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SCMP Reporter

A Taiwanese firm has won State Council approval to invest in a retail joint venture in Zhengzhou, Henan province, despite reports that Beijing will not further open its retail sector to foreign firms this year.

 It is the second such approval in an inland city following a Taiwan-funded joint venture in Wuhan, Hubei province. Neither city is among the first batch of 11 allowed to open their retail sectors to foreigners.

  Sino-foreign retail joint ventures approved by the State Council have import and export rights, while those approved by local governments do not.

 Wang Minghong, director of the international co-operation department of the Ministry of Internal Trade, said the Zhengzhou venture was the second involving Taiwanese capital to receive special State Council approval.

  Mr Wang said the Taiwanese partner, Toyo International Group, would join state-owned Zhengzhou Hualian Commercial Building in the venture, which will attempt to penetrate a fiercely competitive market.

  The project, with an investment of about 50 million yuan (about HK$46 million), will have a sales floor area of 50,000 square metres.

 Unlike most other State Council-approved retail joint ventures, the Zhengzhou project will not face construction delays.

 A spokesman for Zhengzhou Hualian said a new property to house the department store was under construction when the project was submitted for approval.

 'We should definitely be able to open the store before the end of the year as the building will be ready for use,' he said.

  Toyo would take a 40 per cent stake in the project, Zhengzhou Hualian 25 per cent, and other domestic partners the remainder.

  The new store will intensify competition in the city, whose retail sector has been growing despite its location in the poorer inland region.

 Zhengzhou's position as a transport hub at the heart of the country is seen as the source of this market strength. Much retail spending comes from the huge numbers of passengers passing through as they transit to other places.

  Zhengzhou Hualian deputy general manager Liu Chensheng said competition in the city's retail market had intensified.

 There had been fierce competition among department stores for the past seven years.

 Now wholesale commodities markets seeking to sell directly to customers had joined the fray, increasing the pressure.

 Specialised shops, many opened by manufacturers, and supermarkets had also emerged as rivals.

 The city gained renown for a retail sector 'war' several years ago when leading department stores launched increasingly rich lucky draws. The situation led the central government in 1993 to cap the value of prizes offered in such draws at 5,000 yuan.



Taiwan firm wins State Council vote for Zhengzhou venture