China's National Bureau of Statistics released new data this week showing the nation's retail sales for November rose by 13.9% year-on-year to nearly 497 billion RMB (US$60 billion; US$1= 8.3 RMB). It marked a slight drop from October's 14.2% growth.

 

Retail sales for 2003 amounted to 4.58 trillion RMB (US$553 billion), with a growth rate of 9.1%. With the middle class rapidly expanding, the Ministry of Commerce estimates that retail sales will swell by more than 13% to reach 5.2 trillion RMB (US$628 billion) by the end of 2004. Retail sales growth is forecasted to slow to about 10% in 2005.

 

Chinese officials see the expansion of the retail sector as an indication that their macroeconomic control policies are working. The government has been trying to encourage consumer spending while gradually reining in economic growth through strict controls on investment in overheated sectors like real estate and raw materials.

 

Just this week, China took another big step toward fulfilling its WTO obligations by opening the retail market to foreign players, doing away with restrictions that confined foreign retailers to a handful of cities and required them to establish joint ventures with local partners.

 

In 1999, as a condition of membership, China agreed to gradually scale back restrictions on foreign retailers within three years after gaining formal entrance to the WTO. On April 16, 2004, the Chinese government announced that by the end of the year, entry barriers to markets such as retail, distribution, and publishing would be lifted. Some of the foreign retailers itching to expand their presence in the market include: Wal-Mart (US), Metro AG (Germany), Carrefour (France), Legou (Taiwan), Hoyodo (Taiwan), and Rt-Mart (Taiwan). 3C chain outlets such as Tsannkuen are also planning an aggressive move toward the Chinese market.

 

Wal-Mart plans to open between 10 and 15 stores in China in 2005, raising their total number of stores to more than 50. Wal-Mart also intends to continue working with local partners for strategic purposes. Carrefour plans to add 15 stores in China in the next few months, which would bring its total to more than 60. Carrefour already leads all other foreign retailers in China sales. Metro AG has also revealed plans to more than double its store count in China by the end of 2005.

 

Although the central government has lifted most restrictions on foreign retailers, retailers still must conform to city construction regulations that zone them out of certain districts. For example, Beijing city regulations restrict stores larger than 10,000 square meters to designated commercial districts and shopping centers. Wholesale stores of the same size must remain outside of the Third Ring Road, while supermarkets larger than 5,000 square meters must be separated by a distance no less than 4,000 meters.