Wal-Mart Confident China Goods-Sourcing Stable Despite Inflation

Says China will be able to compete on quality not just pricing

Wal-Mart on Sept. 3 said soaring production and commodity costs would not damage its ability to source goods from China, and it even expected an improvement in the product standards. Vicente Trius, CEO of Wal-Mart Asia, said that China had been a stable source of products and would remain so in the coming years.

"The economic downturn or inflation or high production cost has not had an impact specific to our sourcing in China as compared to other countries," he said as he launched the company's regional headquarters in Hong Kong.

"My gut feeling is that the quality of Chinese goods will give a competitive advantage as we go forward," he said. While other emerging markets might compete on price, China will also be able to compete on quality, he added.

Wal-Mart has built much of its success on being able to source cheap products from China's factories, but growing commodity and wage inflation has put the factories under greater pressure. Hundreds of factories have been forced to shut down or relocate inland from the southern factory belt in the past two years, business groups have said.

Trius insisted the global economic slowdown had not hurt their retail businesses in the mainland, which saw 16% growth over the last 12 months."China is an extremely fragmented market. Any retailer there would have less than one percent market share, which I believe offers us a lot of opportunities," he said.

Despite choosing Hong Kong as the regional base ahead of Singapore and Shanghai, Trius said Wal-Mart had no immediate plans to open a store in the southern Chinese city."I would say the availability of properties is a challenge here. We are not talking about prices," he said.

Hong Kong's supermarket sector is dominated by two conglomerate-backed players who have managed to fight off any foreign entry, most notably French giant Carrefour.

Copyright Agence France-Presse, 2008

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