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Special> China International Fair For Investment & Trade> Beijing Review Exclusive> Trade
UPDATED: August 3, 2009 NO. 31 AUGUST 6, 2009
Crossing the River
Frontier trade with Russia gives the Chinese border town of Heihe a taste of prosperity

While China whets Russia's appetite, as it does to much of the globe, with a variety of good-quality and low-priced consumer goods ranging from plastic toys to leather bags, Russia is bristling with rich resources in oil, timber and electricity.

After years of torrid growth, more than 500 trade companies in Heihe recorded a total frontier trade value of $2.9 billion in 2008, according to data from the local government's commerce bureau. The town's population has increased at an amazing rate in recent years as entrepreneurs from surrounding cities and the south flock to take advantage of thriving cross-border businesses that originated with small barter trade.

Russian tourists are also part of a new economy that has transformed the northeastern corner of China into a buzzing trading post. On January 1, 2004, Chinese authorities declared the entire town a free-trade area, allowing Russians to enter and stay there without visas for 30 days, drive their own cars, make duty-free purchases, and even buy real estate.

"I come here quite often these years as the Chinese goods are diversified and more affordable than in our country," Roman Pavlov, a shoe wholesaler from Blagoveshchensk told Beijing Review, in broken English.

Merchants like Pavlov may come for the economic goods, but they stay largely because life here is easy and comfortable. "I do not feel like I'm living in a foreign country," he said, adding that he bought a three-room apartment near the market in 2007.

Indeed, Heihe does feel like a second home for many Russians. Splendid Russian-style architectures are everywhere and sign boards of all department stores and supermarkets are carved in both Chinese and Russian languages. Even the salesmen and taxi drivers can speak fluent Russian. On cool evenings, Russian men and women dance to music at a sprawling new square along the river bank.

Bumpy road ahead

Yet, a few issues still hang over the border town that may afflict its ability to further prosper. In comparison with other border ports like Suifenhe that has rail ties to Russia, the river transport of Heihe is obviously less efficient and more costly. Discussions between the two countries about building a cross-border rail bridge has been going on for years, but have not yielded any results.

Domestically, part of the railway connecting Heihe and Harbin, the provincial capital, is operated by the local government that mandates a much higher freight than the Ministry of Railways, making the port less attractive to domestic traders. Besides this, Russian regulators have been opaque with their trade policies, and tend to take protectionist measures at the expense of Chinese exports.

On top of these uncertainties came the sweeping global financial crisis. The deep downturn and a free-fall in international commodity prices put the Russian economy in a tight spot, sending demands for Chinese products plunging. Worse still, a sharp depreciation of the Russian ruble made Chinese exports even less competitive.

The financial contagion came as a heavy blow to border trade though domestic supportive measures more or less provided some respite, said Liu Xiyu, an official with the local commerce bureau, to Beijing Review.

"It may still take some time and more policy moves before the trade economy passes the worst times." he added.

As the financial crimp rippled through the Russian Far East, even Chinese traders had no place to hide. Among the victims was Heihe Shunxing Trade Co. Ltd., one of the largest private trade companies in the province. Every year it transports quantities of bananas from tropic Hainan Province, apples from Shandong Province, as well as locally grown potatoes, cleaning, packing and adequately storing the produce before trucking them to Russian buyers. In 2008, the trading company logged a total trade value of more than $50 million. The amount so far this year was barely $20 million as orders slowed to a trickle.

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