China Opening up Commercial Sector

BEIJING, July 28 (Xinhua) -- China is further opening up its commercial sector to provide a better investment environment for overseas investors who expect to garner a slice of the huge pie.

The central authorities recently approved another joint project by China Normart Enterprise Corporation and US COSTCO to set up a chain store in Beijing, and a dozen other projects are set to be approved by the government.

China has opened more cities to overseas investors for joint commercial businesses, with new regulations from the State Economic and Trade Commission (SETC) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC).

The Regulations On Overseas Investment in Commercial Business For Trial Implementation allows overseas investors to establish joint retail sales outlets in the capitals of all provinces, autonomous regions, and a number of designated cities on the Chinese mainland. Previously, this activity was confined to eleven coastal cities.

Wholesale business has been opened to overseas investors as well, but is still restricted to the cities of Beijing, Shanghai, Tianjin, and Chongqing.

Retail and wholesale giants like the US Wal-Mart and Germany' s Metro have shown great enthusiasm in applying for new projects since the introduction of these new regulations last month.

Ye Hui, director of SETC's overseas fund management department, says that China has made these new commitments in full consideration of the country's domestic situation, however "the expansion of overseas involvement in retail and wholesale businesses does not mean full-blown opening of the sector."

"China's attitude toward opening up has always been consistent, but China will push the drive according to its own timetable," he adds.

The regulations also clearly outline the qualifications for overseas applicants, their share-holding ratio, and specific authorization procedures. This is regarded as the most specific and comprehensive regulations regarding overseas investment in commercial enterprises yet announced.

Huang Hai, an economist with the State Administration of Internal Trade, points out that the entry of overseas businesses will not seriously affect China's domestic commercial businesses.

China has only 21 state-approved joint retail enterprises, and another 277 joint retail companies are authorized by local governments. Their total sales volume remains below two percent of all retail sales nationwide, he explains.
Market analysts believe that it is inevitable and necessary to further open up the commercial sector. China has adopted a gradual opening of its commercial areas so far.

On the one hand, the inflow of overseas capital can resolve the financing problem of most domestic retailers, and on the other hand, overseas investors will bring modern marketing patterns to China, which will greatly benefit domestic enterprises, and also mitigate the downward trend in China's utilization of overseas investment.

China has been considered one of the world's largest markets, with huge potential. Official statistics show that total retail sales nationwide hit 1.48 trillion yuan in the first half this year, up 6.4 percent from the same period last year.