Thousands of Chinese retailers are experiencing their coldest winter in Russia as they are forced to leave the market and sell their products at below cost.

Their withdrawal from the market was prompted by a new Russian regulation on immigrant labor to prevent foreigners from operating retail businesses in the country.

From this month, foreigners will no longer be allowed to sell alcohol and medicine in Russia. They will also be subject to a limit of 40 percent on the number of vendors operating in a market.

And from April 1 foreigners will be banned from any type of retail activity in Russian markets.

The aim of the new rule is to encourage Russians to take up jobs in the sector and help rid markets of criminal groups. But Chinese retailers will be one of the biggest victims of the campaign.

Weeks before the New Year is normally mid-season for Chinese businesspeople. But there are far fewer Chinese retailers in the markets of some Russian cities.

A large market in Moscow, previously dominated by Chinese merchants, is now almost closed.

"Some Chinese dumped their goods before the New Year and went back home," said Wang, a Chinese student.

And those who decided to stay in Russia are trying to quickly shift goods to lower the risk of high stock.

The regulation will also hurt Russian market owners a stall that once fetched $20,000 cannot even be sold for US$2,000 now.

Since the regulation was approved at the end of last year, Chinese retailers, stallholders and government agencies have been seeking a way out.

Some plan to find a local partner to continue the business, while others intend to register a local company. Chinese embassies in Russia have asked for regular contact with Russian officials to try to find an alternative.

The local government of border city Blagoveschensk has applied for 740 certificates for Chinese retailers from the immigration administration, but it is far from enough.

Nine out of 10 foreign retailers at Sino-Russian borders come from China, according to local media. And some 10 percent of these Chinese businesspeople, who were not granted formal business visas, will be the rule's first victims.

Chinese retailers need to adjust their business to minimize loss, according to Wang Lijiu, an expert with the China Institute of Contemporary International Relations.

"I think some of them should move to sectors such as wholesale, because Chinese products are so popular in Russia and other business activities are still open to Chinese players," he said.

(China Daily January 19, 2007)