Carrefour restarts Chinese expansion
food retailer, has this week opened its first hypermarket in China
for nearly two years after finally ensuring that its operations
there comply with Chinese regulations.
Carrefour has been active in China since 1995, operating more than 40 stores there, but its most recent store opening plans have had to be put on hold while it restructured its business to include a local partner - a rule imposed on all foreign businesses moving into China.
The new hypermarket is based in Urumqi, in the north west of China and is one of 12 new stores planned by Carrefour in China this year, including another one in the same city, a fifth in Beijing and a seventh in Shanghai.
But Carrefour was forced to shelve plans to open eight stores in China last year following revelations that earlier store openings had gone ahead without the necessary regulatory approval.
Foreign companies must operate through joint ventures in China, and can hold a maximum stake of no more than 65 per cent in the venture. Carrefour has, as a result, had to sell 35 per cent stakes in three of its stores in north eastern China to two domestic trading firms, Chengda and Harbin Dongli Equipment Co.
Perhaps as a result of these somewhat draconian regulations - which are likely to be phased out as a result of China's entry into the World Trade Organisation - foreign retailers have so far failed to have the same kind of impact on the Chinese market as they have in other Asian nations.
The latest figures from the Ministry of Commerce, published earlier this month, listed the top 30 retail groups in China, including foreign-owned or funded companies for the first time.
Carrefour (China), China Resources Vanguard, Suguo Supermarket, Wal-Mart (China), Jinjiang Metro and Haoyouduo Supermarket were the six foreign-owned new entries to the list, and between them accounted for sales of 49.5 billion yuan in 2003, some 18.3 per cent of total retail sales from the top 30 players.
The six groups operated a total of 1,748 stores by the end of 2003, accounting for 16.9 per cent of the total store portfolio from the top 30. Total sales by the top 30 were 270.4 billion yuan in 2003, up 29.2 per cent. The total number of stores was 10,321, up 35.1 per cent year-on-year.
"The statistics indicate that local chain store operators are still dominating the industry despite challenges from foreign counterparts," said Huang Hai, an assistant minister.
China has promised to lift restrictions on capital composition and locations within three years of its WTO accession in December 2001, but the minister said he did not expect that this would lead to a rapid influx on foreign retail groups.
"The aggressive entrance by foreign investment is impossible as room in the east is limited because of fierce competition," he said. Most of China's biggest cities are in the east of the country, including Beijing, Shanghai and Hong Kong, and competition in these markets is already very intense.
Few foreign companies have as yet made inroads into central or western China, although Carrefour's newest store is a clear exception - and growth there is likely to be much slower than in the more populous regions further east.
