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  • Justin V. Hastings and Yaohui Wang

Why do Chinese traders along the China–North Korea border turn to informal trade, and what does it provide for them? Using a unique set of interviews with Chinese formal and informal traders operating in North Korea, we argue that the strategies of informal trade are a calculated response to certain types of risk. In doing so, we introduce a typology of risks and the mechanisms by which informal trade allows traders to mitigate those risks. Because informal traders bypass trade regulations and border checkpoints, they are able to mitigate risk more cheaply than formal traders in some cases and can overcome barriers that can cause failure in formal trade. Informal traders can thus maintain trade in many circumstances, including across North Korean personnel instability and policy reversals, Chinese sanctions enforcement, and delays and smuggling crackdowns on both sides of the border.

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