A RECENT CRACKDOWN BY THE RUSSIAN GOVERNMENT ON SUSPECTED ILLEGAL RETAIL OPERATIONS in Moscow has caused problems for Chinese fur manufacturers who have been trying to salvage merchandise from non-paying clients. According to trade contacts, the situation is impacting on Chinese manufacturers who do business in Russia and could have ripple effects throughout the international trade. It is said to involve garments taken back from retailers and offered to the public at sharp discounts in attempts to retrieve at least part of their investments.

The situation is attributed to disappointing sales last season mostly the result of the economic turmoil that has undermined consumer spending in Russia as it has elsewhere. However, unlike retailers in North America and Western Europe who prepared conservatively for the season, the Russian market had been on a roll and prepared for further increases - in short, the retailers overbought, as it turned out. The result was that many wound up with heavy inventories, much of it taken on credit and the retailers unable to pay their suppliers.

CHINESE MANUFACTURERS, INCLUDING RELATIVE NEWCOMERS TO THE TRADE, had extended large amounts of credit in anticipation of a lucrative business with the previously booming Russian market. Faced with the choice of taking back their merchandise or unloading the garments at sacrifice prices through other outlets, many are understood to have opted for the latter. The reports are that thousands of pieces were sold at prices ranging from $300 to $1,000, representing losses of as much as $600 per garment in at least one of Moscow's districts. Russian authorities were said to have halted some operations for non-payment of taxes, hiring workers without permits or other illegalities. The belief is that the government acted legitimately and that order will be restored to the fur business.