Special Supplement: New policy prompts shift in trade mode

The Russian government has released a new policy on retail market order, announcing that foreign dealers are banned from alcohol and pharmaceutical trade from the beginning of this year.

And starting April 1, foreigners are prohibited from retail sales in outdoor markets.

The release of the policy is aimed at protecting Russia's job market and helping to spur growth of Russian small and medium-sized enterprises, experts said.

The policy sent shock waves through the Chinese business community in Russia, which accounts for more than half of the total foreign traders in the country.

Due to historical reasons, individual transactions were one of the main trade modes between China and Russia.

A great number of people, both Chinese and Russian, used to shuttle across the border for trade. They packed their goods they purchased abroad and resold them in their homeland.

Yet the new trade policy signals the traditional trade mode has begun to fade away.

Many of Chinese businesspeople had to dump their inventory to cut losses. As a result, the market share of Chinese vendors began to shrink substantially.

Heilongjiang Province in Northeast China has taken the brunt of the trade injunction. The bordering province has more than 100,000 people engaged in retail sales in Russia, according to data posted on the website of CommerceNortheast.

However, experts said the order also has some positive effects on bilateral exchange.

The Russian trade policy is expected not only to make the local market more transparent but also promote an upgrade of Russian-oriented trade.

The market restructure has forced some foreign dealers to quit the Russian retail market, which has created a void in the market to fill. This in turn provided vast business opportunities for those who have ample funds and a competitive edge.

Currently, the number, quality and scale of Chinese traders cannot satisfy the needs of increasingly growing Sino-Russian economic cooperation, experts said.

For instance, more than half of Heilongjiang's trade with Russia is conducted by individual traders or small private companies.

Though seen as the major trader with Russia, the province had not one company listed among the top 200 Chinese exporters in 2004.

How to gain an edge in market competition is a priority to the small dealers.

Since retail transactions in shops is not subject to the trade order, experts suggest Chinese businesspeople should strengthen commodity improvement to expand distribution networks, especially into the high-end retails channels.

Another suggestion experts proposed was seeking local partners and establishing logistics companies in Russia to avert policy risks.

The provincial authorities noted that governments of both sides will continue an intensified exchange of opinions and new policy moves in a bid to create a sound business environment, and promote healthy economic growth for both sides.

(China Daily 09/05/2007 page12)