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Western Retailers Ease off on China Plans

Chinese boat

Earlier this year, the booming Chinese economy was viewed as a retail hotbed. Now the enthusiasm of major Western retailers seems to be cooling.

Over the last few years, China’s rise in the global economy made it a target market for expanding retailers, both on and offline. Recently however, growth has slowed and many of the same companies are rapidly adjusting their expansion strategies according.

The US-based Walmart and UK-based Tesco are both examples of large chains that had big plans for the booming Asian nation, but are now curtailing their activity in the region. In the case of Walmart, it has decided to open just half the amount of square footage it had originally planned for this financial year. Tesco, on the other hand, will be closing four of its stores.

“China is not the obvious easy money it was a few years ago,” Corbett Wall, Founder of the Shanghai consulting firm +CW Associates, told The Wall Street Journal.

The American Chamber of Commerce identified the slowdown of China’s economy to be one of the greatest risks for US businesses operating there, ranking above labor costs and protectionism. While Asian economies are among the fastest growing in the world, both China and India have experienced a dampening slowdown this year, posting the worst growth in three years.

This sudden deceleration is being labelled a catalyst, forcing many western organisations to reconsider their own growth plans, or in some cases to begin looking for an exit.

According to The Wall Street Journal, foreign direct investment into China slowed to US$59.1 billion in the first half of this year, compared with US$60.9 billion a year ago.

 

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