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Foreign retailers tread carefully
in China
BEIJING - Foreign retailers have
neither swarmed China, nor have they expressed
a desire to change their status to wholly owned
companies since the nation opened up the
sector under World Trade Organization (WTO)
requirements this year.
Huang
Hai, assistant minister of commerce, said no
foreign retailer has applied to be solely
foreign-funded despite the scrapping of the restriction
according to China's commitments to the WTO. "We have
accepted several applications to set up wholly
foreign-owned companies in the commerce sector,
but none of these are from retailers," Huang told
China Daily on the sidelines of a high-level forum
for Chinese and foreign retailers.
Huang
declined to name the applicants, but said they are
all wholesalers. He added that the number of
foreign retailers applying to open new stores had
not increased because of the lifting of the
restriction. Huang said China now has more than 10
wholly overseas-funded companies in the commercial
business, all established under the Closer
Economic Partnership Arrangement (CEPA), rather
than the recent opening of the sector.
The CEPA, a favorable
trade arrangement similar to the free trade
agreement, has allowed qualified Hong Kong or
Macau-based companies to be solely overseas-funded
since last January. The Chinese government lifted
the restrictions on shareholding, locations and store
numbers for all foreign-funded companies in
the commercial sector as of December 11.
Huang said he
believed most of the foreign retailers would
maintain their existing co-operation with local
partners. "More foreign retailers will open new
stores through mergers or acquisitions with local
partners because of the good locations they have,"
he said.
Li Fei, a professor with the School
of Economics and Management at Tsinghua University,
said most overseas retailers would not be
eager to set up wholly owned companies. "They
may depend on their Chinese partners to gain
low-risk and low-cost access to business
networks," said Li. "Anyway, the Chinese market is
a mix given its vast territory, thus it is more
efficient and safe for foreigners to obtain help
from local partners."
Foreign firms will
pick up the pace of their expansion and march into
the second-tier cities and the nation's central
and western regions, according to Li. He said he
believed the full liberalization of China's
retailing market would not have much impact on
domestic retailers. "So far, most local retail
companies have not taken full advantage of their
resources in terms of their specific public
relations and rich knowledge of local consumer
habits. Their urgent task is undertaking
self-analysis and finding their unique
advantages."
Wal-Mart, the world's top chain
retailing enterprise, has announced that given
its good cooperation with its Chinese partners,
it would not seek to set up a solely
owned company at this stage. "Wal-Mart is
actively evaluating the opportunities in China's
provincial cities. We expect to open 10-15 stores
in 2005 based on our current approvals and move
into the first provincial cities in 2005," said
John Xu, the director of external affairs for
Wal-Mart China.
The retailing conglomerate currently
operates 42 stores in 20 cities, stretching
from northeastern China's Harbin to southwestern
China's Kunming. Last year, it pooled US$1
million in cooperation with Li's school to launch
a Chinese Retailing Enterprises Research Center.
According to statistics from the Ministry
of Commerce, a total of 108 foreign retailing
companies have been approved in China, with an
accumulated investment of US$840 million. They
opened 3,361 stores, covering a space of 6 million
square meters. The investment only accounted for
0.15% of China's accumulated foreign direct
investment.
Singapore-based CapitaLand, a
leading property company in Asia, is the latest to
have jumped on the bandwagon. It has acquired two
large stores in Beijing. The move is part of the
company's aim to form its proposed China retail
property fund with listing potential. CapitaLand
Retail China Pte Ltd, a solely owned subsidiary of
CapitaLand Ltd, one of Asia's largest listing
companies, signed a cooperative agreement this
week with Beijing Hualian Group Investment Holding
Co Ltd to obtain two of Hualian's outlets in the
capital city, namely its Anzhen and Wangjing
stores, for 1.746 billion yuan (US$210.36
million). The two stores will be wholly owned by
CapitaLand Retail China.
Under the
same agreement, a 50-50 retail-management joint venture
will also be established with Beijing Hualian to
provide marketing and retail management services
for the under-construction Wangjing store as well
as other properties that CapitaLand Retail China
may acquire in the future. As one of the largest
chain retailers in China, Beijing Hualian, with
two listed subsidiaries on the Shenzhen and
Shanghai stock exchanges, has a portfolio of 68
outlets comprising department stores, shopping
malls and hypermarts spanning 35 cities in more
than 23 provinces in China.
(Asia
Pulse/XIC) |
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