Picture the Great Wal of China: Wal-Mart’s conquest of China. With twice as many consumers as the United States and the European Union combined, China represents perhaps the largest growth opportunity for Wal-Mart in the world. The retailer operates in nine countries outside the U.S: Argentina, Canada, Germany, South Korea, Britain, China, Brazil, Mexico, and Japan. But China is the market that offers Wal-Mart the greatest expansion potential. As of its 2004 Annual Report, Wal-Mart was operating 28 superstores in China, 4 Sam’s Clubs, and 2 Neighborhood Markets. Since that report, Wal-Mart has built another 11 supercenters. Wal-Mart first entered the Chinese market in 1996. By 2003, the company had sales over $707 million, making it the 17th. largest retailer in China. But Chinese officials may not be willing to be encircled by the great U.S. Wal of China. A report from Bloomberg News this week suggests that government officials are nervous about Wal-Mart economic colonialism. New Chinese regulations are slated to take effect October 1st that “would steer overseas investment to smaller stores.” Bloomberg quotes a foreign trade lawyer in Beijing as saying, “China’s officials are worried about the mega-stores. China doesn’t want companies like Wal-Mart to dominate the market. If all of our wealthy consumers are taken by them, China’s domestic retail industry is finished.” Chinese chain stores are gearing up to increase their size and numbers to compete with U.S. firms like Wal-Mart. A story in the China Daily newspaper said that convenience stores, discount stores and smaller supermarkets would be “preferable choices” for foreign investors, citing a government Commerce Ministry official. These reported rules follow on the heels of a proposal last spring by the National People’s Congress, to create a legal framework for superstores in major cities, the newspaper said. When it joined the World Trade Organization in 2001, China made a commitment to open up its retail industry. As part of that pledge, by December of this year, China will eliminate rules requiring foreign retailers to operate with domestic partners and will lift restrictions on the location and number of foreign-funded stores that can be opened. Bloomberg reports that China’s government is also concerned that superstores, which need large parking lots, are not compatible with the country’s tougher rules on property development in urban areas. Wal-Mart officials in China said they had no news of any government change in investment policies. The Great Wal is spreading across China, while the company floods the United States with Chinese take out products.
It will be Christmas in China for Wal-Mart if the country removes all limits on the number of foreign retail stores within its borders. For more background on Wal-Mart and China, see the book “The Case Against Wal-Mart” available on this website.
