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Domestic Giants to Score a First in Home Appliances
Domestic giants and foreign partners are joining hands to develop the first joint venture in the home electrical appliance sector in China.
The Beijing-based Guotong Electrical Appliance Company announced it has reached an agreement with the Asia Financial Service Company, a body under the United States-based International Enterprise Service Group.
Chairman of Guotong's directors' board Dai Yunhua said the capital invested in the joint venture will be several times that of other domestic retailers in the field.
But Dai refused to release details of the investment, saying that according to current government policies, the foreign partner can hold as much as 30 per cent of the stakes in the venture.
Last week Guomei, another Chinese consumer electronic appliances retailing giant, revealed its plan to start negotiations with its foreign counterparts on co-operating within two weeks, and said the US-based Best Buy Inc could be a possible choice.
Guotong, Guomei and Suning are the three largest retailers of home electrical appliances in the country.
The fierce competition between the three giants added ammunition to the price cutting war in the home electrical appliance industry.
But Li Xihua, professor of the Commercial Economic Research Institute under the Internal Trade Bureau, said that although the three giants have been destinations for consumers who want to buy electrical appliances, their current scale will not be able to withstand challenges from foreign retailers after China enters the World Trade Organization.
The world's retailing giants often have 500-600 chain stores, compared to the 20-30 owned by domestic giants.
"Co-operation between the domestic giants offers the best way for their future development,'' Li said, "Joining hands with foreign partners is also ideal for a quick expansion and learning experience.''
Sang Qi, the secretary of Guotong's board of directors, said that with globalization, co-operation with foreign giants will be a trend.
"If we move earlier, we will gain a favourable position in the coming competition against foreign rivals after China's accession to the WTO,'' she added.
Although the foreign giants have more capital and richer experience in running a big sales network, Guotong's reputation among customers, good relations with local producers and its network will be factors that foreign partners must rely on, he said.
She revealed that Guotong is trying to raise more capital through issuing shares overseas.
Guotong has 30 stores around the country and harvested a sales volume of 3 billion yuan (US$363 million) last year.
It has planned to expand to 80 stores this year.
Sang said that with help from its foreign partner, the Asia Financial Service Company, Guotong is seeking to be listed in the United States.
She said the company has been preparing for listing for half a year.
The listing has been delayed by the rumour that Guotong's Shanghai chain stores were breaking down for lack of money.
Another giant, the Jiangsu-based Suning, is also mulling over going public to speed up its expansion around the country.
Source: China Daily
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