Workers assemble an advertising board on the Chinese side of a special economic zone straddling the mainland and the Democratic People's Republic of Korea, in Dandong, Liaoning province, on Friday. [Photo/China Daily]

DANDONG, Liaoning - A free-trade area and a tax-free zone will be set up as part of the first special economic zone straddling the mainland and the Democratic People's Republic of Korea (DPRK), a Chinese government official told China Daily.

Dai Yulin, secretary of the Dandong committee of the Communist Party of China, said the area will help boost foreign direct investment, turning the zone into a hot investment destination.

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In early June, China and the DPRK agreed to build three special economic zones to enhance China-DPRK economic and trade cooperation and promote economic relations with the rest of the world.

A free-trade area of 20,000 sq m will be established on Hwanggumpyong Island, an undeveloped DPRK island adjacent to China's border city of Dandong, Liaoning province, where a tax-free zone of 10 sq km will be set up.

"Hwanggumpyong Island and Dandong city will become the hot ground for investors worldwide, as vast business opportunities exist on the island, DPRK's first open zone where international trade projects related to the DPRK will be developed," Dai said.

He said both domestic and foreign investors have shown great interest in joining the economic zone.

"Projects in sectors of marine engineering, special steel, colored steel and car audio will soon settle in Hwanggumpyong Island and Dandong city," he said.

Those economic zones will be followed by development of the Rason and Wihwa Island economic zones.

According to Li Wei, an economist from Standard Chartered Shanghai, establishing these zones will have a positive impact on the economies of both the DPRK and China's northeast region.

"Prosperity in the DPRK will help stabilize the economic and political situation in the Asia-Pacific region," he said.

Companies are also expressing their interest in the DPRK.

"We can grasp more investing opportunities in both the Hwanggumpyong zone and the DPRK, as more business laws and market regulations are set up to complement the international economic environment in the DPRK, which is still in its infancy in terms of attracting foreign investment," said a permanent delegate at China Aerospace Beijing Changfeng Co Ltd's Pyongyang office, who declined to be named.

The DPRK announced it would open up to the outside and promote local economic growth after leader Kim Jong-il visited China from May 20 to 26, signaling Pyongyang's approach to studying China's development and attracting more Chinese investment.

"Pyongyang is now increasing its efforts to develop the economy. Kim's visit helped promote the construction of the highway connecting China's Hunchun city and Najin in the DPRK and a new bridge across the Yalu River, projects which can help attract more Chinese investment to the DPRK," said Hu Mingyuan, an assistant research scholar with the Center for Northeast Asian Studies, a research institution in Jilin province.

"We expect to see details about rules and regulations tailored for the special economic zone and the free trade zone. A stable investment environment is the most important thing," said Zhang Xiaoji, senior researcher at the Development Research Center of the State Council.