China's Retail Market Profoundly ChangedNo little pressure has been exerted on Chinese retailers due to massive inflow of foreign capital into China's retail market in recent years. Hence "The wolf has come!" alarm sounded.China's opening of retail business started from 1992, and by the end of last year there were altogether 28 joint ventures ratified by the State Council, 277 approved by local governments, with a total fund of around US$2bn lured. So far, 70 percent of world top 50 retail conglomerates have entered into China, such as Wal-Mart of the US, Carrefour of France, Metro AG of Germany and Ito Yokado of Japan, and their success has doubtlessly stiffened their spines in China investment. China's retail business was opened at measured strokes. In July 1992, the State Council granted its "go-ahead" to foreigners for setting up one or two pilot ventures respectively in Beijing, Shanghai, Tianjin, Guangzhou, Dalian, Qingdao and five special economic zones. But they must be equity joint ventures or contractual cooperative enterprises with China side holding over 51 percent shares. They were not allowed to conduct wholesale business and their rate of imported commodities couldn't exceed 30 percent. In June 1999, approved by the State Council, the opening range was extended to all provincial capitals and cities exercising independent planning. Meanwhile foreigners were allowed to wholesale deals of self-imported commodities, a milestone in China's retail opening. What these foreign retailers carried with them are not only rich capital but also advanced operation theories, marketing strategies and management science, thus a profound change made to China's traditional retail industry. Foreign retailers' turnover of consumption goods in 1999 reached 28.4bn yuan, 26 percent up over the previous year. Their business thrives though taking a mere small share of the national. Under such circumstances, China's traditional department stores could no long hold fast to their markets and have been gradually elbowed out, replaced by colorful foreign forms as supermarkets, round-the-clock stores, shopping centers and chains, stockroom-style supermarkets, etc. This has also accelerated China's market-oriented process and added fuel on market competition, pressing domestic enterprises to pull themselves together for improved performance. However, at the same time we cannot ignore the side effects of foreign capital's intrusion. Escalated market competition has led to oversupply and an ill balance in markets. A batch of less competitive enterprises was weeded out and the national economy was harmed. China's cheap labor and preferential tax policy have bestowed generous returns to these foreign investors thus causing huge outflow of domestic profits. Meanwhile, with most foreign retailers operating in big cities and developed regions and nearly none in under-developed areas, China's west in particular, disparities inevitably arise to rule out a coordinated development of China's retail industry. For a fledging industry proper protection of home retailers is needed in the face of foreign capital flooding in, expert says. For developed countries have finished their industrial expansion and thus acquired comparative advantages in the fields of service and trade. But the protection will by no means take the form of rejection; on the contrary, it should be a rational combination of foreign fund utilization and a boost to retail industry in China. By PD Online Staff Member Li Heng |
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