CHINA FRANCHISE NEWS
Vol. 2 , No.10 - June 1 , 2001
TOPICS THIS ISSUE:
- Carrefour to Open New Purchasing Center
- Conflicts Arise between Express-delivery JVs and Postal Bureau
- Beijing Gives More Weight to the Development of Supermarkets and Chain Stores
- State Council Issues Regulations to Ban Local Protectionism
- Tricon Opens Coffee Store in Shanghai
Carrefour to Open New Purchasing Center
The French supermarket giant Carrefour, still in a whirlpool of controversy over its unregulated opening of stores in China, is reported to prepare for the establishment of a new purchasing center in Shenzhen.
90% of the chain's purchases on the mainland are from Guangdong, and 90% of commodities pass through Shenzhen customs, according to an officer in charge of Carrefour's southern China operation. In addition, Carrefour's global purchasing center is located in Hong Kong. It is thus natural for Carrefour to base its mainland purchasing center in Shenzhen.
Although Carrefour has been questioned for opening unauthorized supermarkets in China, it shows no sign of decelerating its expansion in the region. With 27 outlets in China, the chain watched its sales volume reach 8.1 billion yuan (US$978.26 million) last year, next only to the sales of rival Shanghai Lianhua.
For Carrefour, establishing a mainland purchasing center in Shenzhen is an alternative strategy for its business expansion. In 2000, Carrefour purchased 1 billion yuan (US$120.77 million) of commodities in China. The establishment of the purchasing center, therefore, will help coordinate the company's purchasing process and increase its purchasing volume in China.
In addition, Carrefour plans to redefine its operation and management zones and open new stores in Harbin, Changchun, Jinan, Haikou and other Chinese cities. Although the details of the plan are unknown, sources in Shenzhen said that Carrefour is about to put its upcoming new stores in Zhuhai and Dongguan under the management of the Shenzhen operation zone.
Carrefour said, "We will catch up with Wal-Mart." Actually, Carrefour's development in China has exceeded that of Wal-Mart both in terms of scale and sales. Wal-Mart has 11 stores to Carrefour's 27.
(Source: Chinaonline News 04/24/01)
Conflicts Arise between Express-delivery JVs and Postal Bureau
The heads of many international freight-forwarding companies poured out their complaints to the media at a China International Freight Forwarder's Association news conference in Beijing. These companies complained that deliveries by the local branches were inspected and their cargo documents and delivery goods had been confiscated. Sometimes the branches had to pay stiff fines. All these incidents occurred when the branches were conducting legal business operations.
The State Postal Bureau (SPB) announced in mid April that it had joined forces with the local police and government departments for industry and commerce to investigate express-delivery companies in Beijing, Tianjin, Hebei and Shandong. This move to regulate China's postal communications market was substantiated by the implementation of provisions of the Postal Law and local regulations, which state that foreign companies are banned from letter-delivery operations, a SPB official said.
However, the international freight-forwarding companies cited another provision from the Postal Law to support their legal international express-delivery services: although the law stipulates that letter delivery should be a monopoly run by the state postal offices, it adds the clause "unless otherwise determined by the State Council."
According to China's International Freight-Forwarding Service Management Regulation unveiled with the State Council's approval in 1995, international freight-forwarding companies are allowed to offer international express-delivery services, excluding personal letters.
Since China opened its international express-delivery sector to foreign investors in the 1980s, several world-famous express couriers have gained footholds in the Chinese market. They include the United Parcel Service (UPS) of America Inc., FedEx Corp., DHL Worldwide Express Corp., the TNT Post Group and the Overseas Courier Service (OCS). These foreign express couriers have formed joint ventures with Chinese companies to provide express delivery of business mail. The fierce competition has reduced the market share of the SPB's Emergency Mail Services (EMS) to 40 percent.
The state postal departments blamed some express-delivery companies for operating in violation of regulations and causing chaos in the market. The accused express-delivery companies shot back with allegations that the state postal departments were trying to cover up their poor efficiency and failure to separate administrative control from business operations.
An industry insider attributed the constant conflicts between the state postal services and the express-delivery companies to their different understanding and interpretations of the wording of "the exclusive letter-delivery operations" in the Postal Law. The insider also said that there are still disputes over whether the SPB or the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) has the authority to approve and manage the international express-delivery operation.
In an effort to resolve the conflict, MOFTEC sent a letter to the SPB acknowledging the domestic express-delivery sector's great achievements in recent years and suggesting that the status quo be maintained before the revision of the Postal Law.
(Source: Shanghai Foreign Investment Service Center 05/03/01)
Beijing Gives More Weight to the Development of Supermarkets and Chain Stores
No more large scale department store will be allowed to be established within the second ring road in downtown Beijing. Rather, supermarkets and chain stores will be the major commercial entities to be encouraged for development, according to Lu Yan, Deputy Director of the Commercial Committee under the Beijing Municipal Government.
According to Lu, there is an oversupply of department stores in downtown Beijing, and most of them are facing profit pressures. A recent market survey lists only four department stores among the top ten most profitable downtown ventures, with the remaining six all chain stores. Besides, all the stores achieving a 50 percent or more increase in sales volume were chain stores.
Lu Yan says that supermarkets and chain stores will be the major types of commercial entities to be encouraged by the government. In its tenth Five Year Initiative for Commercial Development, the Municipal Government promised great efforts to establish and perfect business facilities in residential communities.
This does not mean that the government will not allow any department store to be set up in the downtown city, said Mr. Lu. Instead, large scale department stores can only be established in the nine designated city commercial centers or multifunctional purchasing centers.
(Source: Xinhua News 05/16/01)
State Council Issues Regulations to Ban Local Protectionism
The State Council released the Regulations on Banning Regional Blockades in Market Economic Activities on April 29, designed to prevent local protectionism.
According to the Regulations, neither entities nor individuals are allowed to prevent non-local products and construction-related services from entering local markets, nor are they allowed to encourage or harbor local protectionists or erode fair competition in any form.
The regulations enumerate economic activities that are defined as a regional blockade:
- Setting restrictions on the products and services that local entities or individuals can manage, purchase or use (meaning only those products or services provided by local companies or appointed companies, organizations or individuals can be managed, purchased or used);
- Setting up checkpoints at roadsides, railway or bus stations, ports, airports or local boundaries aimed at preventing non-local products from entering the local market or local products being sold out of the area;
- Charging discriminating fees on non-local products or services or imposing discriminating charging standards;
- Imposing different technical requirements or standards on non-local products or services from local equivalents or implementing other discriminating requirements such as repeated inspections or authentication requirements in a move to limit market access for non-local products and services;
- Setting up local government-backed monopolized businesses to squeeze out non-local competitors or rolling out special inspection and approval procedures targeting non-local products or services;
- Restricting non-local companies, organizations or individuals from entering local markets or taking part in bidding activities by imposing discriminating requirements and assessment standards or not publishing information in accordance with laws and regulations;
- Restricting non-local companies, organizations or individuals from investing in or creating branches in local markets by imposing rules and regulations not required of local competitors; and
- Imposing discriminating treatment on non-local firms or branches and infringing upon their legal rights.
The Regulations stipulate that local governments are not allowed to impose rules that encourage local economic blockades or hamper the establishment of a unified, fair and regulated national market system or harm fair competition. Local authorities are required to change or revoke regulations discriminating against non-local products or services.
(Source: Xinhua News 04/30/01)
Tricon Opens Coffee Store in Shanghai
Tricon Global Restaurants Inc. opened its first specialty coffee store in Shanghai, seeking to grab a slice of the city's fast-growing café society.
K-Coffee, located in one of Tricon's Kentucky Fried Chicken (KFC) outlets, sells drinks and pastries at prices no higher than RMB15 (US$1.81), half those charged at rival Starbucks Corp.
Starbucks said monthly sales at its 11 outlets in Shanghai have maintained an average 10% growth since January.
(Source: SFISC News 05/16/01)
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