Jean Christophe Voynet, manager of Carrefour Global Sourcing China, told Xinhua the company had signed an agreement with the local government of Hangzhou, capital of east China's Zhejiang Province, to open its 28th Chinese store there.

At the same time, Carrefour set up a global sourcing base in Ningbo, a coastal city in Zhejiang Province, for purchasing goods to be sent overseas. It is the 11th of its kind established by theretail giant in China.

Number one in the European retail market and number two in the world, Carrefour has about 9,200 stores in 31 countries. The year 2002 alone saw its global sales exceed 80 billion Euros.

The French retail giant entered China's vast retail market in 1995. Since then, it has opened a total of 28 stores in 16 major cities. Its sales network covers nearly all of China's economically-developed areas.

Carrefour's major competitor, Wal-Mart, arrived in China in 1996 and has set up 21 branches in six provinces, mostly in southern China.

The world's biggest retail giant has yet to enter China's most economically dynamic cities such as Beijing, Shanghai, Tianjin and Guangzhou, as well as the Yangtze River Delta.

Meanwhile, the world's third largest retailer, Germany-based Metro, has opened only 15 stores in China, and is dwarfed by Carrefour in its share of China's retail market.

Experts believe that Carrefour's success can be attributed to the fact that it has already established a stable consumer group.

A survey made available by Carrefour shows that the company's consumer group in China comprises mainly medium and low-income urban residents.

This conclusion was based on survey results indicating that about 28 percent of its customers arrive on foot, 15 percent on bicycle and 20 percent by bus.

Carrefour's big market share can also be attributed to its flexible marketing strategy and its clear understanding of China'seconomic policies.

Carrefour's flexibility was reflected in its decision to shift its global sourcing base from southeast Asia and India to China.

In 2001, Carrefour spent 3.5 billion US dollars on purchasing in Asia, of which 61 percent was purchased in China.

Voynet explained that most Chinese goods were low-priced and high quality, which was the main reason the company shifted its global sourcing base to China.

The purchase of goods from China also helped Carrefour to win favor and supportive policies from local governments because, since China launched its reform and opening-up policies in the late 1970s, exports had become an important indicator of local government performance. Carrefour's remarkable purchase volume would generate a large export profit margin for local governments.In return, local governments allowed Carrefour to enjoy favorable policies, according to Voynet.

But problems still exist. According to Chinese government regulations, in every retail joint venture, the overseas stock holder can hold only 65 percent of the shares. Two Carrefour chain stores in northeast China still hold 100 percent of their respective shares.

The Chinese government has already requested that the two stores sell the remaining respective 35 percent of shares to Chinese partners as soon as possible.

Moreover, the intense competition from the overseas retail giants has forced local retail companies to innovate in order to survive and grow.

Inter-regional mergers seem to be an increasingly common method. In 2002, China's biggest retail company, the Shanghai-based Lianhua, merged with Jiayou, the largest in affluent Zhejiang Province, in order to compete with the overseas giants.

Chen Nianci, general manager of the Zhejiang-based Sanjiang retail company, said that if Chinese retail enterprises were to survive in the fierce competition, they would have to improve their logistics systems by expanding their purchasing and sales networks, including in the country's vast rural market, as soon as possible.

(Xinhua News Agency January 13, 2003)