New Shenzhen rises in the north

THE demise of communism in the Soviet Union has given birth to a new Shenzhen in China.

Cross-border trade with Russia is growing rapidly in the remote north-eastern region of the mainland, transforming a once small garrison town into a fast-expanding Wild West-style Shenzhen.

The population of Suifenhe, in Heilongjiang province, has grown from about 30,000 to 110,000 in the past four years, and business and trade is growing even faster.

This expansion, and the opportunities arising from liberalised trade links between Russia and China, is attracting foreign interest, most recently a group from the Australian Chamber of Commerce in Hongkong.

The delegation's leader and chamber chairman, Philip Day, believes Russia and China have much to offer each other.

''In Vladivostok [the capital of the Russian province of Primorskii Krai, bordering Heilongjiang], the Russians have a very, very good port; relatively small, but it could be made to be very efficient. It is much more accessible for that area of China than many Chinese ports,'' said Mr Day, who is also a director of the Pacific Rim Consultancy Group.

''The Chinese have a work ethic which the Russians certainly don't have. They have highly developed entrepreneurial skills, relative to those in Russia. They have an economy that is hungry for raw materials, one which is capable of turning out goods fromthe very basic to the quite sophisticated.'' He said the contrasts between the two provinces that share a common border were broad.

''There is a total demarcation between China and Russia,'' he explained. ''There is no intermingling of people from the two countries as there is in many other parts of the world on common land boundaries; there there is a clear demarcation.'' It is believed Suifenhe and the whole region was originally populated as a strategic defence measure to protect China's north-eastern flank against Soviet intrusion.

''Since the perceived threat of Russia has disappeared from the Chinese mind it has become a very hot centre for broader trade,'' said Mr Day.

''The buildings are going up faster than the roads are being built; and really they are mud streets,'' he said of the Chinese border town. ''It is reminiscent of Hollywood's version of the wild west towns. One would be forgiven for thinking they are a bunch of cowboys up there, and some of their behaviour indicates they are.'' Trade across the border is clearly apparent: trucks line up at the crossing, and in Suifenhe Russians can be seen buying goods in the markets around town.

However, Mr Day said much of the business was on a relatively small scale; 200 T-shirts in the back of a van destined for the shops of Vladivostok or elsewhere in the Russian Far East.

The delegation identified about six major Russian corporations established in Suifenhe which were trading mainly through barter deals - due to the lack of hard currency on the Russian side.

Mr Day said, however, that hard cash was evident in Suifenhe. Renminbi, roubles and Hongkong dollars were all seen exchanging hands in shops.

The Chinese Government is trying to build up Suifenhe as a centre for cross-border trade, but Mr Day said he discovered that the Russians were trying to direct trade towards Harbin, the nearest large city, about 91/2 hours away by train. Russian buyers were also driving deeper into China seeking out suppliers directly.

In Russia itself, there are a number of Japanese companies investing in Vladivostok, and in the surrounding areas there are a number of hotels under construction. There is even an Australian running a restaurant called The Captain Cook.

Vladivostok's pride and joy is its stock market. It has about 60 companies listed and is growing rapidly.

''The stock exchange is so unsophisticated yet so sophisticated,'' said Mr Day. ''They have a range of stocks which at the moment are primarily being listed to monetorise state assets.'' ''So at this stage they are not raising new capital. However, this has been proposed,'' he said.

Mr Day said the Vladivostok authorities were seeking to introduce a degree of regulation into the market. At present there is a requirement that companies conduct a quarterly audit, but the reliability of many facts and figures is questionable.

On the other hand, ''the market is sophisticated in that there is no board trading; it is all electronic'', he said.

Most of the companies are port-related firms, such as shipping companies and transportation concerns. However, the exchange is looking at monetorising former defence industry companies which are seeking new, peaceful markets now the Cold War is over.

''Clearly they have an idea of what needs to be done and have an idea of how to do it. But anything in Russia is difficult. I think we overlook the fact that overnight the system suddenly did not exist. The whole command economy dropped out of existence,'' said Mr Day.

Such a shock left Russia with many problems.

But things may well improve for Vladivostok if it can do more trade with China. A four-lane highway is under construction between Suifenhe and the Russian port.

''There is an element of them coming closer together, and I think a lot of the old suspicions are fast disappearing,'' Mr Day said.

''The Chinese have a fairly jaundiced view of Russian achievements - justifiably or not I don't know - but you have to remember Vladivostok is a European town in the heart of Asia, that is the difference, and it is inhabited by people who have a Europeanway of doing things.

''It is important to consider as well that Vladivostok is one of Russia's three ports. The country has lost a lot of coastline and so it is going to become a very important port,'' he said.