Competition among foreign retailers in China has heated up since China entered the World Trade Organization (WTO) nine months ago.
According to a survey by the State Economic and Trade Commission (SETC), foreign-funded firms now account for 23 percent of the large-sized supermarkets.
Such multi-national retailers as Wal-Mart and Carrefour have already earned a solid market and growth potential in China as their chain stores offer roughly 60-70 percent of the food and daily necessities for residents in China.
The SETC predicts that the multi-national retailers will expand their operations to all parts of China within the next 12 to 24 months.
The pace for overseas retailers entering the Chinese market has accelerated since China joined the WTO last November. In the first half of this year, all foreign companies winning access to Chinese market were either in the top 500 of the world or were top guns in Taiwan and Hong Kong. Among the 28 stores newly opened in China, 24 are large-sized super markets with a shopping area of more than8,000 sq m each.
Multi-national retailers have become the forerunners in expanding market shares in China so far this year, said Huang Hai, director of the Trade and Market Department of the SETC.
Fierce competition has led to a thinner profit for commodity distributors in China than the rest of the world. The SETC estimated that the net profit rate of Chinese supermarkets was around two percent in 2001, much lower than the greater than 3 percent ratio of the world-famous Wal-Mart.
Only the financially strong multi-national companies can sustain a low-profit expansion during the first few years of entering the Chinese market, according to Huang.
Such retailing giants as Carrefour, Groupe Auchan and JUSCO entered China several years before the country joined the WTO. Having taken root in the relatively affluent east, they are now expanding into western parts of China. In the first half of this year, Carrefour opened three new joint ventures in Changsha, Chengdu and Kunming cities in central-south and southwestern areas.
Opening the distribution industry to foreign firms represents part of China's WTO commitment to open up its service trade. So far, China has proceeded faster than the WTO timetable by opening scores of big and medium cities to foreign retailers.
As the Chinese economy sustains a fast growth and retail sales surged 8.6 percent in the first half of this year, foreign retailers increased their share of the market. In Beijing and Shanghai municipalities, the ratio of foreign retailers' sales to the total sales of large- and medium-sized local retailers increased by 0.5 and 2.7 percentage points respectively.
(Xinhua News Agency September 25, 2002)
