May 25, 2009
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On Russia's frontier with China, traders feel chill

May 25, 2009

KHABAROVSK, Russia, May 22 (Reuters) - Irina Tursana, selling shoes on a market stall in this Russian border city, owes her livelihood to a Chinese employer. But the Russian's feelings about the Chinese influx is mixed, to say the least.

"I'm concerned that, in 10 or 20 years, they'll want to take this territory. In our souls, we don't like each other," she said, out of her boss's earshot. "They smile to your face but they'd stab you in the back."

Russians in the sparsely-populated Far East of their country, seven time zones east of Moscow, have in recent years flocked to buy the cheap manufactured goods brought across the frontier by Chinese traders, or even, like Irina, to work for them.

But they have remained deeply suspicious of the trend. And now global economic crisis is causing it to falter for perhaps the first time in a decade.

Irina is selling high-heeled shoes at slashed prices because Russian customers can now scarcely afford them.

"This pair cost 1,000 roubles last year but now they're only 500," she said. "Prices have dropped because demand has gone."

The economic slowdown is pushing Russia into its first recession in a decade and is bad news for some 2,000 Chinese traders who bring their goods across the border to the sprawling market on the edge of Khabarovsk.

Trade between China and Russia, forecast to reach between $60 billion and $80 billion annually by 2010, is being disrupted. On Russia's eastern edges, where the two countries exist in uneasy proximity, relations are strained by both economics and a yawning cultural gap.

"For us, trade has been very bad since the end of last year. The drop in the value of the rouble against the dollar has made imports more expensive and Russian people have less money because of the crisis," said Chan Tseluk, a Chinese fur trader. There are few clues the market where she works, only 30 km (19 miles) from the Chinese border, is in Russia.

Chinese men gather round a mahjong board and ferry boxes on handcarts along narrow alleys between stalls selling everything from fishing tackle to hubcaps. Few signs are in Russian.

Chan, originally from the northern Chinese city of Harbin, said traditional demand for her fur -- designed to withstand winter temperatures of 40 degrees Celsius below zero -- had vanished. Traders in less expensive goods agreed.

"I don't want to stay here, because business is not good," said Wang Maoan, who arrived across the border a year ago.

China is Russia's second-largest trading partner after the European Union. Chinese exports constitute nearly one-tenth of Russia's total imports and bilateral trade between the countries reached $48 billion in 2007 -- a sevenfold rise since 1996. The neighbours hope to widen economic ties through the "BRIC" grouping -- Brazil, Russia, India and China. Energy-hungry China is keen to secure access to Russia's minerals and timber.

China Development Bank agreed this year to lend Russian oil firms a combined $25 billion in return for enough crude to last 20 years. Russia is now building a pipeline spur to deliver this oil from new Siberian fields to the border. Khabarovsk region itself, Russia's fourth-largest by territory, produces gold and timber and hopes soon to be selling the Sukhoi superjet passenger plane on the world market.


In the other direction, China sells clothing, shoes and household goods to Russian consumers. But these customers have less free crash, and trade is less profitable since the rouble lost a third of its value against the dollar. "We're certainly feeling the effects of the crisis. Less people are coming to the market and I'd say that, in general, they are buying less," said Yevgeny Naumets, director of the market, which serves the 600,000 citizens of Khabarovsk.

The market, more than 6,100 km (3,800 miles) from Moscow, has grown dramatically in size since it first opened 15 years ago. While there are still some black market imports, these have and continue to be cut, said Naumets, a former tax policeman.

He said about 2,000 Chinese people worked at the market, but added: "It's hard to put an exact figure on it, because they're always coming and going."

Naumets may live and work with Chinese people, but speaks no Chinese and has only crossed the border twice. Many of the Chinese traders speak some Russian and live full-time in Khabarovsk, crossing the frontier regularly to bring back goods.

Russia's Far East has just 6.7 million inhabitants but covers 6 million sq km, more than a third of the country's entire territory. In contrast, nearly 60 million of China's 1.3 billion population live across the Amur river in the northern province of Heilongjiang.

This disparity, coupled with the historical enmity between the two countries and recent Chinese pollution of the Amur river, fuels underlying suspicion among Russians.

"The people coming here from China only want to take our money at bad prices. I want better quality and lower prices," said Vladimir Ivanov, 32, from Khabarovsk.

The coolness between the two nationalities is mutual.

Chinese traders make it clear they are in Russia for business, and most are uncomfortable about talking in detail about their lives in Russia.

One, who gave only the Russian name he uses, "Andrei", said he mixed more with fellow Chinese and immigrants from Kyrgyzstan and Uzbekistan than with Russians.

"We're here to work, but if you employ a Russian, they will only work for three days and then start drinking. We like it when people work," he said.

By Conor Sweeney
(Editing by Robin Paxton and Andrew Roche)

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