Wal-Mart Invests in China

The world's biggest retailer Wal-Mart today announced a takeover of a Chinese discount chain for an estimated $1bn (£500m) in China's booming retail market.

Under terms of the deal, Wal-Mart is buying 35% of Taiwan-based Bounteous, which operates 101 hypermarkets in 34 Chinese cities under the Trust-Mart brand.

Wal-Mart plans to acquire ownership control of the chain by 2010 if conditions are met.

Terms were not disclosed, but a reports put the value of the deal at $1bn for all of Bounteous.

Should Wal-Mart complete the takeover, Wal-Mart would overtake Carrefour of France in the number of giant discount stores in China.

Foreign retailers, including Britain's Tesco and B&Q, see vast potential in China's retail market with the country's rapidly expanding economy and the rise of the middle class.

"Through this investment in Trust-Mart we have the opportunity to expand our presence in China, one of the world's fastest growing retail markets," Wal-Mart's vice chairman, Michael Duke, said in the statement.

"This is an important step in bringing additional scale to our China retail business and enabling us to do what we do best - serving our customers with improved service, high quality and innovative products, and lower prices," he added.

Trust-Mart stores, at least initially, would continue to operate under their own brand name.

Wal-Mart, one of China's biggest foreign employers, has a work force of 37,000 and 68 stores. Carrefour has 240 stores, including 90 hypermarkets.

Trust-Mart was founded in the mid-1990s by Taiwan tycoon Winston Wong, a scion of the petrochemical conglomerate Formosa Plastics Group. It has 31,000 employees, according to the Chinese company's web site.

With the economy growing more than 10%, China's retail market is booming. Retail sales surged 12.9% in 2005 over the year before, to 6.7 trillion yuan ($847bn).

By 2020, industry forecasts say the market could expand to about US $2.4 trillion.