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Last Updated: Tuesday, 5 June 2007, 00:45 GMT 01:45 UK
Russia's Far East looks to China
By Gabriel Gatehouse
BBC News World Tonight reporter, Vladivostok

Vladivostok train station is the end of the line on the trans-Siberian railway from Moscow, a distance of more than 6,400km (4,000 miles) or seven time-zones. Whichever way you look at it, it is a very long way from the capital.

Train in Vladivostok
The Trans-Siberian ends more than 6,400km from Moscow

Nearby, Yulia Taranyuk is showing a group of Chinese tourists around town. You see plenty of them here on the streets of Vladivostok but, says Yulia, their numbers are declining - the traffic is increasingly in the other direction.

"People who live in Moscow or St Petersburg, it's easy for them to go to Europe - for us it's much cheaper to go to China," she says.

"Before, China was nothing, right? And now it becomes something very fast.

"So now a lot of Vladivostok people and people from our district go to China. People go there for the weekend. Just buy something and back home: clothes, everything. Everything is very cheap."

In Vladivostok, if you want to get ahead, then Chinese, not English, is the foreign language of choice.

At Secondary School No 9, the students learn English from the age of eight.

"I want to be an interpreter, like all girls," one says.

"In the future, Chinese will be a more important language than English, because China is developing very fast. I think it is the language of the future."

Prospering or just breaking even

For some, the future has already arrived. Irina Rogacheva runs an agency helping Russians invest in China.

Vladivostok with a Russian warship in port
Vladivostok was a "closed city'" in Soviet times

"You can buy an apartment at a holiday resort in China and let it to a Chinese company straight away. So you make money as well as an investment. Three years ago, property cost $450 per square metre. Now it's $2,500."

In the banking sector too, business with China is booming. Olga Ivashchuk is head of the international division at one of the local banks, and she says this is a fairly recent development.

"Around four years ago Chinese banks didn't even want to speak about co-operation with Russian banks.

"We sent several requests to start business or even to start communicating. But no answer, no reaction, no agreements. But three years ago, the situation changed. Chinese banks became open, and started to co-operate. "

In the border town of Pogranichny there is quite a hustle and bustle going on as Russians arrive from across the border with bags filled with goods. Envelopes of money change hands, and trucks are waiting to deliver their cargo back to the big cities like Vladivostok.

One woman, in her fifties, said she made the trip to China once a month. She brings over 35 kilos of cheap Chinese clothes to sell at a meagre profit in Russia.

"Our country's in such a state these days, you can see what I've been reduced to," she says.

"I've got two degrees. There are jobs, but very poorly paid ones. At my age, it's too late to start up your own business - so this is how it is. We don't live, we exist."

Natural choice

At the University of Vladivostok, Mikhail Shankovsky, professor of international relations, explains the extent to which the Russian Far East depends on China.

Russian and Chinese coaches at the border
There is a steady flow of Russians crossing to and fro at the border

"China is the main source for us of food, clothes, shoes, fruits, vegetables, even workers, already," he says.

"Our agricultural industry can only produce enough food for four out of 12 months per year. And what about the other eight months? Food from China."

Rail freight is expensive, so importing food from European Russia would mean higher prices for consumers.

It all seems very logical and reasonable - European Russia is far away, so the Far East is tying itself more and more to Asia. But not everyone is happy with the arrangement.

"It seems to me that we, I mean the top level of our government, are afraid of so quickly increasing the volume of trade," says Mr Shankovsky.

"The main barrier to our common trade is Russian side, not Chinese side."

Russia has increased import duties and lowered tax-free allowances for goods coming in from China. But the most visible change has been in the street markets.

Business obstacles

At one market on the outskirts of Vladivostok there are dozens of stalls selling fruit and vegetables and almost all of it comes from China.

How can you explain the laws our people make at the top?
Irina Rogacheva
Russian investment agency manager

There are plenty of Chinese traders as well, but you won't see any of them handing money because since 1 April, foreigners have been officially banned from working in markets in Russia.

So they own the stalls, they own the fruit, but they don't actually touch any of the money: they hire local Russians to do that for them.

The law was intended to create more jobs for Russian people and according to Irina Rogacheva, in that, it has certainly been effective: Chinese businesses are closing down, their owners are going home.

But she says the effect has been negative: it is bad for business and pushing up prices.

"How can you explain the laws our people make at the top?" she asks, rhetorically.

"You can't explain them. Sometimes they're completely incomprehensible - from a point of view of real life and real people. It's very difficult to do business in our country."

Russia acquired this far-away strip of Pacific coastline from the Chinese in 1860.

No-one here talks about splitting off from Russia, but a century and a half later, it is not Moscow but China, with its nimbler and more diverse economy, that the people of Vladivostok look to for the food on their plates, the clothes on their backs, and the money in their wallets.

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