Despite their rapid development, China's chain businesses lag far behind the international giants in terms of scale, business operation and goods purchasing management.

"They should sharpen their competitive edge via re-organizations, acquisitions and mergers as soon as possible," said Huang Hai, director-general of the Department of Trade and Market under the State Economic and Trade Commission (SETC).

According to a September survey by SETC and the National Bureau of Statistics, China has 519 chain stores and chain restaurants, employing 550,000 people.

The survey, the first of its kind in China, covers all chain stores with an annual sales volume of no less than 5 million yuan (US$602,000) and chain restaurants with an annual sales revenue exceeding 2 million yuan (US$240,000), with each operating more than 10 outlets.

By the end of 2000, there were 459 chain companies with 18,790 outlets in China, up 28.6 per cent and 53.2 per cent respectively compared with the previous year.

Their sales volume totalled 72.9 billion yuan (US$8.8 billion) in 2000, 59.8 per cent higher than in 1999.

"On average, each enterprise has more than 40 outlets, far less than a middle-scale chain in the United States, France or Japan," Huang said.

He said the quickest and easiest way for domestic chain businesses to expand is via mergers and acquisitions.

The survey also indicated that most of China's large chain enterprises are in coastal areas and key cities such as Beijing, Shanghai and Guangdong.

By the end of 2000, there were 114 such enterprises in Beijing with 1,808 outlets and 70 in Shanghai with 4,695 outlets.

(China Daily February 9, 2002)