The Shadow of "Cherkizon" Looms over Ekaterinburg

08.10.2009 — Analysis

After the shut down of the Cherkizovsky market in Moscow the Chinese and Vietnamese are on the search for not only a new all-Russia wholesale outlet, but also a place to set up production of consumer goods. The observers of RusBusinessNews searched for them in Ekaterinburg.

One of these days townspeople have been seriously puzzled by the words of Viktor Konteev, Vice-Mayor of Ekaterinburg. During one of the meetings he announced: "We have been at the expert meeting at the Deputy Mayor's office in Moscow. The situation is like this. You know that "Cherkizon" has been shut down. Our "Tagansky Ryad" (a local merchandise market) now hosts up to 20% of the traders from the "Cherkizovsky market".

The Cherkizovsky market in Moscow, also called "Cherkizon", was perhaps one of the world's biggest marketplaces. It occupied the territory of more than 200 hectares. According to the data from the Federation of Migrants of Russia, the market employed over 100,000 people, about 60,000 of which were traders from China, and the rest were the citizens of Russia, Vietnam, Korea and other countries. "Cherkizon" was closed down in June 2009 after Rospotrebnadzor (Federal Service for Supervision in Consumer Rights Protection and Human Welfare)  passed a corresponding order for non-compliance with sanitary regulations, and special services found 6,000 containers with 2 billion dollars worth of smuggled goods.

Where did the majority of foreign traders from "Cherkizon" go, is still a mystery. Most probably, these migrants have spread over the many other merchandise markets in Moscow, but some part of them moved to major Russian cities or is planning to do so in the nearest future. Ekaterinburg is one of the most convenient places for a new settlement. Located in the centre of Eurasia, the capital of the Urals boasts a well-developed railway, automobile and airway connections to the European part of Russia, Siberia and Central Asia. Direct flights to Beijing were opened this summer. Not the least of the factors is that Ekaterinburg is located much closer to China than Moscow.

Wholesale dealers from virtually all the European part of Russia: from Voronezh and Krasnodar to Murmansk and Perm used to purchase clothing, footwear, imitation jewelry and other merchandise at "Cherkizon". That means that after the re-location of wholesale trade to Ekaterinburg the transportation distance for many of them will practically be the same.

At the moment Ekaterinburg has its own flourishing China-town - "Tagansky Ryad" - a wholesale merchandise market where several thousand Chinese and Vietnamese people work. Had their number increase in a matter of days due to the inflow of over 20,000 traders from "Cherkizon", this would not have gone unnoticed. "It is not clear where the Mayor's office obtained such data, - Lyudmila Belousova, Chief of Administration for the Public Relations Department of ZАО Tagansky Ryad informed RusBusinessNews. We offer trading space for rent and we sign a contract with every tenant. Among our tenants there are no people from the Cherkizovsky market. Maybe, there are some among the buyers or workers whom our tenants might employ but we do not monitor this".

Up until now "Tagansky Ryad" offered up to 6,000 trading spaces. But because of the fact that Russia has to phase out all street trading by 2012, the market administration is gradually decreasing this number. Today there are about 1,500 spaces and that means we do not have enough space even for "local" traders. The situation may change by December 2009 when the market administration opens "Hanoi", a new trade and hotel centre, with a total area of 10,000 square meters. Another trading centre in the neighborhood is planned to open at the beginning of 2010.

Moreover, a second Chinese market in Ekaterinburg is in the design stage at the moment. "Akadem-Grad" Company intends to build a "Russian-Chinese Trade and Fair, Exhibition and Culture Centre". The facility is planned to occupy the area of 18 hectares near the city border. The future centre will specialize in the sale and servicing of construction materials, equipment, machinery, cars, furniture and electronics from the PRC. However, the construction start-up time of this facility is still unknown because of the crisis.

According to the official data of foreign diplomatic missions in Ekaterinburg, today the territory of the Ural and West-Siberian Region is home to about 20,000 people from China and 7,000 people from Vietnam. "I do not have the information concerning the arrival of Vietnamese traders from the Cherkizovsky market, Le Quy Quynh, Consul General of Vietnam in Ekaterinburg, informed RusBusinessNews. Moreover, because of the crisis the number of Vietnam people who live and work in the Urals is decreasing".

In the meantime, according to the official data from the Regional Administration of the Federal Migration Service, only about 100 former traders from the Cherkizovsky market out of 600 that left Moscow came to Ekaterinburg. All the people that came - mainly, citizens of China and Vietnam - have already registered with the migration authorities in the Sverdlovsk Oblast. According to Tatiana Lepeshonok, Expert of the Department for Co-ordination of UFMS Territorial Bodies Activities, the mass arrival of the Chinese has not yet been observed. In comparison to the 300,000 army of guest workers, living in the Middle Urals, 100 people is not much of a burden.

"To monitor the migration of citizens, entering Russia from the countries with a visa system, is quite simple. In any case, all those who pass immigration control when entering the country, have to register when returning to their country of origin by getting an exit visa", - noted Tatiana Lepeshonok. However, according to her, illegal migrants can only be detected through various and regular checks.

Experts, polled by RusBusinessNews, cannot assess the scope of hidden migration of the foreign workforce into the capital of the Urals, but note that there is a new trend that has appeared recently. "Many Chinese now obtain Russian citizenship and instead of bringing finished goods to Russia they bring raw materials, semi-finished products, machine tools and workforce. Here they set up production and receive assistance from the Chinese government", - Andrei Alshevskih, a Member of the Sverdlovsk Oblast Duma told RusBusinessNews .

The Vietnamese use the same tactics. In the towns of the Sverdlovsk Oblast they opened up at least 4 officially registered clothing factories where Vietnamese work. And there are many more illegal production facilities of consumer goods. A curious incident took place in the summer of 2009. In Degtyarsk (the Sverdlovsk Oblast) police found an underground sewing workshop where 23 Vietnamese made not only sports and children clothing under the world famous brands but also uniforms for GIBDD (Road Police) and Emercom (Emergency Situations Ministry). It is significant that the owner of this production facility was a native of Vietnam who obtained his Russian citizenship.

The best indicator of all significant changes in the labour activities of the Chinese and Vietnamese people in Russia is the evolution of relations on the consumer market. "From the beginning of 2009 the Urals saw significantly less Asian products and certain niches on the market got vacant. It happened because of the increase in the rates of currency exchange, tightening of import duties and also indirectly because of the shut down of the Cherkizovsky market in Moscow (which was a hub for large flows of illegal merchandise), ", - Fedor Shelepov, Director General of ZАО Multitex in Nevyansk responded in an interview to "RusBusinessNews" .

"Our wholesale dealers started to return to the local enterprises. But they purchase little batches - up to 100-200,000 rubles", - said Dzhanna Menovshikova, President for the Union of the Light Industry Enterprises of the Sverdlovsk Oblast.

It seems, the alarm sounded by the Administration of Ekaterinburg proved either false or premature. The capital of the Urals is not yet ready to significantly increase the number of trading spaces at the merchandise marketplaces. At the same time, there is a well-manifested trend in the Urals for labour migrants to switch from illegal imports to illegal production of consumer goods - clothing, in the first place. As soon as the volume of illegal clothing becomes significant, local clothing factories that work legally will feel the competition.

By Pavel Kober, Evgenia Eremina and Arseni Vaganov