China's retailers optimistic about foreign competitors' full entry

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Last updated at: (Beijing Time) Tuesday, March 23, 2004

China's retailers optimistic about foreign competitors' full entry

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From the original overwhelming fear to calmly facing today's fierce competition, China's retail sector has gradually got used to foreign rivals' presence. Although anxiety remains as the WTO's (World Trade Organization) full market-opening deadline nears, many have displayed confidence to carry on.

"China's future retail leader might not be us, but without any doubt it will be a home-bred company," said Du Sha, general manager of Homeworld, a renowned shopping mall chain based in Beijing's neighboring city Tianjin.

Du's confidence comes with good reason. As many domestic supermarkets are struggling in a fight with foreign giants like Wal-Mart and Carrefour, Homeworld has succeed in beating Carrefour to take the No. 1 place in its hometown.

Expanding in northern China's large and medium-sized cities, Homeworld represents a new business mode that combines hypermarkets for daily necessities, construction material and also a chain seafood restaurant, an operation never seen in foreign competitors and a boost to many domestic retailers looking for their niche.

"We have our own advantage," Du said, "retailing is an old industry closely related with national culture, which means it cannot but be led by domestic businesses in the end."

Li Ling, a department store managing director in east China's Zhejiang Province, echoed Du's optimism.

"We're not afraid of competitors," she said, "today's retail sector in developed countries is our tomorrow."

Like them, many retail personnel agree that foreign retailers, while developing themselves, have facilitated China's homebred retailers' growth with their advanced management concepts and methods.

But anxiety about potentially rapidly rising foreign pressure remains, as Carrefour and Wal-Mart boast annual global sales of billions of US dollars, China's local retailers are far from being strong.

The sector has been urging the government to stop granting preferential national treatment, such as lower rent, more favorable downtown locations and tax breaks, to foreign retailers, viewing it as a competitive edge unfair for domestic businesses.

Pei Liang, secretary general of the China Chainstore and Franchise Association, said the way for China's retailers to become bigger and stronger lay in capital operation, merger and acquisition.

"Assets of most of the domestic players in the field are worth only several hundred million US dollars," he said, "that means it is possible for domestic companies to buy them."

So far, foreign retailers have invested three billion US dollars in China's mainland since 1992, and authorities have approved 264 foreign-funded ventures with 2,200 chain stores.

Besides easing limits on foreign ownership and the number of foreign-owned retail branches by Dec. 11, the anniversary of China's entry into the world trade rules body, China will also allow foreign players to have a presence in medium-sized and small cities and even the rural market.

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