Ministry of Commerce officials said that although proposals to legislate the opening of mega stores are not on the agenda, the ministry is working to map out the commercial layout of major cities by the end of this year.

Around 100 deputies to the ongoing session of the 10th National People's Congress have submitted a proposal calling for a legal framework on the establishment of mega stores in major cities.

NPC Deputy Wang Tian, who is also President of the Hunan Bubugao Chain Supermarket Co Ltd, said a copy of the proposal had also been sent to newly appointed Minister of Commerce Bo Xilai.

According to Wang, Bo said the ministry will conduct a study on the proposal.

The proposal calls for legislation to set up a hearing system on the opening of mega stores, in order to prevent excessive numbers from opening in one area.

An official from the ministry's department of market system development responded that they have already carried out similar work.

"We have asked the major cities to submit their commercial layout plans for our review, which focuses on the opening of mega stores," said the official.

The ministry's stipulations cover major wholesale stores with an annual revenue more than 50 million yuan (US$6.04 million), department stores covering more than 5,000 square meters, large-scale supermarkets, warehousing stores, shopping malls, food stores with an annual revenue of more than 20 million yuan (US$2.42 million) and commercial streets.

"With the city-level plan for commercial layout, we expect to avoid the overlapping construction of mega stores, which will lead to a waste of resources and vicious competition," he said.

In the requirements for the plan, the ministry also said a hearing system is necessary for the opening of mega stores, something which is similar to the NPC proposal, the official said.

All of the cities have been ordered to submit their plans by the end of this year, he added.

Cities including Shanghai, Beijing, Nanjing, Wuhan, Shenyang and Qingdao have already submitted their proposals, according to the official.

The official added that the ministry did not consider that legislation on this issue was required.

"But if the legislators decide to have a law, the layout we are working on will provide a sound basis for this," he said.

NPC Deputy Wang said legislation is urgently needed to curb the reckless opening of mega stores in China.

China currently has 236 mega stores covering 7 million square meters.

According to Wang's survey, the mega stores being constructed or in the process of being built will cover a total area of 20 million square meters.

The construction will cost a total of 170 billion yuan (US$20.5 billion), Wang said.

To support these big stores, another 170 billion yuan will be needed, which accounts for 20 per cent of the annual revenue of China's major stores, Wang said.

Chen Wenling, a commercial expert from the Development and Research Center under the State Council, said legislation and local commercial layouts have their different advantages.

Legislation has a much stronger power than the local layout scheme, especially in regulating local government, Chen said.

Local governments often blindly approve investments on opening big stores just for short-term benefits, she added.

"But the legislation process will be much longer and more complicated. The chaos from the opening of too many mega stores may already have happened by the time the legislation is completed," she said.

The city-level commercial layout scheme is more efficient in preventing overlapping from taking place, she said.

"The best choice is that the ministry stipulates a rule based on the local plan," Chen suggested.

Chen said the proposal is apparently targeted at foreign-funded stores, which are usually large.

Some foreign retailers have been running illegally with permission from local governments but not from the central authorities.

Some local governments, who are very eager to attract foreign investment, have taken bold steps to open their commercial sectors at a pace which is faster than China's World Trade Organization commitments.

China's WTO agreements, which gradually lift restrictions in the commercial sector, aim to give some breathing space to local players, Chen said.

But some foreign investors' illegal and aggressive expansion did not give local businesses enough time to prepare, putting them under great pressure, she added.

Deputies submitting the proposal fear that foreign investment will enter the industry on a large scale as China further opens its retail sector by the end of this year, in accordance with its WTO commitments, Chen said.

(China Daily March 12, 2004)