongyang earlier this year. He's not in a position where he needs to cattow to Washington.

5:14So the idea of using these sanctions as a means of squeezing him to force him to give up his nuclear weapons is just not realistic at this stage.

5:28This is The Big Take Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever-shifting region. Today on the show, North Korea's unexpected comeback. How did one of the world's most sanctioned countries start raking in billions? And what happens when a pariah state finds a way to flex its power?

6:03In 2020, North Korea was in dire straits. The COVID-19 pandemic forced the country to shut its borders and cut off trade with China, its largest economic partner. That pushed it deeper into isolation. At the same time, poor harvests were fueling a growing food crisis. It was a very, very difficult period for North Korea. And then it was compounded over the course of 2020 by a series of bad harvests, bad flooding, weather issues, you know, that soldiers had had to go and rescue people. Bloomberg's cat Barton says conditions had deteriorated to the point where Kim Jong-un appeared on state television and offered a rare public apology.

6:49Kim made this very emotional apology to his people, saying that he regretted that he hadn't, as leader, hadn't been able to improve their quality of life and shed a tear on state TV. But if 2020 marked the low point of Kim's rule, the years since have brought about a remarkable turnaround. Today, money is flowing into the country from new and unexpected places. So we have crunched the data on this, and it could be as much as 22 billion U.S. dollars that Kim has earned in the last four years. Now, just for context, the North Korean economy was about$34 billion in 2025. So it's a huge amount of money.

7:35And it's four times the amount of money that Kim had earned in the preceding four years from that. And interestingly also, none of this windfall is aid. The North Korean economy has typically always been reliant on some degree of aid. And he's not receiving that anymore. Kat says the single biggest source of money flowing into North Korea today comes from Russia. Vladimir Putin's invasion of Ukraine in 2022 offered Kim an unlikely lifeline. As Moscow burned through its supply of munitions, it turned to Pyongyang for a rare source of artillery from the Soviet days. It was like he won the lottery.

8:15He discovered that he had exactly what Russia needed after Putin invaded Ukraine. For decades, Kim Jong-un's own security strategy had been conventional artillery bombardment of Seoul. And Kim had this huge stockpile of weaponry that he was planning to use for that purpose. However, in the intervening years, he's obviously developed nuclear weapons. So that conventional artillery, the ammunition, was not actually as essential to his own defenses as it used to be. South Korea's intelligence agency estimated was about now more than 30 ,000 container loads of weapons have gone to Russia. And they've also deployed around 16 ,000 troops.

8:55So the Russia-specific section is estimated to be about 14 billion. And of that, 90 % is due to the war, the military relationship between the two countries. Kat says the payoff for North Korea isn't just financial. In 2024, Russia and North Korea signed a mutual defense pact, committing to come to each other's aid if either country was attacked. They also deepen ties in military, trade, and investment. Russia's war with Ukraine has given the prior country and its leader something more valuable than money, military knowledge, battlefield experience, and access to advanced technology. Now, with help from the Russian military, he has been able to launch warships.

9:45He has got technology on those warships, air-to-air missiles, which seemingly is coming directly from the Russian military relationship. So he is getting this kind of technical know-how, technical expertise. The Ukrainian intelligence agencies told us that they believe that North Korea is producing drones in factories in North Korea that are then being used. That level of knowledge is something that also goes beyond just a financial value, right? It absolutely makes them a far more dangerous fighting force. They now have soldiers who have experience in modern drone warfare, which South Korean soldiers do not.

10:23But Russia's need for military support isn't the only factor driving North Korea's fortunes. Rising tensions between Washington and Beijing have given China a reason to keep North Korea close. China is probably not thrilled about North Korea having nuclear weapons. They were not particularly happy when North Korea decided to become the only third party in the world to intervene directly in the Russia-Ukraine war. But at the same time, China is locked in this ongoing trade tension with the United States and they need North Korea. They need them to be a buffer zone. It's very convenient. They do not want North Korea to collapse.

11:02And as a result, they're prepared to pay for it to help keep them afloat. That steady support is showing up in the numbers. Trade between China and North Korea has been climbing. In the first half of the year, trade reached$1.5 billion, its highest level since international sanctions were imposed in 2017. That's more than 20 times the level during the pandemic. Kat says publicly, China tries to maintain compliance with the United Nations sanctions regime. Since 2006, the 15-member UN Security Council has slapped a series of economic sanctions on North Korea for developing nuclear weapons. And the U.S., the EU, South Korea and Japan have expanded their own sanctions in 2022 in response to North Korea's increased missile testing.

11:51So if you look at the China trade data, it's quite bizarre because a lot of it is things like winks, it's false eyelashes. Those things are not sanctioned. Officially, wigs and false eyelashes make up the bulk of what China imports from North Korea. But there are also reports of sanctioned items, like coal, that make it across the border. A lot of what is happening is that the raw materials are exported to North Korea, for example, human hair. then North Korean workers who are paid far, far less than Chinese workers are doing the hard work of gluing these false eyelashes or preparing the wigs and whatever.

12:30And then the finished products are exported back to China. And then there's a third source of income that's outright criminal. Cryptocurrency theft. North Korea is home to some of the world's most successful cyber criminals. Hacking groups tied to Pyongyang are now responsible for more than 70 percent of global thefts. Last year alone, hacking groups associated with or sponsored by the North Korean government stole$2 billion worth of crypto. There's a South Korean lawmaker who is actually a North Korean defector himself. He used to work on the weapons of mass destruction programs. And he told me once when I interviewed him that the recruiters would come to the schools and they would take the top one or two students.

13:13they would go to the hacking programs. The next top students, they would go to the weapons programs. So it's even above the pursuit of nuclear weapons, according to this defector-turned-South Korean lawmaker. And what we've seen in the last decade is that a global uptake of crypto, a global usage of crypto, has accelerated and spread. And there's not that much being done to stop them, to be honest. What's striking is that much of this money never actually enters North Korea. When we talk about this 14 billion that Kim Jong-un has earned, when we talk about the 2 billion that hackers have stolen, he's not getting bags of cash in Pyongyang, right?

13:50That money is being laundered largely through Chinese organized crime networks. And the North Korean regime is then getting access to clean bank accounts of yuan or maybe even USD that they can then use outside of North Korea to buy what they need to bring, whether it's gizmos for their weapons programs, whether it's grain, cooking oil, coal, whatever they need to buy to bring back in. they can do that. The money doesn't ever come back to North Korea, but it's still serving the regime very, very nicely from outside the country.

14:27After the break, we find out what Kim's doing with all this wealth. And what does his newfound strength mean for North Korea's neighbors and the U.S.?

14:44Quick one before you jump back in. You're listening for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. ChatGPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in ChatGPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using ChatGPT for Work. Download the ChatGPT desktop app or contact sales to learn more. Hey there, everybody. Amy Robach and TJ Holmes here from the Amy and TJ podcast.

15:23With midterm elections just around the corner, we're breaking down the biggest political stories leading up to November. And some of those big political stories aren't just what's happening on Capitol Hill. Yes, we just saw Lindsey Graham, the death of a longtime senator. Also, we've got a couple of missing members of Congress. Also, we got a lot of members of Congress behaving badly. We got accusations, allegations flying all day long on Capitol Hill. It's just like a reality show. We're going to cover everything you need to know during this heated political season. And it starts with our morning run.

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16:39It's raw. I knew that the issue of transgender athletes was not going well with a lot of black men. Roland Martin unfiltered. I went off. I said, this is exactly what I'm talking about. Y 'all gonna scream at Chanel, but you don't want to see a black luxury company in the same vein. Catch Roland Martin's daily commentary on the Black Information Network. 12 seats, those are moving south. So if you Democrats, you don't wait to 2030, you better be hitting the ground going hard in the south now. And download Roland Martin Unfiltered on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

17:28Inside North Korea, there are clear signs that the country is becoming richer. While most journalists haven't been permitted to visit the country since the pandemic, some tour groups are allowed in. Bloomberg's Kat Barton says a tour guide she spoke to says Pyongyang, the country's capital, has been transformed. You can even see the changes from space. The issue for North Korea is that they just didn't have that much electricity outside of the capital. So at night, there was just this black spot between China and South Korea that was not illuminated. But you can see visibly in the satellite images over the last four years, that has improved significantly in Pyongyang, but also elsewhere across the country.

18:12Kim Jong-un has repeatedly touted his construction projects. And it does indeed appear to be the case that they are building large numbers of homes. They are building factories. there has been a kind of domestic construction boom that is starting to change not just Pyongyang, the capital, but even other smaller cities outside of that capital. Trade data suggests that North Koreans, especially the elite in Pyongyang, are already spending more. In June, North Korea imported more than a million dollars worth of sports and leisure products, from ping pong balls and water skis to video games and fitness equipment.

18:50But for governments in Seoul, Washington, and Tokyo, the real concern is what's happening inside North Korea's military. The most important thing, according to the United States Forces Korea, which is the body that oversees the U.S. military presence in South Korea, is the battle-hardened soldiers have come back from the Ukraine conflict. And they have experience, they have expertise in modern drone warfare. You've also seen, as a result of this military relationship, that Kim has been able to kind of compress his weapons development timelines. So things that maybe used to take months, years, have been improved in efficiency.

19:30What the Ukrainian military told us also is that they've seen the quality of the munitions used in the battlefield in Ukraine has improved. The North Koreans are not just copying, you know, a simple Russian ballistic missile, but they're actually improving it. They're doing it their own way. Now the focus seems to be more on just building out that conventional capacity, which gives him far more options across the board and makes them far more dangerous for South Korea and for the United States. So then really, is there any incentive for Kim Jong-un to actually come back to the negotiation table to talk about anything?

20:05Not right now. I think one of the other interesting things recently has been that for Kim, He would have looked at Venezuela. He would have looked at Iran. And he would have thought, well, I feel quite vindicated in my decision not to give up those nuclear weapons. Because from the North Korean perspective, had Iran already got a nuclear weapon, no way would they have been attacked as they were earlier this year. What do you think is the biggest implication of this stronger, wealthier North Korea for its neighbor, just for South Korea, but also for its relationship with other neighbors around the region, China, Japan?

20:43For China, North Korea is obviously a useful buffer zone. For South Korea, this has fundamentally changed the nature of the relationship between the two countries. In the last couple of years, Kim Jong-un, officially, both countries before, were always theoretically committed to unification. And they both kind of in their constitutions laid claim to the entire Korean peninsula. But Kim Jong-un a few years ago got rid of that and said, South Korea is an enemy state. It's our principal enemy. We will never unify. You know, they tore up the roads, they tore up railways that had connected the two countries.

21:19And they've really hardened their line. In South Korea, in contrast, we have a far more traditionally dovish party in power now. The Democratic Party and Lee Jae-myung are traditionally far more open to outreach, to offering aid, to engagement with North Korea. But all of their efforts have been rebuffed. And the fact that Kim is in this stronger than ever position, flush with cash, with a more developed and serious, credible army than he's ever had before, has really put him in a much stronger position. And China certainly has no incentive to push him at this stage to negotiate. So as far as we can tell, it looks like the Kim regime is set to continue for some time to come.

22:00Now, what we're seeing so far is that both North Korea and Kim Jong-un, we've had a reversal of fortunes, right, because of Ukraine. What happens if the war in Ukraine ends tomorrow? You know, has Kim fundamentally changed North Korea's standing in the world? He's managed to successfully milk the opportunity, for sure. If and when the war stops, the money will stop. Because Russia will no longer need cheap ammunition. It will no longer need ballistic missiles. It will no longer need North Korean soldiers. But the more important longer-term aspect is for sure the relationship with China. China has always traditionally been the benefactor.

22:40And China, as I say, will not allow North Korea to collapse. If the Ukraine war stops, he will have that relationship with Beijing to fall back on. And maybe it would be possible at that stage to ramp it up. It seems as if Kim has managed to, in some ways, permanently alter North Korea's trajectory. It is still an incredibly poor country. And it is still a very repressive country. We know even less about it now than we used to. partly because as a result of the COVID pandemic, the border has hardened to the point that you just do not get defectors escaping in the same way that you used to. But it does seem that the domestic controls remain obviously extremely close.

23:26I mean, it's a police state, so it's a very difficult place for people to live. And although the regime, the country is in a stronger position geopolitically, it still struggles with its economy. Is this windfall necessarily going to be transformative? Are they going to have done enough to keep them afloat into the future? There could be lean years ahead for sure.

23:54This is The Big Take Asia from Bloomberg News. I'm Wan Ha. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you liked the episode, make sure to subscribe and review The Big Tech Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

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25:37Here's what you missed. People wake up and go, oh, damn, wait a minute, hold up. They changed all of that? Yes. It's real. This is a wholesale attack. It is targeting black people in every federal agency. It's raw. White folks have never allowed that reckoning to last more than a decade. Catch Roland Martin's daily commentary on the Black Information Network. And download Roland Martin Unfiltered on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.