China's going to nurse its own commercial conglomerates

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Last updated at: (Beijing Time) Sunday, March 21, 2004

China's going to nurse its own commercial conglomerates

From Mar. 16 to 17 the Chinese Ministry of Commerce held a national conference on the reform and development of circulation business in Beijing, the first one since its establishment.

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From Mar. 16 to 17 the Chinese Ministry of Commerce held a national conference on the reform and development of circulation business in Beijing, the first one since its establishment. The meeting is focused on how to get into full operation of the reform and development in circulation business, discuss in depth on deepening the reform of circulation enterprises and issues, such as speeding up the cultivation of circulation giants with international competitiveness. Also discussed at the meeting is the promotion of the development of medium-and-small circulation concerns and for a further modernization of the circulation industry.

Fully open to foreign competitors by the end of the year

Zhang Zhigang, vice Minister of Commerce, said at the conference, China is going to get its commercial sector more open to the outside world in order to honor its WTO commitment. Restrictions on foreign-funded businesses in this industry will be lifted at Dec. 11 this year in terms of the number, equity and geographic coverage.

Starting from 1992, the commercial sector in China has actually made an accumulative use of foreign capital amounting to about USD 3 billion by September, 2003 and in the period, 264 foreign-invested commercial enterprises and branches, mostly in new circulation business, have got approval for their establishment, disclosed Zhang Zhigang. The influx of foreign capital has helped to accelerate the modernization of China's circulation sector. Foreign players have brought to Chinese counterparts the best management experience, marketing savvy and business models of the world, which has promoted the growth of domestic business in this aspect.

The authority in this industry points out that there is so much to be improved in the use of foreign capital in the commercial industry. The indication can be found in the following figures. Of the total actual use of foreign fund in the country, the commercial sector only used a bit of about 0.6 percent while the sales revenue contributed by foreign-funded commercial enterprises to the retailing sales volume of the national gross consumer goods, came to a merely less than 3.5 percent. In addition, geographically speaking foreign retailers are mostly located in major cities in developed areas of east China and are specialized in supermarkets. It is expected that they will expand their footholds to the central and western regions of China and to tap for more types of business in this industry when China's commercial sector is open wider to the outside world.

Circulation business still weak

Zhang Zhigang made the comments that the circulation industry was still a weak link in the national economy of China. With all its small enterprises, low intensification, backward management expertise, and poor modernization it has hampered the overall competitiveness of the China's circulation industry.

In 2002, the circulation industry (including the wholesale, retailing and catering trade) contributed 7.8 percent to China's GDP, a sharp contrast to more than 15 percent of the GDP attributable to the sector in developed countries in 1990s such as the US, Japan, Britain, and France. The same year saw China's tertiary industry absorb 28.6 percent of employment in which the wholesale, retailing and catering made up a meager 6.7 percent of employment, much lower than the average in the developed countries.

Zhang Zhigang further analyzed that the circulation industry was facing a new situation for its reform and development. The goal and content for a fully well off society mean that the consumption structure is upgrading in China and new hot spots of consumption have come to appear. Given the condition, it is urgently necessary to develop modernized means of circulation and organization forms to promote the new industrialization. Motivated by the globalization and especially by China's WTO membership foreign retailers will further step up efforts to make their presence in China with a faster pace China's circulation business will be faced with new Lashes and challenges. Chinese enterprises in the circulation sector should waste no time in speeding up their reform and keep on expansion to sharpen their international competitive edge.

Nursing circulation giants

To make the weak circulation industry stronger, said Zhang Zhigang, the Chinese government would accelerate the reform and development of the circulation sector by making more efforts on reform of circulation businesses. That is to nurture large players in the trade and promote the healthy growth of medium-and-small enterprises, thereby improving the modernization of the sector.

Zhang Zhigang also released that China expected to foster 15 to 20 large circulation corporations in 5 to 8 years for them to develop their own brands and intellectual property rights with specialties and strong core competitiveness and fundamental capability as well for racing against international rivals in the world field of games. Potentially promising players will be selected from large scale strong wholesalers and retailers, as well as powerful circulation enterprises in the industries of refined oil, automobile, steel products, supplies for agricultural production, construction material, pharmaceutical distribution and foreign trade. Whoever picked out will get special guidance and support from the government in major factors affecting the development of large circulation enterprises, such as system, strategies, management, finance and branches as well as techniques and talents.

A batch of domestic circulation businesses relatively large and powerful has so far emerged in China. There are 98 listed circulation businesses all over the country and more than 20 commercial and material circulation businesses generate an annual sales revenue of over ten billion yuan.

By People's Daily Online

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