By Rosie Goldsmith BBC Radio 4's Crossing Continents

Khabarovsk is the capital of the Russian Far East

Eight hours by plane or a week by train, Khabarovsk is a long way from Moscow. But it is not just distance that separates the cities. This part of Russia, on the eastern tip of Siberia, is developing a separate economy and lifestyle, partly due to the Chinese presence there.

Judging by the new ice skating rink in Khabarovsk, life is good for Russians living here. The rink is the most modern in the country.

It seats over 7,000 spectators and is the base for the successful ice hockey team, Amur-Khabarovsk, which is sponsored by a local gold mining company.

AMUR RIVER VALLEY A glimpse into life on the border between Russia and China In pictures

Bright and brash, the rink is evidence of private money coming into the city.

In the main street outside, the paint on the brightly coloured facades still looks wet. Cranes are everywhere, overshadowing the Soviet-era housing estates where the majority of residents still live.

Khabarovsk was once a forgotten outpost, but now the capital of the Russian Far East is waking up from a spell of hibernation. And the potential wealth of the area is staggering.

Vladimir Kuchuk feels the area is unable to utilise its resources

But it could still go horribly wrong.

"Just over a decade ago, with the collapse of the Soviet Union, this area was left unceremoniously out in the cold," said Vladimir Kuchuk, a regional government adviser.

"Under Soviet central planning we had a big defence and timber industry. With the arrival of the market economy and Moscow's lack of interest in us, we had to find new funds and new partners."

The region is rich in natural resources such as gold, oil, natural gas, timber and diamonds.

But Kuchuk told the programme: "We do not have the money to mine or develop them or to build pipelines."

According to Maxim Gladki, a Khabarovsk journalist, today its economy looks not west to Moscow for salvation but further east to Japan, Korea and China, all close and interested neighbours.

Economic tension

Anatoly Novokov is a local director of immigration

It is the Chinese which preoccupy the Russian Far East and their presence is highly visible. And although relations between the two former communist giants are officially friendly, there is economic tension.

Northern China shares a 1000 mile frontier with Russia along the Amur River, one of the world's longest. The city of Khabarovsk sits on its shores.

Since border restrictions were eased in the early 1990s, Chinese workers have flooded across the river to work as traders, constructions workers and farm labourers.

Northern China is developing fast but it lacks space and natural resources. The Russian Far East has all that. Meanwhile, Russia needs the labour to build up its new, burgeoning economy.

We cannot allow every foreigner with a dollar in his pocket to settle here Anotoly Novokov, Director of Immigration

Only eight million Russians live in the Far East. On the Chinese side of the border, there are ten times that number. One of the directors of immigration in the region, Anotoly Novokov, spoke of the dilemma in their dealings with the Chinese:

"This region of Russia is fast depopulating. We need a programme of resettlement. We must think of our own people and jobs first.

"There have been problems with illegal migrants and with poachers from China. The borders and the numbers of Chinese entering are now strictly controlled."

But he adds carefully, "We would treat German or French would-be immigrants in the same way. We cannot allow every foreigner with a dollar in his pocket to settle here."

Many Chinese migrants have come here to find work

At the Chinese market in Khabarovsk the Russian customers are not so guarded.

Galina said, "It is nice to have all these goods from China but why can us Russians not produce them?"

The market opened only 10 years ago. The 700 traders are Chinese - most on short-term visas - and all the goods, from food to furniture, are Chinese.

Another customer, Boris said, "The Chinese will overtake in the Far East."

Life of Luxury

A few more hours out of Khabarovsk is a village called Luxury. The name is in bleak contrast to the village itself. There is just one house, a pretty wooden dacha painted green, blue and brown.

If [the Chinese] want to come, let them come, as there is certainly enough land and work to do Valentina, farmer

Luxury also has only one inhabitant, a farmer called Valentina, who is in her 60s.

"We used to have a thriving, self-sufficient village with 130 houses," she said, "there used to be dances and orchards and pig farms. But now I am struggling to manage on my own."

Like most families in Siberia and the Russian Far East, Valentina's came from the West. With subsidies and coercion the Tsars - and then Stalin - moved people out here to live and work. In the 1980s the relative prosperity of urban life drove farmers out of their villages.

"The land is being neglected," Valentina says. "I am sad about all the people who have left who could develop the land."

She is pragmatic about the Chinese. "If they want to come, let them come. There is certainly enough land and work to do."

BBC Radio 4's Crossing Continents was broadcast on Thursday, 18 December 2003 at 1100 GMT.