On the other hand, reliant on good relations with the government, these companies were able to apply high taxes on goods with low tax rate values, thus greatly shortening the time needed for transactions and shipping.

Consignors once enjoyed great convenience—by paying customs clearance companies, they were able to clear all procedures quickly. The consignors were also at a disadvantage, provided only part of a duty-paid certificate, or even no certificate, by the clearance companies, hence the term "gray" customs clearance.

This put them into the unenviable position of facing various government inspections and possible economic losses. Therefore, this is an internal situation unique to Russia. It not only leads to a loss of government tariffs, but also endangers the economic benefits of Chinese merchants and other enterprises. It also hinders the healthy development of China-Russia non-government trade, too.

Since 2000, the recovery and growth of Russia's economy, along with the advancement of its market-driven system establishment, has been coupled with a powerful crackdown on gray customs clearance.

After Vladimir Putin became prime minister, on multiple occasions he advocated reinforcement of customs control and the abolition of gray customs clearance. Last year, the breakout of the global financial crisis and the fall in oil prices threw the Russian economy into turmoil again. Russia's official statistics show that from January to June of 2008, Russia's GDP dropped by 10.1 percent.

Since the beginning of the financial meltdown, gray imports have since taken up a larger part of total import volume—a sharp increase to 13 percent from January to May 2009, up from 8 percent from January to August 2008. Currently, severe economic situations and collapsing incomes once more make the gray customs clearance, well known for its low tariffs, an enforceable policy.

Also important is the fact that, as Russian incomes decline alongside a spike in unemployment, Moscow has begun to take a series of measures to protect the economic interests of its citizens. Consequently, although consumption does not represent a large part of the GDP decrease, its continuous shrinkage can be problematic.

According to statistics, Russians' actual salaries dropped by 2.8 percent in the first half of this year, while the delayed payment of salaries increased by 50 percent at the end of May from the beginning of this year. It is estimated that the number of unemployed has reached 6.3 million, accounting for 8.3 percent of the total working population. As a result, expulsions of waves of migrant workers have resumed.

In fact, as early as November 2006, the Russian Government decreed that the numbers of foreigners participating in retail trade would be completely eliminated in the period between April 1 and December 31, 2007. Further, last June bore more bad news for migrant workers in Russia, when the government publicly cited their presence as a cause behind Russia's continued economic misfortunes.

Therefore, it is not difficult to understand why local authorities chose to reorganize the Cherkizovsky Market.

Influences

The impact of the Cherkizovsky Market closure has been profound. In the short term, it has brought heavy losses to Chinese merchants and companies. Over the long term, the ensuing commodity shortage has led to price increases, negatively affecting the lives of ordinary Russians. Also a long-term problem is the fact that, if improperly handled, bilateral trade will fluctuate, hindering joint efforts to stop the global financial crisis, and develop bilateral strategic and cooperative partnerships.

Chinese merchants have borne the brunt of the economic loss from the closure, of course. But they have suffered a long history of such losses, too, since Russian authorities have frequently broken up markets run by foreign merchants in recent years—with the earliest shutdown dating back to 1998.

Since then, losses by Chinese merchants in these closures have totaled billions of dollars. On June 29, Chinese merchants suffered losses of more than 2 billion dollars following official accusations of "smuggling" and "violation of health and fire prevention safety."

But the closure has also had negative influences on Russian consumers, too.

With the deepening of China-Russia economic and trade relations, Beijing has become Moscow's top trading partner. For Russia, which is still in an economic transition, refusing cheap quality Chinese goods by cracking down on gray customs clearance has cast a cloud over people's lives.

An investigation by the Russian Independent Institute for Social Policy shows 45 percent of the Russian people are willing to buy Chinese goods. Indeed, the non-governmental trade between China and Russia is win-win situation for both sides. If Russia closes its border and Chinese merchants stop supplying goods to Russia, there are sure to be price rises along with the emergence of social problems inside Russia, causing more pressure for the Russian Government.

Furthermore, if the two sides cannot deal with the closure properly, it might trigger sharp fluctuations in bilateral trade, hindering their joint treatment of the global financial crisis and development of bilateral strategic and cooperative partnerships. China is now Russia's top trade partner, while Russia is China's ninth.

Their bilateral trade volume reached $56.8 billion in 2008, up 18 percent from 2007. Bilateral trade volume in 2007 had increased 44 percent from that of the year before. In the first five months of this year, this trade saw a decrease unprecedented at any point in the last 10 years, owing to the global economic crisis.

Statistics from the Chinese Ministry of Commerce bear this out. Moreover, Sino-Russian trade volume during the first five months of 2009 was $13.5 billion, a decrease of 39.2 percent from the same period last year.

Overall, China has imported $7.43 billion in goods from Russia, down by 29.3 percent, while it exported $6.06 billion to Russia. This represents a drop by 48 percent from the same period last year.