Chinese investors are demanding that closed-circuit surveillance cameras be installed in Chinese-North Korean joint ventures operating inside North Korea to prevent workers from stealing materials and products that cause financial losses, sources said.

Chinese companies investing in North Korea say the installation of CCTV cameras in their facilities are a “critical factor in the success or failure of joint-venture businesses,” a source from North Hamgyong province told RFA’s Korean Service on Tuesday, citing an executive from North Korea’s foreign trade bureau.

As an example, the source, who declined to be named, said there was a “big fight” between a Chinese investor and local managers from a Chinese-North Korean joint venture in Chongjin, capital of North Hamgyong province and the country's third largest city.

“The investor suspected that there was an unreasonable amount of output compared to the amount of investment, and he claimed, based on recordings by security cameras, that the workers had been stealing products,” the source said.

As a result, the Chinese investor threatened to withdraw from the joint venture.

“North Korea, in need of foreign investors, tried to deal with the situation with judicial authorities, but they were put to shame because the investor presented the video footage as evidence,” the source said.

“The Chinese investor had been watching the joint venture’s production line via surveillance cameras with solar-powered batteries that aren’t affected by power outages,” he said. “Because the investor presented the video footage of the workers stealing products, the company manager eventually admitted stealing and apologized.”

“Workers who do not know about security cameras still steal raw materials and final products,” the source said. “However, it is mainly managers who steal more raw materials and products than workers.”

A second source from North Hamgyong province also told RFA on Tuesday that the pilfering of materials and products from inside Chinese-North Korean joint ventures is why new Chinese investors have made it a priority for firms to install security cameras.

“Old security cameras don’t work when there is power outage, so they are useless,” he said. “Workers and managers usually sneak materials and products out during power outages.”

Many investors in the past lost their investments and had to pull out of Chinese-North Korean joint ventures because their workers and managers stole products, said the source, who requested anonymity.

“Even if they operated security cameras for 24 hours, it would not be easy to completely prevent North Korean workers from stealing,” he said.

In the past, textile manufacturers in North Korea contracted to produce export-bound apparel for companies in China skimmed off raw material supplied by the Chinese during the production process and manufactured items such as coats, which they later sold at bargain prices in North Korea's tightly controlled black markets.

Commerce Ministry order

China’s Ministry of Commerce issued a notice on Sept. 27, 2017, ordering the closure of all existing joint ventures with North Korean firms in China and entities owned by North Korean companies or individuals, as part of new United Nations sanctions imposed on Pyongyang for its nuclear and missile tests.

The order also required overseas Chinese-North Korean joint ventures to cease operations, though firms approved by the U.N. Security Council’s sanctions committee, such as nonprofits and noncommercial infrastructure projects, could remain open.

The businesses were to shut down within 120 days from Sept. 11 of that year, the day on which the Security Council unanimously adopted the U.S.-drafted resolution to slap harsher sanctions on Pyongyang a week after the country conducted its sixth and largest nuclear test.

The ninth set of sanctions imposed by the Security Council on North Korea since 2006 also included a ceiling on Pyongyang’s crude oil imports, a ban on the country’s textile exports, and an end to contracts for additional overseas workers who generate much-needed funds for leader Kim Jong Un’s regime.

It is unclear how many Chinese firms have complied with the order from their government, an ally of North Korea which has long argued for a softer approach to Pyongyang and only reluctantly supported U.S.-led sanctions efforts.

Chinese entities have been repeatedly caught skirting or violating U.N. sanctions on trading oil, coal, and other commodities.

Reported by Jieun Kim for RFA’s Korean Service. Translated by Leejin Jun. Written in English by Roseanne Gerin.