CHINA FRANCHISE NEWS
Vol. 3 , No. 2 - January 22, 2002
TOPICS THIS ISSUE:
- Pharmaceutical Retail Market to Open to Foreigners
- China Achieves 10pct Growth in Annual Retail Sales
- OK Convenience Stores Enter Mainland in February
- Price Smart Ready for Full Entry
- Carrefour looking for Local Supplier
- Wumei Moves before Dancing with Foreign Wolves
Pharmaceutical Retail Market to Open to Foreigners
China's pharmaceutical distribution sector will be fully opened to foreigners in 2003. Foreigners will be permitted to operate both retail and wholesale businesses within the country, according to Yu Mingde, deputy director with the Economic Operation Department of the State Economic and Trade Commission (SETC).
He said that this was a promise of the Chinese government made during bilateral negotiations on China's WTO entry. The State Economic and Trade Commission (SETC) and the Ministry of Foreign Trade and Economic Cooperation will be responsible for the work. The following are main conditions for the experiments:
1. With an approval, foreign companies and enterprises are allowed to set up joint ventures and cooperative commercial enterprises in China to undertake pharmaceutical retail business.
2. Foreign partners must achieve an annual sales volume surpassing US$2 billion for three consecutive years before applying to set up a joint venture. Total assets must exceed US$200 million prior to their application.
3. The Chinese side must be an enterprise engaged in goods distribution business with strong economic power and operational capacity. It must have assets of more than 50 million yuan (US$6.02 million) (30 million yuan for enterprises in central and west China) one year before the application and the annual sales of 300 million yuan (US$36.14 million) (200 million yuan for enterprises in central and west China) for three consecutive years.
Furthermore, if the domestic operator is a foreign trade enterprise, its annual foreign trade volume must exceed US$50 million for three consecutive years before the application, of which US$30 million should be gained from exports. If the Chinese side is a pharmaceutical wholesaler, the domestic equity for the joint venture must be more than 51 percent.
(Source: Xinhua News Agency, January 8, 2002)
Practice note: Lehman, Lee & Xu is general counsel to both the Foreign Research-Based Pharmaceutical Industry Association and the China International Franchisor's Association.
China Achieves 10pct Growth in Annual Retail Sales
China's retail sales in 2001 rose by about 10 pct from a year earlier, while the consumer price index in 2001 rose by 0.8 pct from 2000. These figure were released by State Development Planning Commission minister Zeng Peiyan ahead of a press conference.
Following are the statistics on China's total retail sales volume of consumer goods in recent years, announced by the China National Bureau of Statistics (NBS):
Year | Retail Sales (in trillion yuan) | Growth in Real Terms |
2001 | 3.36 (405.5 billion U.S. dollars) | 10.1 percent |
2000 | 3.05 (368.2 billion U.S. dollars) | 9.8 percent |
1999 | 3.11 (376.2 billion U.S. dollars) | 10.0 percent |
1998 | 2.92 (352.3 billion U.S. dollars) | 9.7 percent |
1997 | 2.72 (328.6 billion U.S. dollars) | 10.7 percent |
(Source: AFX-Asia, January 15, 2002)
OK Convenience Stores Enter Mainland in February
The Hong Kong retailer Convenience Retail Asia Limited has decided to enter the mainland market by opening its first OK convenience store in Guangdong around mid-February. According to CEO Richard Yeung Lap Bun, the company plans to open 5-10 stores in the southern part of China in the initial stage, and expand to 30-50 stores by the end of this year. He said that the company remains committed to investments of 100 million hkd in the region and looks to break even in the next three years. Yeung expects a 15 pct rise in 2001 sales by its OK convenience stores in Hong Kong.
As a member of the Li & Fung Retailing Group, Convenience Retail Asia Limited has the exclusive right to use the Circle K brand name for convenience retailing in Hong Kong, Macau, Southern, Eastern and Northern China. The Circle K brand is one of the fastest-growing convenience store brands worldwide, with over 5,700 outlets as of January 2001. The first Circle K store opened in Hong Kong in 1985. Today, all Circle K stores in Hong Kong, 146 in total, are solely owned and managed by Convenience Retail Asia.
(Source: AFX-Asia, January 14, 2002)
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Price Smart Ready for Full Entry
US retail giant Price Smart established a representative office in China in 1996. It has since opened 12 outlets in Beijing, Chengdu, Kunming, Zhongshan, Qingdao and other major Chinese cities, laying a solid foundation for further expansion under WTO rules. Price Smart plans to have 18 branches by the end of 2002 and projects sales of 4 billion yuan (about 482 million U.S. dollars). Its 13th branch opened on January 19th in Shenyang, capital of northeast China's Liaoning Province and the 4th largest city in China.
Established in 1976, Price Smart ranks among the Fortune 500 and owns more than 270 outlets with over 30 million customer members worldwide.
Economists here believe that China's entry into the WTO has provided unprecedented development opportunities for the world's chain-store retailers like Price Smart. Their entry into the Chinese market with new management styles will make a strong impact on traditional Chinese retail businesses.
(Source: Xinhua News, January 10, 2002)
Carrefour looking for Local Supplier
With the help of Guangzhou Commercial Bureau, retailer Carrefour held a trade fair in Guangzhou, looking for Chinese suppliers for its domestic and foreign outlets. Carrefour aims to find more good local products for its worldwide stores including its Guangzhou store which is scheduled to open before the Lunar New Year, said Mr. Chen Yaodong, Vice President of Carrefour China.
Carrefour owns over 9000 stores all over the world and achieved a sales volume of US$ 65.8 billion in the year 2000. Since its first entry into China in 1995, Carrefour has opened 27 stores in 14 cities and established two global purchase centers in Shanghai and Hong Kong.
(Source: South City News, December 19, 2001)
Wumei Moves before Dancing with Foreign Wolves
The local retailor Beijing Wumei Commercial Group moved strategically into South China to position itself to compete with foreign chains. Wumei is to open its Shanghai and Nanjing retail stores very soon. Another 6 stores of similar size are also planned in southern cities.
Wumei pioneered the retail chain store concept in Beijing. By the end of the year 2001, it owned over 200 outlets with an annual sales volume of 2 billion yuan. Cooperating with Hutchison Tibbett & Britten (HTBL), a JV with Tibbett & Britten, one of the world's third party logistics giants, Wumei has set up China's first third party supply chain management service network in retailing, which enables Wumei's outlets to take various forms ranging from supermarkets downtown to convenience stores in the suburbs. Its newly opened retail store near the Asian Games Village received visitors including Mr. Liu Qi, the mayor of Beijing.
(Source: www.ccfa.org.cn, January 11, 2002)
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