The Tenth Five-Year Plan of Retail and Wholesale Industry and its Development

During the 10th Five-Year Plan period (2001-05), a number of large conglomerates of commodity circulation will come into being through M&A, combination, chain-store operation or agent management practice. They will be characterized by specialties in business, sound management, wide radiation and strong competitiveness. By the end of 2005, medium and small-sized State-owned stores will have basically gone through reconstruction or restructuring. They will be regrouped into agglomerations at various levels and with different scales.

Meanwhile a number of large commercial conglomerates with annual retail sales over 30 billion yuan will be formed through consolidating part of the stores. Some of the large monopolies will shoulder the task of developing large commodity circulation conglomerates.

Shanghai plans to set up two or three large conglomerates with retail sales over 30 billion yuan and more than 10 medium-sized ones with retail sales over 10 billion yuan by the end of the period. Beijing plans to establish one or two chain-store conglomerates with retail sales over 10 billion yuan and three to five ones with retail sales over 5 billion yuan.

China aims to consolidate the key role of chain-store business in the commercial and service trades in five years to ensure big increment of sales revenue and number of chain business enterprises and chain stores.

By the end of 2005, the number of chain stores will reach 100,000 with sales revenue amounting to 700 billion yuan, or about 20 percent of the overall sales revenue of wholesale, retailing and catering trade. 20 chain-store enterprises each with annual sales revenue of over 5 billion yuan and 40 ones each with annual sales revenue of 2-5 billion yuan will be built. Five to 10 internationally competitive large chain conglomerates will be incubated.

Restructuring of State-owned commercial enterprises will enter a vital stage, with the focus to be on dealing with the difficulties in debt-ridden State-owned wholesale enterprises and large general-line retail enterprises. Small and midsize State-owned commodity circulation enterprises will be further promoted by means of joint stock cooperation, merger, purchase or closedown.

Building of a modern enterprise system will be stepped up. At present, public economy accounts for more than 30 percent of the commodity circulation in China, of which, the public sector takes up more than 20 percent, the collective economy, more than 10 percent, and other economic sectors, more than 60 percent. During the 2001-2005 period, the country will continue to promote and standardize the reform in restructuring and withdraw small and mid-size State-owned enterprises from the public sector through leasing or selling in a bid to establish a pattern of commodity circulation shared by State-owned enterprises and share-holding enterprises, non-public enterprises and foreign-funded enterprises.

Current situation of the retailing and wholesale sector

In 2000, the volume of domestic retail sales of commodities amounted to 3,415.3 billion yuan, an increase of 9.7 percent over the previous year, of which 2,111 billion yuan was realized in urban areas, a 10.6 percent growth; 1,304.3 billion yuan occurred in rural areas, an 8 percent increase.

In 2000, the proportion of State-owned retail sales lowered in the total volume of domestic retail sales of commodities. Of the domestic total sales volume, 30 percent or more was public-owned, with 20 percent being State-owned and 10 percent collectively-owned. The rest 60 percent was shared by entities of other ownerships.

In 2000, retail volume of food, beverage, cigarette and wine sustained a big increase of 28 percent, 62 percent, 61 percent and 108 percent, respectively, over the previous year. Retails of garments and daily necessities increased 20 percent and 17 percent respectively.

In 2001, the volume of domestic retail sales of commodities reached 3,759.5 billion yuan, up 10.1 percent over the previous year, of which 354.3 billion yuan were from urban areas and 1,405.2 billion yuan from rural areas.

In 2000 the top ten provinces or provincial-level municipalities in terms of retail sales of consumer goodsincluded Guangdong (407.2 billion yuan), Jiangsu (260.4 billion yuan), Shandong (254.6 billion yuan), Zhejiang (229.9 billion yuan), Liaoning (184.8 billion yuan), Hubei (178.9 billion yuan), Henan (178.7 billion yuan), Shanghai (172.2 billion yuan), Hebei (161.4 billion yuan) and Sichuan (152.4 billion yuan).

In 2000, the sales revenues by the top 100 retail enterprises totaled 137 billion yuan, or 4 percent of the domestic total of consumer goods sales. State-owned public enterprises appeared on top of the 100 list. The leading 10 among thetop 100were Shanghai Hualian Supermarket, Shanghai Hualian Department Store, Dalian Department Store, Shanghai First Department Store, Shanghai Agriculture-Industry-Commerce Supermarket, Sanlian Trading House, Shanghai Yuyuan Shopping City, Jiangsu Suguo Supermarket, Shanghai Jinjiang Maidelong Shopping Center and Chongqing Trading House.

They accounted for over 30 percent of the top 100's total retail sales. Among the top 100, large department stores dealing in traditional way still held sway while chain business enterprises accounted for less than one quarter. Regional distribution of the top 100 is unbalanced. Much more companies are located in the east than in the west. Nearly 30 of them are in Shanghai and Beijing.

In 2001, the whole west region was home to only nine of the top 100, with the sales value totaling 14.69 billion yuan. The other ninety-one concentrated in east and middle regions, 15 of which were in Beijing (with sales value of 38.22 billion yuan), 13 were in Shanghai (with sales value of 58.25 billion yuan), and 13 were in Jiangsu (with sales value of 25.79 billion yuan).

In recent years, the booming of chain supermarkets, franchised stores, specialized stores and warehousing stores have vitalized the circulation industry of China and are challenging the traditional retailing enterprises.

By the end of 2000, there were 10,174 incorporated retailing enterprises with sales value above the state's quota (annual sales value exceeding 5 million yuan and the number of staff is no less than 60) and with 2.166 million employees. Among them 4,616 enterprises were state-owned with 909,000 employees; 2,505 were collectively-owned with 324,000 staffs and the rest 588 were privately owned with 78,000 employees.

Sales of consumer goods at domestic market increased steadily. In 2002, the total retail sales of consumer goods topped 4 trillion yuan to reach 4,091.1 billion yuan, up 8.8 percent over the previous year. Of this, the retail sales of consumer goods in urban areas reached 2,589.8 billion yuan, up 10 percent, and the retail sales of consumer goods at and below county level was 1,501.3 billion yuan, up 6.8 percent.

In terms of different sectors, the sales of the wholesale and retail industry reached 2,786.0 billion yuan, up 9.2 percent, the sales of the catering industry was 509.2 billion yuan, up 16.6 percent, and the sales of other industries was 795.9 billion yuan, up 3.2 percent. The real growth of total retail sales of consumer goods was 10.2 percent if price factor was taken into consideration.

Telecommunications, motor vehicles and related products had shaped new hotspots in consumption, and the sales of household electric and electronic appliances were brisk. The total retail sales of telecommunication equipment by wholesale and retail enterprises was up by 69.2 percent over the previous year; that of motor vehicles was up by 73 percent; electric and electronic appliances for household use was up by 14.6 percent.

China's commodity circulation industry is witnessing a rapid development period thanks to the reform of circulation mechanism and the restructuring in this field. However, the present situation is still far from meeting the requirement of national economic development. It remains a weaker link in the national economy. It is still at a lower stage of industrialization and lags far behind the developed countries.

On the whole, outstanding structural problems still exist in the commodity circulation industry. One is that the circulation enterprises are still doing business in a small and scattered way, and are not well organized. In 2000, the sales value of the 273 national major large retailing stores summed up to 107.28 billion yuan, 3.8 percent of the domestic total of consumer goods sales. This situation is quite different from that of the US where the first 15 retail companies account for more than 20 percent of the country's total sales value.

The second problem is that a great disparity exists between the domestic chain store enterprises and their overseas competitors. Application of modern marketing methods is still in its beginning stages. A quite number of chain store enterprises are not strong enough to compete like a modern one. They will have a long way to go to meet the scale of internationally recognized large chain store groups. Shrinking of traditional wholesale trade and inadequate investment in goods logistics centers and distribution centers have restricted the overall development of retail trade.

The third problem is that the gap between urban and rural areas is widening. In 2000, the volume of consumer goods sales increased by 10.6 percent in urban areas and by 8.3 percent in rural areas. The gap was 2.3 percentage points.

Management techniques also need to be modernized and equipment needs to be updated. Application of high-tech in circulation industry falls behind. In addition, staffs need to be qualified. There is a lack of professional managers who are accomplished in goods circulation business and well aware of modern management. Manpower is weak in circulation theory study and technology application.

By the end of 2000, China had 153,93 wholesale corporate enterprise above the norm (wholesale enterprises above the norm refer to enterprises with annual sale exceeding 20 million yuan and employees of more than 20.). Of them, 9,317 were State-owned enterprises, 2,406 were collectively-owned enterprises, and 560 were private enterprises.

The top five regions in number of state-owned wholesale enterprises above the norm were: Guangdong Province, 988; Beijing, 617; Shandong, 590; Zhejiang Province, 542; and Jiangsu, 529. State-owned corporate enterprises in other regions: Tianjin Municipality, 170; Hebei Province, 416; Shanxi Province, 259; Inner Mongolia Autonomous Region, 157; Liaoning Province, 455; Jilin Province, 197; Heilongjiang Province, 278; Shanghai Municipality, 146; Anhui Province, 289; Fujian Province, 442; Jiangxi Province, 271; Henan province, 472; Hubei Province, 403; Hunan Province, 347; Guangxi Zhuang Autonomous Region, 275; Hainan Province, 46; Chongqing Municipality, 126; Sichuan Province, 279; Guizhou Province, 137; Yunnan Province, 370; Tibet Autonomous Region, 7; Shaanxi Province, 210; Gansu province, 100; Qinghai Province, 37; Ningxia Hui Autonomous Regions, and 48; and Xinjiang Uygur Autonomous Region, 114.

By end of 2000, the top five regions in number of privately-owned wholesale enterprises were Fujian, 136; Zhejiang, 109; Guangdong, 57; Beijing, 53; and Shandong, 37. Privately-owned wholesale corporate enterprises in other regions: Tianjin, 3; Hebei, 6; Shanxi, 2; Inner Mongolia, 6; Liaoning, 25; Jilin, 1; Heilongjiang, 4; Shanghai, 15; Jiangsu, 18; anhui, 3; Jiangxi, 0; Henan, 19, Hubei, 4; Hunan, 4; Guangxi, 2; Hainan, 8; Chongqing, 9; Sichuan, 10; Guizhou, 1; Yunnan, 12; Tibet, 0; Shaanxi, 2; Gansu, 4; Qinghai, 1; Ningxia, 4; Xinjiang, 5.

There were 7,728 markets conducting wholesales of comprehensive products, farm and farm sideline products and industrial consumer goods in China in 2000, an increase of 595 over the 7,133 in the previous year. Of them, 4,237 were in the urban areas, 306 more than the 3,967 in the previous year, and 3,455 were in the rural areas, an increase of 289 over the 3,166 in the previous year. The total transaction volume of the markets reached 1051.8 billion in 2000, up 16.6 percent on the year-on-year basis, including 737.7 billion yuan by urban markets, up 15.8 percent, and 314.1 billion yuan by the rural markets, up 18.7 percent. Of the 7,728 markets, 735 were comprehensive wholesale markets, generating 131.8 billion yuan in transaction volume in 2000, 2,416 were industrial consumer goods wholesale markets, realizing 584.9 billion yuan in transaction volume, and 4,532 were farm and farm sideline products wholesale markets, making 335.1 billion yuan in transacting volume.

By the end of 2001, China boasted 3,273 wholesale markets each with an annual transaction volume of more than 100 million yuan, and more than 40 wholesale markets each with an annual transaction volume exceeding 5 billion yuan. The country's 10 major commodity wholesale markets were: The Zhejiang China Small Commodity Town, the Zhejiang Shaoxing China Light Industry and Textiles Town, the Hanzhengjie Small Commodity Wholesale Market, the Liaoning Shenyang Wu'ai Small Commodity Wholesale Market, the Hebei Shijiazhuang Xinhua Trade Center, the Shandong Qilu Chemical Industry Commercial Town, the Liaoning Haicheng Market Xiliu Garment Market, the Shanghai Fengjin Commercial Town, the Hebei Nan Santiao Small Commodity Wholesale Market, and the Guangdong Xijiao Light Industry and Textiles Town. Each of the ten has an annual transaction volume of more than 10 billion yuan.

Characteristics of wholesale markets in China:

-- Uneven regional distribution. In 2000, China has 3,087 wholesale markets each with transaction volume exceeding 100 million yuan, of which 1,957 were located in 10 eastern coastal areas, accounting for 63.4 percent of the total, 723 were in the 11 provinces of central China, 23.4 percent of the total, and 407 were in 10 provinces of western China, 13.2 percent of the total. Jiangsu, Shandong, Guangdong, Hebei, Zhejiang and Liaoning had 1,669 wholesale markets each with transaction volume of 100 million yuan, accounting 54.1 percent of the national total.

There were 39 wholesale markets each generating more than 5 billion yuan in transaction volume in 2000. Of them, east China had 34, Jilin, Anhui, Jiangxi and Hunan in central China each had one, and Chongqing, the only one in west China, had one. With the development of economy and improvement of transportation conditions in western China, western China has posed great potential in development of wholesale markets.

-- Backward transaction methods. China's wholesale markets are still dominated by the traditional booth trading system. But the wholesale markets in the developed countries mostly use the methods of open bidding and auction in transaction. The booth transaction method on China's wholesale markets decides prices over the counter, which cannot fully reflect the relations between supply and demand.

-- Prompt cash transaction. Most of the wholesale markets in China adopt the "cash on sale" settlement method, and the method of centralized settlement by banks has not yet been widely used in China. In contrast, prompt cash transaction is rarely used on the wholesale markets in the developed countries.

-- Backward goods flow and distribution conditions. The majority of the wholesale markets in China has not set up standardized goods flow and distribution system, causing big wastes in manpower and materials, and low efficiency. The imperfect system of goods flow and distribution has given easy access to fake and shoddy products on the wholesale markets.

-- Paying great attention to fee collection, but less to management and services. Many wholesale markets have not built up sound administration rules to help improvetheir management and services.

(US$1=8.27yuan)

[Source:State Development and Reform Commission]