Wednesday , May 22 2024

Vietnamese shopkeepers in Russia face rising competition from Chinese

Vietnamese-owned businesses in Russia are seeing rising competition from Chinese counterparts as Moscow grows its economic partnership with Beijing to deal with Western punishment.

Van Anh, manager of a trading company that imports food from Asian countries for distribution in Russia, said Chinese vendors have been increasing their presence in Moscow in recent months.

The Moscow Trade Center (also called the Liublino Market), where Anh works, is now full of vendors.

“Chinese companies have rented all the slots,” said Anh, who has been living in Russia for 30 years.

She added that although there were disruptions early last year when most foreign companies withdrew from Russia as the nation started a special military campaign against Ukraine, she felt that the Russian economy seems to be back on track now due to increased trade with China.

Since the conflict with Ukraine began in February last year, Russia has been dealt over 13,000 restrictions by Western countries, more than the combined figures for Iran, Cuba and North Korea.

But Russia’s GDP only declined by 2.1% last year and the International Monetary Fund has forecast that it might actually grow 0.3% this year.

This is because the Russian government has been making hasty responses to keep its economy afloat amid flocks of trade barriers imposed by the West. It has pumped its core interest rates to 20% and blocked capital from flowing out of its banking system. It also banned foreign currency sales.

By April last year these actions had helped Russian banks to get back nearly 90% of the money that local residents had withdrawn.

Another strategy was to increase trade with other countries, including China. Bilateral trade between Russia and China surged to a new record of $190 billion last year, according to Chinese Customs.

In the first quarter this year the figure rose nearly 40% year-on-year to $53.84 billion.

But more shipments from China means more competition for Vietnamese vendors in Russia, many of whom are already importing from China.

“Chinese factories already have all the material and technology they need to develop their own products,” said Anh, adding that Chinese companies have been actively striving to increase their exports to Russia with support from both governments.

Ba Vuong, a clothes vendor in Moscow, said that more made-in-China clothes are being sold where he lives, and there has also been an increase in Chinese electronics and furniture.

Data confirms the trend.

Chinese exports to Russia rose 47% year-on-year to $24.07 billion in the first quarter, according to Chinese Customs, which estimated that bilateral trade with Russia is set to reach another new record of $215 billion this year.

Another challenge that Vietnamese vendors in Russia are facing is the depreciation of the ruble.

Vuong, who has been living in Russia for 25 years, said that one U.S. dollar was traded for RUB65 before the Ukraine conflict, but now the rate is RUB75-80, indicating a weakened ruble, and this has lowered the incomes of Vietnamese vendors.

Russian consumers have also been tightening spending, and therefore Vietnamese vendors have seen declining sales.

Some Vietnamese vendors have now stopped sourcing products from China and established their own factories to manufacture in Russia, even though their production scales are modest.

Others have switched to less competitive sectors such as restaurants.

But for most vendors, life remains comfortable thanks to cheap fuel and food prices in Russia. Residents can also get free medical and education services.

This is why Vuong will continue to stay in the country.

“For people who have left Vietnam for a long time like me, Russia is like a second home.”

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