SM Prime seeks to boost the share of its spending in China as it acquires more sites for expansion, Sio said. This year’s investment in China is 46 percent of the 12 billion pesos SM Prime will spend on expansion.
China’s US$3.21 trillion economy is 22 times the Philippines’ US$144 billion. China’s economic growth accelerated to 7.9 percent in the second quarter, while the Philippines slowed to 0.4 percent in the first quarter.
“I am cautiously optimistic about the group’s expansion into China,” said Paul Joseph Garcia, who helps manage US$1.25 billion as chief investment officer at ING Investment Management Ltd in Manila. “China is a very competitive market and hard to penetrate. Even global retailers are not having it easy.”
SM Prime doesn’t sell retail space, preferring long-term recurring rental income to short-term gains, and will apply the same principle in China, said Hans Sy. SM Prime will focus on China’s emerging cities because their development and consumers’ profiles closely resemble those at home, he said.
To draw crowds into its China malls, SM Prime hosts events to mark Valentine’s Day, Halloween and Christmas.
“Little Miss SM” pageants are well received because China’s one-child policy makes it more likely that parents will dote on their children,” Hans Sy said.
“The success we are having now in China is from the formula here in the Philippines,” he said. “Whatever we do here, we do there.”
SM Investments posted record profit of 14 billion pesos last year, on growth at its shopping malls, grocers and department stores. SM Prime’s profit reached a record 6.41 billion pesos last year.
SM Prime, which is adding two more Philippine shopping centers this year after opening one in May, entered China in 2007 after buying Henry Sy’s malls in Xiamen, Jinjiang and Chengdu for US$252 million.
The company will by October double the size of its Xiamen mall, which Henry Sy opened in 2001. It plans to open a shopping center in Suzhou next year, in Chongqing the following year and in Zibo in 2012.
Rolling out one mall a year will allow SM Prime to build up its organization, gain further familiarity with China’s market and prepare for faster expansion in 2013, said Hans Sy.
“The malls will lead the way” for the group’s expansion into China, Sy-Coson said.
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