Wal-Mart, Citic Pacific in Joint Venture in China

Wal-Mart Stores Inc. will team up with Hong Kong-based Citic Pacific Ltd. to open hundreds of stores in China -- a booming but increasingly competitive market -- over the next five years, the Beijing-backed conglomerate said Wednesday.

Citic Pacific and Wal-Mart, the world’s largest retailer, will invest to open stores in central China as well as the eastern cities of Shanghai and Nanjing, said Citic Pacific’s managing director, Henry Fan.

“We have a lot of property projects in China and we will welcome Wal-Mart as our anchor tenant,” Fan said, pointing out that the U.S. retail giant was keen not to own its retail real estate in China.

“It’s a win-win,” he said, noting that the venture would involve at least $250 million.

Wal-Mart, which will hold 65% of the venture, opened its first Chinese outlet in 1996 and now has more than 40 stores in the country, which has a $240-billion retail market, Asia’s largest after Japan.

Foreign retailers looking to expand in China, including France’s Carrefour, Germany’s Metro and Britain’s Tesco, have been hampered by restrictions that finally lapsed last month under China’s commitments to the World Trade Organization.

Overseas players can now own 100% of their stores and set up shop anywhere in the country, although winning local regulatory approval can be difficult.

Wal-Mart and Citic, the Beijing-based parent of Citic Pacific, already have a joint venture store in Nanjing. Citic Pacific plans to take it over, forming the basis of a broader venture between the two, Fan said.

“We are looking for suitable sites, and the next store will be in Shanghai,” he said.

Headed by one of China’s wealthiest men, Larry Yung, Citic Pacific’s holdings include toll roads, power plants and stakes in Cathay Pacific Airways and rival Dragonair.

China-focused retail stocks enjoyed a bull run last year as investors scrambled for access to surging spending power created by China’s economic growth of about 9%. Besides foreign players, local retailers have been expanding quickly, including Wumart Stores Inc. and Lianhua Supermarket Holdings Co.

Fan said he expected Citic Pacific’s investment in the retail joint venture to start later this year. He also expects Citic Pacific’s capital spending this year on new investments to total $604 million to $1.2 billion.

Wal-Mart shares Wednesday fell 71 cents to $53.78 on the New York Stock Exchange.