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China's illegal market lures bargain hunters from Eastern Europe, Soviet Union


Michail Kourepine might be expected to stand out as he lumbers down Elegant Water Street here, lugging an impossibly large bag stuffed with recent purchases, wearing tight blue jeans, no shirt and a belt marked repeatedly with the name of a famous French brand of sportswear.

The towering, 28-year-old from Leningrad, U.S.S.R., might stick out, that is, were it not for the scores of other outsized Soviet and Eastern European tourists, traders and black marketers bullying through this free market's tight confines with distinctly non-Chinese brusqueness.

They are among the hundreds of entrepreneurs from former East-bloc nations who land here each week in search of bargains on silk shirts, down jackets and other cheap, Chinese goods to resell for large profits back home.

From sophisticated traders ordering 10,000 pearl necklaces at a time to penny-pinching tourists buying a few leather jackets to cover their dirt-cheap plane and train tickets, they have forged a modern-day version of the ancient Silk Road that for 1,500 years until the Middle Ages brought Chinese goods westward.

The total estimated value of their sometimes shady dealings has grown so rapidly in the last few years that it now rivals China's official trade with some of the buyers' homelands. The underlying dynamic of this off-the-books trade illustrates key differences between the world's last major bastion of socialism and its former ideological partners, and it helps to explain why communism inChina has not collapsed.

Put simply, while enjoying new-found political freedoms -- including travel abroad -- Soviet and East European citizens endure extreme shortages and high prices for daily necessities at home. The Soviet Union's gross national product fell more than 5 percent last year and may decrease by more than 15 percent this year. A pair of new shoes eats up more than two months of an average Moscow salary.

By contrast, China's more than 10 years of economic reforms have brought much of its politically oppressed people an increasing bounty of affordable goods. Its gross national product adjusted for inflation more than doubled in the 1980s. Many Chinese homes have TVs, VCRs and even washing machines.

While adhering to hard-line socialist rhetoric, China's leaders have allowed market forces free rein in large segments of their nation's economy. The result has been a series of record grain harvests, the doubling of urban workers' real income in the last decade and new houses for more than 40 percent of all rural families.

The Chinese economy still suffers grave overall problems. About 40 percent of China's large, state-run industries are losing money, for example, and their subsidies are draining the central government's coffers. Unemployment is rising, particularly among rural laborers.

But for now, many Chinese have never lived so well. And many observers here believe that as long as that persists, China's leaders may be able to contain the pressures for political reforms here -- unlike their fellow communists in the Soviet Union and Eastern Europe.

These stark political and economic contrasts were not lost on Victoria Jaukova, a 27-year-old pop singer who came here last week from Moscow to ferry back several huge bags of Chinese-made clothes and perhaps hunt up a singing gig for herself

in a joint-venture hotel.

"In Moscow, we have glasnost, but everything else is absent," she said, while slicing a Chinese pineapple in a hotel here with so many Soviet guests that its restaurant's menus are printed in Russian. "Meat and fish are absent in Moscow; milk is absent. We talk, talk, talk, but we have no breakfast, no dinner.

"Here they have everything, all kinds of food and products everywhere -- cheap. They have everything but a revolution. They still have the Communist Party on top of them," she said.

The relative economics means that a silk shirt bought here for the equivalent of $9.50 can bring more than twice that in Moscow. A $28 leather jacket sells for $75 to $100 there. A half-dozen duffel bags worth of Chinese clothes can add up to several thousand dollars profit in the Soviet Union.

As along the former Silk Road, today's East-West trade involves at times comic, cross-cultural confrontations, ones in which Japanese calculators and the barest bit of English serve as the lingua franca.

"This price," asserted a young Chinese vendor, wearing a Stanford University T-shirt and sunglasses as he thrust his calculator forward one day last week in the Elegant Water market. The Marlboro cigarette dangling from his lips barely moved.

"No, too big, this price," parried Viktor Gorbatyi, a burly Leningrad shop manager, clad in shorts and Hawaiian-style shirt and sporting shades, Marlboro and calculator.

"No, no," the Chinese vendor retorted, punching out a new, slightly lower number.

"No, last price, no," Mr. Gorbatyi growled as he offered one final, low figure before turning his broad back to move on.

The mutual disdain in such encounters is barely disguised. "The Soviet people are so backward," the Chinese vendor immediately turned to confide to a nearby Westerner.

"The Chinese are really difficult," Mr. Gorbatyi said during a break from business. "They change their prices after you make a deal."

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