Russia Introduces Concept Of “Weekend Free Trade Wet Markets” To North-East China

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New “Micro-FTA” Concept Could Boost Cross-Border Agricultural Exports

Op/Ed by Chris Devonshire-Ellis

Russian delegates speaking at the Russia-China dialogue session at the Far Eastern Economic Forum currently taking place in Vladivostok raised the suggestion of introducing a Pilot Free Trade Scheme for the North-East Asian Agricultural Industry. Suggestions were made that to boost bilateral trade and the bilateral trade in agriculture, China adopt a pilot scheme whereby “Weekend Free Trade Markets” that could be established by Russian traders in Chinese cities within a 500km of Vladivostok, allowing them access to Chinese markets to sell produce. Russian traders would open Chinese bank accounts to allow the Chinese to extract taxable revenues, while the same markets could have better access to Russian vegetables, fruits, other agricultural, and sea food products.

There is merit in the idea, as tourists from not just China but also South Korea and Japan flock to Vladivostok to purchase seafood and other delicacies either not available in China or at significantly more expensive prices. 84% of all Chinese tourists to Russia’s Far East – about 3.6 million per annum – visit Vladivostok, where the vast majority of those are to be seen in the cities many sea food restaurants. They are typically ordering plates of exotica such as Kamchatka Crabs, Sea Cucumbers and Scallops at a fraction of the price they would pay in cities such as Harbin and Dalian, let alone further south in Shanghai. One option to make this happen is to use the newly announced Heilongjiang Free Trade Zone just announced as a pilot scheme by Beijing.

Far East Russia also has a burgeoning organic foods industry, with pesticide free crops being grown in what is already a short growth season. Chinese agricultural produce, due to the excessive domestic consumer demand, is often forced or involves the heavy use of pesticides to maintain production levels, sometimes leading to tasteless end products in Chinese markets, and occasionally worse. Food poisonings, cancer rates and occasionally the use of banned chemicals in agricultural and diary produce have proven problematic in China in recent years.

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There would be resistance from local Chinese farmers of course, unless they can be persuaded to act as middle men in some way. But there are other benefits – Russia’s Far East has over 1.5 million hectares of fallow land, and that could be used, in conjunction with Chinese entrepreneurs and investors, to grow still more organic quality produce for the Chinese and Japanese markets. Tied with nearby Kamchatka’s incredible seafood resources, and the already existing Chinese Eastern Rail routes serving cities such as Mudanjiang, Harbin and beyond, the Russian Far East might just have hit upon an eco-solution of note – selling up-market vegetables, fruits and seafood to a Chinese market weary of the same old Wet Market same old. China would also benefit as it would spur Russian investment into the Far North-East, promote potential for Joint Ventures and allow China to generate taxable revenues from the consumption of Russian produce currently being enjoyed by Chinese consumers and the Russian treasury. It also develops an eco-industry which both Russia and China can be partners in. That also has rather more significant trade revenue and tax applications further down the line as the business model develops, and can be adjusted to fit. Its a small, yet simple market concept, yet the implications could develop an industry.

It’s an idea worth pursuing, if only for the thought that the Kamchatka Scallop one is about to chow down on in Harbin’s excellent Huamei Russian restaurant is not just totally fresh, but duty free too.

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Russia Briefing is written by Dezan Shira & Associates. The firm assists foreign, including Russian investors into China and has 13 offices across the country. Please contact the firm at china@dezshira.com for assistance or visit us at www.dezshira.com

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