China still key destination for retailers' expansion
Updated: 2013-12-23 11:18
By Zhang Yuwei (China Daily USA)
Despite a slower economic growth, China remains a key destination for international corporations' drive for growth. US retailers that have entered the market with a relatively longer-term establishment in China, in particular, are looking into further expansion in the world's No 2 economy, according to a recent study by credit-rating agency Standard & Poor's.
Among the 150 US retailers and restaurant companies that have operations in China S&P rates, five were studied in the recent report in terms of their exposure in China and the strategic importance that they have attached to China. Three out of five - WalMart, McDonald's, Starbucks, Yum! and The Gap - are restaurant companies.
Helena Song, New York-based director of Standard & Poor's corporate and government ratings, said US retailers that expand into China tend to be the "largest players in their category". Song, referring to the five sample companies in their study, noted that these companies have already penetrated the domestic US market, have experience in international expansion, and boast a strong global brand and solid cash flow to support meaningful and longer-term investments.
"As these companies establish a base and accumulate more experience in China, they develop more local operation knowledge and expertise," said Song, who led the study.
Most US fast-food restaurant companies have shown a big appetite in China and are among those early comers with some entering China as early as the 1980s. Yum! Brands, for example, entered China by opening KFC, the first quick-service restaurant, in Beijing in 1987. Yum calls China the "greatest restaurant opportunity of the 21 Century".
And for good reason.
After more than two decades' operation, KFC is the No 1 fast-food chain brand in China with more than 4,400 restaurants in some 850 cities across China and a new one every day. Just in 2012 alone, Yum's Shanghai-based China division opened nearly 900 new chains in China and generated more than $1 billion in profit.
Song said American quick-service restaurants' successful expansion in China reflects their "strong brand name appeal, solid financial resources, and experience in developing new international markets".