Ministry plans contract regulations solve supplier-retailer tensions

14:45, February 17, 2011      

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China's Ministry of Commerce and related industrial associations are formulating rules governing contracts between suppliers and retailers, said ministry spokesman Yao Jian, referring to questions about Carrefour's tense relationship with suppliers in China.

At the end of last year, Carrefour was involved in a series of disputes with its suppliers, including Master Kong, a Taiwan-based instant noodles supplier, owing to the fact that the retailer refused to lower the high entrance fees and sales commissions it charges.

The problems in relationships between suppliers and retailing giants exist not only with foreign-funded companies. The core reason for this issue is the fact that manufacturing is flourishing in China, while the development of retail is lagging behind, Yao said at a press conference today.

"We have been working with industrial associations to establish new contract regulations, hoping to solve the problem through standardized contracts between suppliers and retailers," he said.

Meanwhile, Yao also mentioned a new coordination mechanism that would be established jointly by the Ministry of Commerce and China Chain Store and Franchise Association.

Yao reiterated the promise China made when joining the World Trade Organization (WTO) to further open its services industries, adding that both foreign-funded retailers and manufacturers have significantly boosted China's economic development.

Last year, 318 foreign-funded retailing enterprises were established in China, up 13 percent year on year. Total utilized foreign capital in the retailing industry was 1.09 billion U.S. dollars, 9.1 percent higher than 2009.

Except for the tension with suppliers, some Carrefour stores in China were fined up to 500,000 yuan, or 75,987 U.S. dollars, for deceptive pricing by the National Development and Reform Commission.

According to a report by the Global Times, a Carrefour store in northeastern China's Jilin Province has stopped replenishing stock and may face closure. China Business News also reported a Carrefour in Zhejiang may close before May 1.

By People's Daily Online
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