Retail giant Tesco looks set to enter a joint venture with China Resources Enterprise (CRE) to operate hypermarkets and supermarkets in China.
The deal, which would combine Tesco's 131 Chinese outlets with CRE's 3,000 Vanguard stores, is likely to be announced later today (Friday), according to media reports.
It is understood CRE would control 80 per cent of the enlarged business, with Tesco holding the remaining 20 per cent share.
Tesco entered the Chinese market in 2004 and had recently announced plans to increase its operations in the southern part of the Asian nation. It also announced the launch of its first Chinese online store in July.
However, after almost 10 years of rapid expansion around the globe, the world’s second retailer has withdrawn from a number of international markets in the last 18 months, including the US and Japan.
Tesco reported a one per cent decline in its global like-for-like sales for the first quarter of 2013, including a 3.8 per cent fall in its Asian markets.
The joint venture is being viewed as an opportunity for Tesco to reduce its Chinese investment, while still having a presence in the country’s fast-developing retail market.
“It's a sensible-sounding deal because it will allow them to focus more on the core UK market,” an unnamed analyst told Sky News.
Tesco and CRE both confirmed they were in talks in stock market statements, and CRE said that the venture would combine its 'deep understanding of local customers, established nationwide infrastructure and proven track record as a partner with Tesco's global retail expertise, international sourcing scale and supply chain capabilities'.
