China: a battleground for retailing giant

After Wal-Mart withdraws from the markets of Korea and Europe, it expands its outlets in China by acquiring Trust-Mart, one of the biggest retailers recently. Wal-Mart plans to hire 150,000 more people within 5 years.

Trust-Mart, a Taiwanese owned retailer, has 99 outlets. After Wal-Mart spent US$1 billion to acquire it, this retailing giant almost triples its number of outlet from 60 to 159 in China. Wal-Mart, like its rivals such as Carrefour, is going to eat up more and more shares of this highly fragmented and competitive market. It is estimated that the top 100 retailers take over only 10.5% of the retailing market. Only 20% of the retailing industry is "organized". Many multinationals see China as a market with great potentials, particularly considering the increasing middle class and their purchasing power.

Yet many doubt if the competition between domestic retailers and foreign companies is fair enough. Since the year of 2002, Zhang Hongwei, vice President of National Association of Industry and Commerce, has complained about the "super-national treatment" enjoyed by foreign retailers. Although some may argue that Zhang has vested interest, his criticism is not unfounded.

Many local governments offer favorable terms to global players such as Wal-Mart because more big brandnames help boost the property market. They could usually get land or rent subsidies from local government one way or another. That is why more than half top international retailers are already running business in China.