Last Nov. 29, the fortunes of Sichuan Changhong Electric Co, an appliance maker with headquarters near China's largest panda bear reserve, soared.
Wal-Mart Stores Inc, the world's biggest retailer, had picked the Chinese company as a color TV supplier for its one-day "Thanksgiving Blitz" in the US. The event netted Wal-Mart US$1.4 billion in sales of home electronics, toys and other products. It helped Changhong double its profit last year to 176 million yuan (US$21.3 million).
The decision by Wal-Mart and rivals such as Best Buy Co and Circuit City Stores Inc to carry everything from Chinese TVs to textiles to toys also helped fuel the US trade deficit, which last year totaled US$103 billion with China, the widest gap between any two nations in history. Wal-Mart is the biggest purchaser of China's goods, buying so much that if the Bentonville, Arkansas-based retailer were a country, its US$12 billion in purchases from China would have made it the Asian nation's eighth-largest trading partner last year, ahead of Russia and the UK.
"The retail landscape in the US is very consolidated, making it much easier and cheaper for Chinese manufacturers to penetrate," worsening the trade deficit, said Paul Gao, a consultant at McKinsey & Co in Shanghai.
For color TVs "the share of a couple of large retail chains is very high, easily over 50-60 percent of the total market," Gao said.
Wal-Mart rose from a regional discount store to the world's largest publicly traded company by sales in just two decades. It has led a consolidation in the retail industry that has enabled sales for companies such as Changhong to skyrocket in the US, analysts say.
* Wal-Mart spent US$12 billion purchasing goods from China last year.
* It posted worldwide sales of US$244.5 billion last year, up 12 percent from the year before.
* Wal-Mart's purchases from China account for 10 percent of the US trade deficit with China.
Two discount retailers -- Wal-Mart and Minneapolis-based Target Corp -- accounted for 48 percent of the US$517.9 billion in products the 50 largest US retailers sold in the US last year, according to Bloomberg data.
Wal-Mart alone had US$244.5 billion in worldwide sales last year, up 12 percent from 2001. Exxon Mobil Corp, the second-largest US company in sales, had US$178.9 billion in sales last year.
Wal-Mart's trade with China is a one-way street, making it responsible for about 10 percent of the US trade deficit with China. More than four-fifths of the company's sales were in the US last year and 95 percent of the goods it sells in its 26 stores in China are sourced locally.
Wal-Mart's decision to sell Changhong's sets under the Apex Digital brand helped boost Chinese TV exports to the US last year 12-fold over 2001's level to US$480 million, leading to a finding by the US International Trade Commission last month that Chinese TV exports hurt US manufacturers.
US makers of everything from televisions to coffee tables say the flood of cheap Chinese imports is forcing them to shutter factories and fire workers, some 2 million of whom have lost their jobs in the past two years. US manufacturing contracted in June for the fourth-straight month, according to the Institute for Supply Management.
At the core of China's competitive advantage is a wage gap that allows the country to produce goods more cheaply than in the US. It takes the average US factory worker about two weeks to earn the yearly wage of his Chinese counterpart, who makes about US$1,000 a year, according to the Bureau of Labor Statistics.
Wal-Mart says it's just giving customers what they want: high-quality, inexpensive goods. The consolidation of the US retail industry has saved consumers about US$100 billion because businesses such as Wal-Mart can sell goods at lower margins than can department stores, according to Boston Consulting Group.