As Wal-Mart Stores Inc, Carrefour SA and other foreign retailers crowd into China, they are greeted with open arms by a government which, in this industry at least, shows few protectionist proclivities.
A major reason for the welcoming attitude is that the foreigners, for all their lofty ambitions and deep pockets, remain minor players in a giant market where 1.3 billion people are learning the joys of mass consumption.
"Excessive market share [by a foreign company] is not a concern for the government," said Candy Huang, an analyst with BNP Paribas in Shanghai. "The biggest player in China currently has only around a 5 percent national market share."
The foreigners are working hard to become bigger. Earlier this month, British retailer Tesco Plc said it would open 10 more outlets in China this year after its first store in Beijing opened last month.
With a 90 percent stake in Hymall -- a grocery brand under Taiwan-based Ting Hsin International Group (
Home Depot Inc of the US also recently signed an agreement to buy China-based retailer Homeway's 14 home furnishing stores to better compete with British rival B&Q, which has 52 stores in China.
"Consolidation is definitely the trend," Huang said. "In the end there will be only three or so big players -- but the retail market will definitely not be dominated by foreign names."
Local authorities will not allow foreign players to totally dominate and will support Chinese retailers as they move to improve their procurement and marketing practices to overseas standards, analysts said.
Chinese retailers, too, are trying to become bigger using takeovers.
One example is GOME Electrical Appliances Holdings Ltd's (
GOME's takeover of China Paradise would only be deemed truly successful following full integration of their operations and business styles, observers said.
"We really have to see whether GOME-Paradise works," said an analyst at a Hong Kong brokerage.
"There are thousands of employees [in GOME-Paradise] and hundreds of new stores, so the big question is how to standardize negotiating strategies with suppliers," said the analyst, who declined to be named.
Like GOME, retailers in China are often choosing non-organic expansion to attain greater reach, said Tiger Tong, an analyst with Singapore-based Asia Knowledge.
"Mergers are accelerating because the market is simply too fragmented, and bigger players hope to merge their way into attaining more effective `economies of scale' to boost margins," Tong said.
He noted that in certain "sensitive" sectors such as machinery, China has tightened rules on mergers and acquisitions but the retail sector was not an area where the government was trying to restrict foreign participation.
"In the retail sector, China is encouraging foreign mergers and acquisitions," Tong said.
A proposal last year by the central government to consider regulating the number of stores or the rate of expansion for foreign retailers is unlikely, if passed, to be strictly enforced in practice.
"In terms of real implementation it would be terribly difficult to carry out," Huang said.
"Bear in mind that regional governments want to boost their economies so they are more than willing to let foreign retailers come into their cities or provinces to open stores to solve unemployment problems," she said.
Regulators were trying to find a balance between ensuring the vitality of big domestic retail outlets and responding to foreigners' complaints about entry barriers and opaque acquisition rules, she said.
CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’ US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said. Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said. He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation. Trump has claimed that Taiwan took up to
A start-up in Mexico is trying to help get a handle on one coastal city’s plastic waste problem by converting it into gasoline, diesel and other fuels. With less than 10 percent of the world’s plastics being recycled, Petgas’ idea is that rather than letting discarded plastic become waste, it can become productive again as fuel. Petgas developed a machine in the port city of Boca del Rio that uses pyrolysis, a thermodynamic process that heats plastics in the absence of oxygen, breaking it down to produce gasoline, diesel, kerosene, paraffin and coke. Petgas chief technology officer Carlos Parraguirre Diaz said that in
SUPPORT: The government said it would help firms deal with supply disruptions, after Trump signed orders imposing tariffs of 25 percent on imports from Canada and Mexico The government pledged to help companies with operations in Mexico, such as iPhone assembler Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), shift production lines and investment if needed to deal with higher US tariffs. The Ministry of Economic Affairs yesterday announced measures to help local firms cope with the US tariff increases on Canada, Mexico, China and other potential areas. The ministry said that it would establish an investment and trade service center in the US to help Taiwanese firms assess the investment environment in different US states, plan supply chain relocation strategies and
WASHINGTON POLICY: Tariffs of 10 percent or more and other new costs are tipped to hit shipments of small parcels, cutting export growth by 1.3 percentage points The decision by US President Donald Trump to ban Chinese companies from using a US tariff loophole would hit tens of billions of dollars of trade and reduce China’s economic growth this year, according to new estimates by economists at Nomura Holdings Inc. According to Nomura’s estimates, last year companies such as Shein (希音) and PDD Holdings Inc’s (拼多多控股) Temu shipped US$46 billion of small parcels to the US to take advantage of the rule that allows items with a declared value under US$800 to enter the US tariff-free. Tariffs of 10 percent or more and other new costs would slash such