Why Rich Russians Are Buying 'US-Made' Jeans In Beijing's Back Alleys

Ex-Communists create a capitalist's paradise in the city's 'Little Russia.'

The aftershocks of Moscow's big-bang economic transformation are reaching even Beijing and changing the Chinese capital in a curious way.

A growing number of Russian entrepreneurs are leaving behind their newly capitalist homeland to seek their fortunes in China, the world's last Communist-run titan.

Tales of plying Chinese rags into Russian riches have sparked a peaceful invasion of Beijing, whose residents only decades ago built underground shelters to guard against a feared atomic attack from Moscow. Beijing now features an expanding Russian quarter, where Cyrillic signs and Russian-speaking shopkeepers welcome China's one-time enemies to spend American dollars.

"The first traders started trickling into Beijing in 1989, just after Gorbachev arrived to normalize ties with China," says a Russian entrepreneur in Beijing, who spoke on condition of anonymity. "They were followed by Russian government officials who profited from Moscow's fast-paced privatization of state firms," he adds.

"China's economy was in a period of high-speed growth as the Russian economy was collapsing," he adds. "Some of those earliest traders have since become millionaires."

Although China and Russia were close allies in the 1950s, they became bitter rivals for leadership of the communist world a decade later, with brief border clashes and fears on both sides of nuclear war.

The end of the Soviet Union led to a rapprochement, and the two countries agreed this year to form a "strategic partnership" aimed in part at counterbalancing the United States, the world's sole remaining superpower.

"We intend to boost our economic and technological cooperation to a level matching improved political ties," says Igor Rogachev, Russia's ambassador to China.

Chinese statistics indicate bilateral trade reached $7 billion last year, but a Russian analyst who works in Beijing says the actual figure was probably twice as high. "Most of the Russians doing business here engage in only cash transactions and usually do not report them because of corruption, high tax rates, and lack of legal safeguards in Russia," says the analyst, who asked not to be identified.

The analyst says that "some of the wealthiest Russians have purchased Western-style villas on the outskirts of Beijing," where China's political elite and nouveaux riches have vacation homes.

"But no one is going to brag about their wealth in the press," she says. "Both Chinese and Russians, after living under communist governments for so long, have learned to keep their lives and their riches in the shadows."

The analyst says the success of China's drive to dismantle its socialist economy has dovetailed with the economic shock in Russia that followed the collapse of the Soviet Union.

"China's economic reforms are creating a widening pool of upward mobility, while Russia's are resulting in a small class of rich elites and poverty for the majority," she says.

Huang Yasheng, a political scientist at the University of Michigan in Ann Arbor, agrees: "China's step-by-step approach to adopting a market economy has been much more successful than Russia's rapid abandonment of central planning."

Meanwhile, the Elegant Treasurehouse district of Beijing, where more Russians are buying Chinese clothes and toys, has been transformed over the last seven years into a Little Russia.

The Chinese shops, rickety shacks that are being replaced by chrome and glass boutiques, nearly all advertise in Russian.

And in a city where the second language of most educated youths is English, Elegant Treasurehouse is a small but expanding oasis of Russian.

"I studied Russian in Moscow in the 1950s, so it was natural for me to open a store here," says a white-haired shop owner called Old Li. "The Russians are coming in droves," he says, but adds that he refuses to take their volatile currency. "What's the sense of having rubles - even Chinese banks won't accept them."

Nearby shops sell goods ranging from Lee jeans to Reebok sports ware to stuffed Mickey Mouse dolls.

Despite tags reading "Made in USA," shop owner Chen Xiao says most of his clothing was produced in southern Guangdong Province by Hong Kong-run firms. "The Russians all know that the clothes are Chinese, but the clothes can get a higher price with Western labels," he says.

Mr. Chen, who left a low-paying teaching job in southwestern Sichuan Province two years ago, says: "I make at least 10 times as much money selling clothes to Russians than I did teaching Chinese children."

Chen often bargains with customers in Russian and says he taught himself the language with books and cassette tapes.

"A lot of shop owners here have learned basic Russian - even the rickshaw drivers can speak a few sentences," says Chen.

Just steps away from Chen's shop, Russian eateries, including Elephant, The Russian Restaurant, and The Saloon, feature the latest videos and pop music from Moscow, along with Chinese waitresses who chat with customers in Russian.

But some unwritten taboo seems to keep Chinese customers away from the district. "The Russian area of Beijing can get pretty rowdy after dusk," says the Russian entrepreneur. "The 'gold fever' that drives most people here makes it a lot like the American Wild West, without the cowboy hats or horses."

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