China defends new retail rules
Regulations ‘not aimed at specific retailers’
December 21 2003
China has insisted that its plans to regulate further investment by foreign retailers are intended to ensure the industry’s development rather than penalise any particular company.
The measures, announced last month and scheduled to come into effect as early as January, have been seen as potentially slowing down the expansion of supermarket retailers such as Carrefour, as well as to a lesser extent Wal-Mart and Metro.
The boom in foreign retail investment in China has been seen as coming at the expense of local operators.
China promised to ease central government restrictions on foreign investment when it joined the World Trade Organisation two years ago. Under its new proposals, retailers will be given one of three rankings.
‘A’ rated companies, those which have breached no rules, face no future investment restrictions. Those which have breached regulations in the past and then changed their ways will be ‘B’ rated and will not be allowed to invest or open new outlets in the country for one year.
Retailers judged to be repeat offenders will be given a ‘C’ grade, with investment be held back indefinitely
When the rules were announced, official newspaper the Peoples’ Daily quoted an expert who said: “The measures will halt the Carrefour-style of expansion practised by foreign retailers in China during the last few years.” The French supermarket giant faced official criticism in 2000 when it was ruled to have opened stores without central government approval.
Some retailers have found that Chinese regional authorities tend to be more amenable to the prospects of inward investment than state officials. The new regulations are in part aimed at taking back central control of retail development in China.
The Chinese Ministry of Commerce has now circulated its draft proposals to foreign and local retailers. Ministry official Huang Zhizhu told news agencies: “The rating system is aimed at regulating disorderly competition in the sector and does not target any particular firms.”
Carrefour has 41 stores outlets in China and has plans to open three hypermarkets in the next three year. Neither Wal-Mart, which has 31 stores and plans for more, nor Metro, with 17 outlets and a $720m investment programme in 40 new stores over the next five years, is thought likely to face too many obstacles under the new rules.
Kingfisher, which has 14 B&Q DIY outlets in China and plans for up to 70, is also understood to be on reasonably cordial terms with the Chinese government.
