Foreign retailers have neither swarmed to China, nor have they expressed a desire to change their status to wholly-owned companies since the nation opened up the sector.
Huang Hai, assistant minister of commerce, said no foreign retailers had applied to be solely foreign-funded despite the scrapping of the restriction according to China's commitments to the World Trade Organization (WTO).
"We have accepted several applications to set up wholly foreign-owned companies in the commerce sector, but none of these are from retailers," Huang told China Daily on the sidelines of a high-level forum for Chinese and foreign retailers.
Huang declined to name the applicants, but said they are all wholesalers.
He added that the number of foreign retailers applying to open new stores had not increased because of the lifting of the restriction.
Huang said China now has more than 10 wholly overseas-funded companies in the commercial business, all established under the Closer Economic Partnership Arrangement (CEPA), rather than the recent opening of the sector.
The CEPA, a favourable trade arrangement similar to the free trade agreement, allowed qualified Hong Kong or Macao-based companies to be solely overseas-funded since January last year.
The Chinese Government lifted the restrictions on shareholding, locations and store numbers for all foreign-funded companies in the commercial sector since December 11 last year.
Huang said he believed most of the foreign retailers will maintain their existing co-operation with local partners.
"And more foreign retailers will open new stores through mergers or acquisitions with local partners because of the good locations they have," he said.
Li Fei, a professor with the School of Economics and Management at Tsinghua University, said most of the overseas retailers would not be eager to set up wholly-owned companies.
"They may depend on their Chinese partners to gain low-risk and low-cost access to business networks," said Li.
"Anyway, the Chinese market is a mix given its vast territory, thus, it is more efficient and safe for the foreigners to obtain help from their local partners."
Meanwhile, foreign firms will pick up the pace of their expansion and march into the second-tier cities and the nation's central and western regions.
He said he believed the full liberalization of China's retailing market would not have much impact on domestic retailers.
"So far, most local retail companies have not taken full advantage of their sources, in terms of their specific public relations and rich knowledge of the local consumer habits," said Li.
Their urgent task is undertaking self-analysis and finding their unique advantages.
Wal-Mart, the world's top chain retailing enterprise, has announced that, given its good co-operation with its Chinese partners, it would not seek to set up a solely-owned company in a short period of time.
"Wal-Mart is actively evaluating the opportunities in China's provincial cities. We expect to open 10 to 15 stores in 2005 based on our current approvals and move into the first provincial cities in 2005," said John Xu, the director of external affairs for Wal-Mart China.
The retailing conglomerate currently operates 42 stores in 20 cities, stretching from Northeast China's Harbin to Southwest China's Kunming.
Last year, it pooled US$1 million co-operate with Li's school to launch a Chinese Retailing Enterprises Research Centre.
According to statistics from the Ministry of Commerce, a total of 108 foreign retailing companies have been approved in China with an accumulated investment of US$840 million. They opened 3,361 stores, covering a space of 6 million square metres.
The investment only accounted for 0.15 per cent of China's accumulated foreign direct investment.
