By Jeremy Laurence
RAJIN, North Korea (Reuters) - Foreign media were given a rare glimpse inside a North Korean marketplace on Friday, and witnessed thousands of people exchanging cash for a wide variety of goods, as the secretive state experiments with modest change.
One of the world's most closed, centrally-planned economies, North Korea has embraced a semblance of free market trading in selected regions along its borders, including in the Rason Special Economic Zone in the far north at the China-Russia border.
"They can buy as much as they want," a North Korean guide told a group of about a dozen international journalists as he led them through the Rajin market. "You can buy in either Korean won or Chinese yuan."
The state's authoritarian leadership cracked down on market activity around the time of a failed currency reform about two years ago, but has since relaxed the ban, experts say, due to the strain on the moribund economy caused by international sanctions.
In June, within days of North Korean leader Kim Jong-il's return from his third trip to China in a year, Beijing and Pyongyang declared they would work together to make two new special economic zones (SEZs) work.
The second SEZ is in the west, at Hwanggumpyong island, near the Chinese city of Dandong.
Last month Kim again visited China, on his return from his first visit to Russia in nearly a decade, also as part of his secretive state's push to secure economic aid and try to entice investment in the port of Rason.
Chinese constructors are due to finish a new road from the border to the port this year, and Russia has nearly finished building a railway line to the port.
Beijing has encouraged the North to follow its path of "socialism with Chinese characteristics," or controlled capitalism, but analysts say that replicating such reforms would be suicide for North Korea's leadership.
The vast indoor-outdoor market in Rajin was built in 1997 by a Chinese company.
Zheng Zhenxi, a top official of the Tianyu Group that built the market in the heart of port town of Rajin, told reporters by the dusty road after the visit that he wants to expand it next year.
He could not say what stall holders were charged to lease a lot, or what commission was levied against their earnings. But he did say that haggling was allowed.
Zheng runs the same group that escorted about 100 Chinese businessmen and a group of foreign journalists around the Rason Special Economic Zone this week in a bid to woo foreign capital into the area, where the government has embraced a more liberal economic policy.
Diplomats say the markets are back up and running in the North but are strictly controlled.
The Rajin market looked like many markets in the Western world, overflowing with goods from rice and other grains, to all kinds of meats and even items such as sofas and cabinets.
The market was divided into different sections: food, clothing, home furnishings, electronics and children's toys.
There was a foreign exchange office, but it was closed. Zheng said yuan and Russian rubles could be exchanged there at the official state rate. U.S. dollars cannot be converted.
The market was a hive of activity, although the North Koreans were clearly surprised to see the chain of foreigners weaving through their stalls. The journalists were forbidden from taking any video or photographs, and from writing in notepads.
The stall holders, all wearing official badges, and customers eagerly encouraged buyers to part with their cash. A pair of black shoes were being sold for 75 yuan ($11.75), traditional communist style caps 20 yuan, while 5 doughnuts cost 1 yuan.
The traders cash bags were full of yuan currency, indicating they were doing brisk business.
($1 = 6.381 Chinese Yuan)
(Reporting by Jeremy Laurence; Editing by Alex Richardson)