North Korea Razes Unofficial Market .

By EVAN RAMSTAD

SEOUL -- North Korea closed the country's biggest unofficial market in June, a South Korea-based organization that tracks economic activity in the North learned this week, a significant step in a government effort to slow the spread of market activities there.

An estimated 30,000 small business were believed to be operating in the market in Pyongsong, on the outskirts of the capital city of Pyongyang, according to Network for North Korean Democracy and Human Rights, or NKNet. Merchants there sold items such as food, clothes and Chinese-made goods.

The market is apparently the latest to fall victim to a government antimarket effort that began in 2005 and accelerated last year. The effort has been openly resisted by many North Koreans and posed a challenge for dictator Kim Jong Il's government as he reasserted authority this year after apparently suffering a stroke a year ago.

Separately, Mr. Kim told an envoy of Chinese President Hu Jintao on Friday in Pyongyang that he is willing to hold diplomatic talks in bilateral and multilateral forums about North Korea's pursuit of nuclear weapons, the Chinese news agency Xinhua reported.

The statement is the latest in a series of signals by North Korea that it is ready to return to the bargaining table with China, the U.S. and other countries after engaging in a series of provocative actions, including the test of a nuclear explosive, this year. North Korea since the early 1990s has cycled through a pattern of provocation, negotiation and deal-breaking with other countries that want it to end its nuclear program.

The North Korean government intensified its spending on its military and weapons in the 1990s as a multiyear famine ended its control over food supply and other key parts of the economy. Ordinary citizens began trading food and goods themselves, leading to the rise of an unofficial market economy that was tolerated by the government until 2005.

In that year, the government tried to force most adults out of markets and into jobs run by the state. Last year, the effort intensified with an announcement that all general markets would converted to food-only markets that open once every 10 days.

The conversion attempt has failed, according to organizations and analysts in South Korea, as traders and refugees who are able to get to China have reported that sizable markets remain open in most towns and cities.

NKNet for much of the year has gathered and reported contradictory news about the fate of the Pyongsong market, which grew to such a large size because it was accessible to both residents of Pyongyang and people from the outlying provinces who aren't permitted into the capital city.

This week, the organization reported that it had learned from people who are able to leave North Korea to do business in China that much of the market was demolished in June. "Since we have now have word from several sources, we are confident the reports are reliable," says Park Jin-gul, who edits English-language reports for the organization.

A provincial secretary declared the market "serves no benefit to society" since profits are kept by individual entrepreneurs, NKNet reported. Two smaller markets have formed in Pyongsong since June but many merchants are selling and trading from home.

Lim Soo-ho, a specialist on North Korea market activity at Samsung Economic Research Institute in Seoul, said authorities have long targeted the Pyongsong market because Kim Il Sung, North Korea's founder and the father of Kim Jong Il, sought to build a park there before his death in 1994.

"North Korea has tried to close the market several times," Mr. Lim said. "This time, some guy with a lot of power from the central authority pushed the closing and he succeeded."

Write to Evan Ramstad at evan.ramstad@wsj.com