The State Economic and Trade Commission has worked out a series of preferential policies for the merger and acquisition of State-owned commercial companies by foreign investors.

The central government is particularly encouraging foreign investment in the central and western regions, said Li Rongrong, minister of the commission.

As the world economic slowdown gradually starts to impact China, the further expansion of domestic consumption is of vital importance. The Government hopes to achieve this goal by utilizing the expertise and capital of foreign investors.

"China will continue adopting pro-active fiscal policies and speed up the reforms of the commercial sector," Li said. Domestic and foreign investors will be encouraged to set up both large markets and small franchise stores, said Xu Ming, an official with the commission.

Foreign retail giants can enter the Chinese market by setting up joint ventures in the capital cities of provinces and autonomous regions, special economic zones and municipalities - a foreign retailer with an average retail volume of more than US$2 billion for three successive years can apply to the central government to set up joint venture in China.

The move was initiated after the country opened the commercial sectors of 14 coastal cities in 1992.

"The experiment of foreign investment in the commercial sectors in the 14 cities has been a great success," Li said.

Since 1992, many of the world's biggest retailers have established joint ventures in coastal cities. These joint ventures now number 356, with a total annual turnover of more than 52.6 billion yuan (US$6.4 billion).

The world's second largest retail giant, Carrefour, now has 27 stores in 15 Chinese cities.

And the world's largest retailer, Wal-Mart, has won approval to open 18 stores.

"Such great development have brought advanced management experience and modern marketing skills," Xu said. "Shopping facilities and environment, the quality of services and commodities and the marketing patterns of domestic commercial enterprises have also been greatly improved."

"There is still big potential for the growth of foreign investment in the commercial sector," said Xu.

According to Xu, foreign investment in commercial enterprises accounts for only 1 percent of China's total foreign capital inflow, and the total turnover of foreign-invested commercial companies accounts for just 4 percent of China's total retail sales volume.

(China Daily December 3, 2001)