Rag trade flourishes as old rivalry dies: Teresa Poole encounters hopeful shoppers from the old Soviet bloc in search of a quick profit in Peking markets

IT HAD the makings of a barter deal. The portly, bleached-blonde, 54-year- old woman from Kiev was trying to sell a pedigree Pekinese puppy that she had brought from the Ukraine. But the group of five Chinese men who had set up shop in the dingy Peking hotel room selling clothes, artificial flowers and small ceramic pots to traders from the former Soviet bloc were haggling hard over the price of the dog.

The woman, accompanied by a middle-aged matronly friend with dyed red hair and a sombre 28-year-old man, was taking a cursory look at a rack of clothes as the price of puppies was discussed. The three had travelled together from Kiev for three days in Peking, and each had about dollars 2,000 ( pounds 1,325) to spend. It was the blonde woman's seventh trip to Peking, one of the thousands of small traders from the former Soviet Union who are pouring into China's capital, many regularly, to buy bags of cheap clothing that can be sold for two or three times the price back on the streets of Kiev, Vilnius, St Petersburg and Moscow. Selling the dog would help to finance the shopping.

On the walls of the hotel room were samples of the company's Chinese-made raincoats, leggings and sweaters. On the bed sat a large Chinese man with cropped hair and silver satin pyjama trousers, arranging a stack of dollars 5,000 in cash and more than that in Chinese currency. Later the small safe in the corner would be opened by the assistant manager to show off more than dollars 100,000 in cash. The large, plastic, turquoise suitcase, he said, was for transporting money. Running around the floor was a misshapen mongrel puppy which may or may not have been responsible for one of the worst-stained carpets in China.

Since the Russians and their former countrymen first appeared in Peking's markets two years ago this trade route has flourished. Many now come by plane rather than suffer the long rail journey. These three had taken a charter plane package deal from Moscow which included an 80kg luggage allowance. Now that the world's two great planned economies have yielded to market reform, former ideological foes are sparring over wholesale deals.

'It's very difficult to find good quality,' complained the Kiev woman, cradling the puppy in her arm. 'There are a lot of poor-quality things. The samples are fine, but the actual goods are not so good,' she said, hurrying to the next room.

'The worst are the Mongolians,' countered one of the Chinese. 'They have no money and they bargain too much. The Russians negotiate the price, but they buy in large quantities.' Puppy prices seemed to be more problematic. 'She wanted 5,000 renminbi ( pounds 420 on the black market) for the dog,' laughed another Chinese man. Upmarket pets are popular again in Peking, but they were only willing to pay half that.

The state-owned Ritan Guest House, a run-down building on the west side of Ritan Park in central Peking, and the nearby street market, are where much of the capital's small-scale Sino-Soviet trade is conducted. The first three floors of the hotel have been colonised by more than 70 private Chinese wholesaling firms, one to each room, each room decked with clothes samples and catering to customers from the former Soviet Union and eastern Europe. Company name cards have Russian, rather than English, translations.

In one room, which offered a range of Barbie dolls as well as the usual clothes, shoes and bags, a 25-year-old Russian student explained how he and two friends in Moscow had raised dollars 3,000 for him to spend on goods to sell back home. Managing this particular 'shop' was a 62-year-old Chinese who had learnt his Russian as an exchange student in Moscow in the early 1950s.

On the third floor, two Ukrainian couples clutching calculators were stuffing dozens of bright red and turquoise raincoats into plastic hessian bags. 'If you buy less than dollars 1,000, you don't make any profit on the trip,' said one. They were all 35-year-old engineers. Their own economic reforms were going 'much worse' than China's, said one.

Outside on the road, known as Silk Street, customers were negotiating prices at the outdoor market stalls and loading up bicycle carts with bags of clothes. Shoppers from Vilnius were piling up their purchases by the side of the road. Bigger customers hire trucks to transport the goods away from the hotel.

Most of this casual trade in Peking never features in China's trade figures, but even so official statistics show Russia as China's fastest-growing trade partner, with an increase of almost 90 per cent in recent monthly figures. Much of the trade flows directly over the land borders; business between Heilongjiang province, in the north-east, and neighbouring Russia accounts for one third of China's total trade with the CIS states. In the west, border trade between Xinjiang province and the former Central Soviet republics is also buoyant.

For the Peking stall-owners, the forthright Soviet way of doing business can be abrasive compared with China's formal, tea-drinking ways. But the Peking businessmen probably keep the upper hand.

'The styles they like are the things we were selling 10 years ago. We can pull stuff out of our warehouse, and sell old stock,' boasted one.

And Russian business acumen? 'They don't have a lot of practice at doing business. But they don't have a lot of money either. So they bargain.'

(Photograph omitted)