Ninety-seven percent of retailers from nine key Asian markets have strong confidence in China's retail market, according to Jones Lang LaSalle in its third annual retailer confidence survey of Asia.
Eighty-two percent of retailers expect overall performance to improve next year while 97 percent believe profits will remain stable or improve in the Chinese market.
The Jones Lang LaSalle Retailer Sentiment Survey is a gauge of retailers' confidence and examines factors that affect business. The third annual result was based on a survey of more than 160 international and local retailers from a wide spectrum of trades.
The survey showed an optimistic outlook for China's economy, with the rapidly expanding middle-class and booming tourism market being the main causes for confidence in the Chinese market.
China's gross domestic product (GDP), which has seen an average increase of 8.9 percent annually during the last seven years, is expected to rise by 10 percent to 10.7 percent this year, according to a previous forecast by the government.
Retailers in China are among the most aggressive in Asia in terms of expansion. Ninety-two percent expect to expand their networks in 2007, and none of the retailers polled said they would reduce store numbers.
"Although most of the retailers keep great confidence in the Chinese market, the key challenges cited by retailers are mainly related to business costs," said Michael Hart, head of research, greater China (North), with Jones Lang LaSalle. "The major concerns are fuel prices, increasing rents and the tax system."
Eighty-nine percent of retailers believed the biggest hurdle would be finding new store locations, saying it was difficult to find both a high-quality business environment and cost-efficient location.
China's retail sales of consumer goods surged 14.1 percent in November from a year earlier to 682.2 billion yuan, and the figure is expected to hit 8.6 trillion yuan (1.07 trillion U.S. dollars) in 2007, according to the Ministry of Commerce.
Retailers' confidence in the Asian market as a whole in the next 12 months is correspondingly strong, according to the survey, mainly buoyed by economic growth and rising incomes across the region.
Sixty-three percent of the respondents expect overall trading to improve, with only five percent expecting a weakening trend.
More specifically, 75 percent of respondents believe their sales volume will improve next year, comparatively favourable with the second survey in 2005, in which only 65 percent of the retailers expected higher sales.
However, retailers in Asia are more guarded about their profit expectations, with slightly more than half expecting an improvement in profit but an additional 43 percent believe profits will be stable.
Of those that plan to expand next year, increasing store numbers is the preferred choice, followed by increasing product range or services.
Compared with the Chinese market, mergers and acquisitions have become common trend for retailers across Asia as a method to achieve economies of scale, public resources and location advantages.
Retailers investing in the Chinese market say cost and a lack of qualified business locations are the major obstacles to securing suitable sites for expansion in the region.