Large Companies Tapping into China

Over the past few years since the opening of China’s door to foreign capital, the country has steadily attracted significant capital in numerous areas including industrial and high technology.

 The country has also seen the emergence of numerous mainstream U.S. retailers in China, including Wal-Mart Stores Incorporated (NYSE/WMT), Kentucky Fried Chicken owned by Yum! Brands Incorporated (NYSE/YUM), McDonald’s Corporation (NYSE/MCD), Best Buy Company Incorporated (NYSE/BBY), and Starbucks Corporation. (NASDAQ/SBUX).

 But, this has been only the start, as the country is exploding on the retail front. The Chinese retail sector is on a major upward trend, deciding to open up its retail sector in 2006 to foreign retailers. The new structure means that foreign retailers wanting to enter into China will no longer need to align themselves in a joint venture with local partners.

 The structure change should open up the floodgates for retailers into China. The growing interest in China should not be a surprise given that you have a massive middle class that is larger than the entire population of any country in the world with the exception of India. The middle class has ample money to spend, and they want to spend it. Chinese consumers are also in love with foreign brands, as it is a sign of quality and distinction compared to that of domestic brands, which continue to have inferior perception and are generally not as good in quality either.

 Clearly the numbers are telling the story. So far, in excess of 1,000 applications submitted by foreign retailers have been approved, according to The Shanghai Foreign Investment Commission. That is just massive for the Chinese retail landscape, which will be completely revamped and may soon begin to look like Main Street, U.S.A.

 Wal-Mart is already in China. Other major U.S. retailers planning to get a piece of the Chinese consumer includes privately held Toys “R” Us, Best Buy, and Home Depot Incorporated (NYSE/HD). I believe this is only the start of the retail invasion, as foreign firms scramble to set up shop in China and win consumers who have money to spend.