The zone, located in the city of Ussuriysk near the border of Heilongjiang Province in northeast China, is one of six zones to be established in foreign countries -- the others are Zambia, Mauritius, Thailand, Pakistan and Cambodia.

The Ussuriysk Economic and Trade Cooperation Zone, approved by Russian and Chinese commercial authorities, covers 2.28 million sq meters.

More than 60 large and medium-sized domestic and overseas companies specializing in a large variety of manufacturing and processing industries, including shoes, apparel, timber, household appliances, automobiles and components, are expected to set up offices and plants in the zone.

Products will be exported to Japan, the Republic of Korea, the United States and southeastern Asian regions, with transportation and costs considerably lower than on the Chinese mainland.

Companies in the zone will enjoy preferential tax policies and comprehensive legal and logistics services including business registration, customs and land procedures and visa applications.

The first phase costing 400 million yuan (53 million U.S. dollars) has seen production lines of six Chinese enterprises go into full operation, making shoes, wood and furniture.

More than 500 Ussuriysk residents are working in the zone, earning about 2,000 yuan (263 U.S. dollars) a month, which is higher than the local average wage.

Russian people are expected to have more job opportunities when the project comes fully onstream in 2010.

Establishing overseas economic and trade zones is one of the three "go-out" steps initiated by China's Ministry of Commerce to mobilize domestic privately-run enterprises to explore the world market during the country's 11th Five-Year Plan (2006-2010) period.

The ministry also encourages companies to set up branches in technologically developed countries and regions. Enterprises in the tertiary sector are encouraged to provide contracted project services, labor, and telecom, transport and technological services to the world market.

The Ussuriysk zone fills a need after a ban on foreigners selling goods in Russia's hugely popular retail markets came into force in April. A large number of Chinese retailers who have been active across Russia were forced to desert their stalls.

Russian police occasionally raided some retail markets, carting away goods from Chinese merchants on the grounds that there were no legal entry papers for the commodities.

The goods, however, entered the country through what is known as "grey customs clearance," which is recognized by Russia's Customs Commission.

The long-standing practice involves intermediaries that handle customs clearance for bulk commodities loaded in planes or containers trucks.

After paying the so-called "customs clearance companies," the consignors of the goods do not have to deal with Russian customs authorities in person. However, they receive no official customs declaration documents.

The cooperation zone, with legal registration and governmental recognition in all processing and trading procedures, is expected to standardize non-governmental bilateral trade, reduce business friction and bring economic benefits to both sides.