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How Many Tests Has Carrefour to Pass?
Carrefour, born in France in 1963, is the world's second largest retailer. With market capital exceeding US$49 billion, it is now operating 3280 supermarkets in 26 countries and regions in Europe, Asia and America. The number, plus its discount and convenience stores, adds up to a total of over 8,800 Carrefour chain stores across the world.
Beginning its entry into China in 1995, Carrefour has thus far opened 28 stores in 15 cities across China and its sales volume hit 6 billion yuan annually. It plans to open 10 more in 2001.
On February 8, however, a piece of news came like a pail of cold water from the British "Financial Times". The report says, Carrefour violated the Chinese government's related stipulations on the opening of retail business. The Chinese government will adopt measures for the rectification of Carrefour and its specific measures will be issued in February. Carrefour's first branch set up in China's inland was at that moment engaged in sales promotion activities for the Lantern Festival (the night of the 15th of the first lunar month); domestic media did not publish any related information. On February 19, an official with the State Economic and Trade Commission (SETC) confirmed the news from the "Financial Times". On the afternoon of February 20, a bilingual (Chinese and English) dispatch was faxed from Carrefour's subsidiary in Chengdu to its headquarters in Shanghai, -- a report titled "Carrefour Runs into a Snag in China", carried in "Tianfu Morning Post", unveiling the details about "Carrefour's illegal operation". For a time, Carrefour became the focus of attention of leading domestic media. The media raised a string of questions; officials of the State Economic and Trade Commission made speeches, president of Carrefour arrived in China and Carrefour apologized.....In the face of a spate of questions from the media, Carrefour remained silent again. As a competent department, the State Economic and Trade Commission did not say a single word about the matter. The question now is how many tests must Carrefour survive in the face of the "yellow warning board"£¿
In spite of all this, Carrefour's business did not go downhill as a consequence. This reporter witnessed a buying spree once again in a Carrefour branch in Beijing on March 31.
Carrefour hasn't been shut in the end. It is, after all, only "warned by a yellow board", not "banished for being warned by a red board". It is clear that the door of the Chinese market is still opened wide to Carrefour, only if it "presents the required ticket".
Carrefour did have gone through a lawful examination and approval procedure for its entry into China and its development in the country. The trouble was that it was the local government that helped it perform the formality for setting up the branch, according to the SETC official, however, foreign businessmen, who plan to set up a chain store or a warehouse market, have to file an application to the State Council for examination and approval.
In July 1999, the Chinese State Economic & Trade Commission and Ministry of Foreign Trade and Economic Co-operation jointly published the "Experimental Method for Foreign Businesses Investing in Commercial Enterprises". The Method specifies the approval procedures for the establishment of Sino-foreign joint ventures. First, Chinese party to the joint venture shall submit a feasibility study report and related documents to the local economic and trade commission in the pilot area, which, on its part, shall, together with the internal trade department in charge, report to the State Economic and Trade Commission in accordance with the specified procedures. The Commission approves the report after soliciting the opinions of the Ministry of Foreign Trade and Economic Co-operation. Then, the local department of foreign trade and economic co-operation in the pilot area submits the contract and the articles of association to the Ministry of Foreign Trade and Economic Co-operation according to specified procedures. The Ministry of Foreign Trade and Economic Co-operation shall examine and approve the contract and the article of association. At this point, the approval procedure comes to an end. The approved commercial joint ventures shall, within one month after the day of the receipt of the instrument of ratification, bring with it the "Instrument of Ratification for Foreign-Invested Enterprise" issued by the Ministry of Foreign Trade and Economic Cooperation, to go to the State Administration for Industry and Commerce to perform registration formality. Violation of the "Method" will be subject to investigation and prosecution carried out by State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Co-operation, together with the State Administration for Industry and Commerce. Things to be approved by the State Council during this period are the reports that have been discussed and proved by the departments concerned, i.e., to approve the establishment of projects. Currently, there are only 21 approved joint retail commercial enterprises in China, of course, Carrefour is not included; in fact, there are nearly 300 foreign-funded enterprises that have actually entered China.
According to persons concerned, on the question concerning the entry of foreign retail commerce into China, the situation in which local governments, out of the consideration of their income tax revenues, transcend their approval power may appear. This being the case, why, then, the SETC does not simply delegate power to the local departments concerned, say, to the local administration for industry and commerce. This makes it possible to avoid repetition or going the roundabout way, and thus save both time and human and material resources, as well as timely grasping the good market opportunity.
How long does the procedure take for examination and approval? Entrepreneurs, who have been used to hearing the saying that "One yuan worth of money today is not equal to the same amount of money tomorrow.", do not know how large the number of "today" and "tomorrow" they have to wait for before they can pass through the whole procedures of examination and approval. For the enterprises, in the face of the same standard, it is without a doubt that violators of rules must be subject to penalty, otherwise, it would be unfair to the law-abiders. In terms of the government, how to find a best, agreeable point by the planning means or from the market law is a universal problem facing the administrative departments. It is our hope that a quick and effective method can be found to solve the problem concerning the entry of foreign-funded enterprises into the Chinese market.
By PD Online staff member Du Minghua
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