Provincial governments have been told to map out a development plan for retail networks in large and mid-sized cities by next year or risk refusal of approval for any foreign-funded retail enterprises for cities which do not have such plans.

The announcement by the State Economic and Trade Commission (SETC) also reaffirmed that public hearings should be held before setting up any large-scale shopping centers, such as supermarkets.

The new policy aims to readjust the density of retail market enterprises in certain districts and prevent over-competition in the field, according to an SETC official, who declined to be named.

The official warns that without a development layout, numerous large-scale shopping centers and malls could be concentrated in certain districts of a city, which not only harms the development of retail business but also causes a waste of resources.

However, foreign analysts believe that the new policy intends to slow down the accelerating expansion of foreign retail giants on the Chinese retail market, according to the Wall Street Journal.

Foreign retail giants such as France-base Carrefour; United States-based Wal-Mart Stores and PriceMart; and Dutch-based Makro taken firm footing in major cities like Beijing, Shanghai and Guangzhou.

Carrefour announced at the end of last year that it would double the number of its supermarkets in China by the end of 2004 from the present 30. Wal-Mart, meanwhile, said it intends to establish another 22 stores this year.

The new policy may put the brakes on their ambitious expansion plans, analysts said.

But some foreign-funded retailers said they are not worried about the new policy.

A manager of a foreign-funded shopping center, who declined to be named, said that Beijing municipal government has already issued a similar policy, which fixes the minimum distance between shopping centers larger than 5,000 square meters.

The Shanghai government also requires a public hearing before the launching new stores, he said.

According to him, while the new policy may theoretically affect the development of foreign-funded enterprises, the effect will not be as serious as some analysts suggest.

The new policy also mirrors possible different attitudes on the development of foreign-funded shopping centers between central and local governments, according to the analysts.

The central government wants to help to develop domestic retail enterprises and ease the competition in the field. However, local governments hope the establishment of more foreign-invested retail enterprises can create more job opportunities.

Some domestic companies have urged the government not to fully open up the retail market to foreign competitors when local retailers are still underdeveloped.

(China Daily February 22, 2003)