CHINA'S RETAIL SECTOR IN TRANSITION

Abstract

This paper examines China's retail sector with a focus on three major changes in the 1990s: the declining sales performance of key domestic retailers; entry of overseas retailers; and development of indigenous retail chains as a national strategy to modernize the retail industry and there by fend off foreign competition. While the central government approved the entry of only 18 overseas retailers, thousands of overseas-invested retail enterprises operate throughout China, especially in Shanghai, Beijing, Guangdong and Fujian. This raises an important research question: how did so many overseas retailers or investors bypass regulatory barriers to gain entry into the highly protected market? Despite government efforts to revitalize and modernize the retail sector, the majority of the key domestic retailers have been suffering from declining sales since 1996, and the longstanding pattern of geographical variation largely remains, that is, the level of development and the relative importance of the retail industry still decline from the eastern coastal region towards the western region. The declining sales performance of the key retailers cannot be entirely attributed to foreign competition, but it does prompt concern about whether the domestic retail industry would be able to recover if China is admitted into the WTO and more foreign retailers enter.

Keywords:

• China
• retailing
• economic reform