Foreign Retail Enterprises in China

Foreign retail enterprises began trickling in China as early as 1992. By 2000, over 350 such enterprises were operating under various local sanctions, but only 40 of them had gained proper approval from the central government. A crackdown followed, presumably in anticipation of WTO entry, requiring foreign investors to conform to a set of trial regulations passed in 1999. These regulations limited investors geographically to capitals and single-city administrative regions and set tough requirements on assets and profitability.

clip image002 thumb4 Foreign Retail Enterprises in ChinaRegulations were again changed on WTO entry with the unveiling of a new plan for the retail sector’s transformation. Their rules initially stipulated even more constrictive geographical limits, minority partnership for foreign firms in joint ventures with domestic enterprises, and limits on the number of ventures and their branch networks. After two years, these constraints were softened and have now been dropped completely.

The world’s two largest retailers, Wal-Mart of the US and Carrefour of France, both endured hard times for nearly a decade following their debuts in China. Carrefour, China’s largest foreign retailer with over 170 stores open to date, saw its first profitable year as late as 2003. That same year, Wal-Mart was still reporting net loss, having done so consecutively each year since its introduction to China in 1996.

With restrictions eased, these two giants and other foreign firms all have big expansion plans. In 2010 Wal-Mart opened   47 new stores in Mainland China, reaching a total of about 225. The foreign influx underway may be the biggest overhaul of the Chinese retail market ever, with unpredictable results.

Characters thumb4 Foreign Retail Enterprises in China

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