Pritzker’s Chinese Partner in $1 Bil Deal Called Major Trafficker of N Korean Minerals

One of China’s biggest investors in US real estate may also be its leading trader in North Korean minerals, according to reports last week on Radio Free Asia, citing North Korean sources within China.

Wanxiang Group is the largest importer of a wide variety of North Korean minerals according to the report on Radio Free Asia, including having bought up the rights to all mineral exports from an entire province. The UN passed new sanctions banning trading in wide range of North Korean minerals in March of this year, including coal, iron ore, gold and rare earths.

The Zhejiang auto part maker, which through its US affiliate has purchased more than 60 properties in the US since 2010, is said to have signed import long-term import agreements with mining companies in North Korea, and is apparently among a number of Chinese companies actively involved in the cross-border metals trade.

Last year Wanxiang America entered into a $1 billion hospitality investment joint venture with a private equity firm controlled by Hyatt Hotel heir John Pritzker.

Although this most recent set of sanctions was supported by China, the resolution which came in response to renewed nuclear tests by the Kim Jong-Un regime, allowed substantial loopholes on enforcement according to experts familiar with the North Korean minerals trade.

Exclusive Rights to North Korean Minerals for the Next Decade

Citing an anonymous North Korean source, Radio Free Asia, which is operated by the US government, reported that Wanxiang has a monopoly on the import of minerals from North Korea’s Yanggang Province and also holds exclusive rights to importing from the country’s largest copper mine for the next decade. Several other large Chinese corporations were also said to be involved profiting from Korea’s reduced access to world markets by moving resources across the border into China.

The account of Wanxiang’s trading of North Korean minerals comes shortly after US officials had identified Dandong Hongxiang Industrial Development, a Chinese trading company based near the North Korean border as having handled more than one-fifth of the commerce between North Korea and China. No monetary value has been placed on Wanxiang’s alleged dealings in the North Korean minerals trade.

The Radio Free Asia report characterised little-known Hongxiang as a scapegoat for the activities of larger Chinese firms, and Chinese authorities have said they are conducting their own investigation of of the company after American authorities filed criminal charges against its owner. The US has stepped up economic and diplomatic pressure on North Korea in recent weeks after the Chinese ally conducted another nuclear test in early September. Reports in the last few days have analysts expecting an additional test this week.

Wanxiang Investing Billions in US Real Estate

Wanxiang’s dealings in North Korea indicate a growing global footprint for the company controlled by tycoon Lu Guanqiu. The mainland entrepreneur built a fortune estimated by Forbes at $1.87 billion by transforming Wanxiang from a farm implement producer into a major supplier for automakers including both Ford and GM.

For most US observers outside the car industry, Wanxiang appeared on the investment radar when it partnered with John Pritzker’s Geolo Capital to set up a $1 billion fund targetting US hotel properties in August last year. That glitzy hotel deal, however, came only after Wanxiang America had branched out from purchasing US auto part makers to acquiring real estate, at first near its Chicago headquarters, and later spreading out into other US locations.

Before entering the hotel deal, Ni Pin, the president of Wanxiang America indicated that the Chinese firm had purchased 60 US properties in the previous five years, including office towers, shopping centers, warehouses, homes, medical buildings and student housing.

Wanxiang, which is China’s largest automotive components company by revenue, has also been in the news for buying Danish entrepreneur Henrik Fisker’s bankrupt electric car company in 2014 and renaming it Karma Automotive. The Chinese firm relaunched the Fisker Karma hybrid sports car two months ago.

The US Justice Department has filed a civil suit against Hongxiang seeking to seize funds in 25 Chinese bank accounts controlled by the company after it was found to have exported banned materials to North Korea. No legal action has been reported involving Wanxiang or its affiliates for the alleged mineral trading.