In a country where telephones are considered a security risk, a few citizens even drive their own cars—a privilege previously reserved for high-ranking officials—while along the borders, some use smuggled Chinese-made mobile phones and Chinese cellular networks to arrange business deals with partners in China and South Korea, according to North Korean traders and defectors. The North continues to be plagued by chronic shortages of everything from food to fuel to electricity. But an entrepreneurial class is developing, news from the outside world is filtering through, and expectations of a better life are rising. "This is exactly what was happening in the Soviet Union in 1989" before it collapsed, says Leonid Petrov, a North Korea expert at the Academy of Korean Studies in the south of Seoul. "Nobody believes in the old socialist ideology anymore—they believe in money."

Of course, it's impossible to gauge just how extensive and entrenched the mercantile ethic has become. But anecdotes from those who live in Hoeryong suggest the reforms accelerated changes that have quietly been gathering momentum for years as North Koreans looked for new ways to survive. Park, the trader, is a woman in her late 30s who started selling cigarettes and medicinal herbs in the mid-1990s to supplement her meager government handouts.

On a recent trip, she went to China to sell salted fish bought with money she borrowed from relatives, intending to return with a truckload of clothes and TVs. Japanese models sell especially well. "Color," she says, "and the bigger screens, the better." This is hardscrabble, black-market work, and Park must be careful that she isn't caught or cheated. "If you don't use your head right, you lose everything you have," Park says. "But if you have five Chinese yuan (about 60¢), you can double them."

Park says demand for her goods is strong. North Korea experts and aid workers say less than a third of the country's nonmilitary factories are still running. Almost all the electronic products and other manufactured goods on sale in the North come from China, along with more expensive luxury goods from Japan and South Korea, according to North Korean traders. Outside Pyongyang and a few other big cities where the élite still get government rations, the majority of the inhabitants in urban centers can now buy almost everything they need from officially sanctioned markets. Says Hwang, an architect turned trader who visits Hoeryong regularly: "Nothing comes from the state anymore."

For a growing proportion of Hoeryong residents, say those interviewed by TIME, the central marketplace provides a livelihood. Transport services and cottage industries are springing up to keep the market supplied with items such as baked goods, candy and moonshine. More sophisticated forms of commerce are developing too. It's illegal to sell your government-supplied house, but informal real estate brokers will put buyers and sellers together for a fee, say traders and North Korea watchers. A small bribe is usually enough to persuade a city-hall bureaucrat to change the name on your residence permit. In a country with no consumer-banking system, selling your house is one way to raise money to get into trading. Another option: the local loan shark, who charges interest of up to 30% a month (he'll demand furniture or real estate as collateral). Need a car? Private car ownership is illegal; however, people can buy a nice secondhand Japanese sedan on the black market. Those who can afford to can protect their enterprises and their private belongings by paying off officialdom through large "patriotic" donations to the government.

Park isn't yet rich enough to buy protection. But she says she owns a Japanese color TV, a stereo and a VCR. She's got a Chinese-made generator to run the appliances when the power grid fails, as it does regularly. She eats fish and white rice and, on holidays, meat, which is a luxury for most North Koreans. And she can afford to frequent the new restaurants and karaoke rooms that have opened in Hoeryong recently. She has no plans to leave her homeland. "I'm happy," she says.

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