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In China, Wal-mart has little choice but to suck it up

Wal-Mart has grown to about 350 stores and well over 100,000 'associates' in China since opening on the mainland 15 years ago.


From the FT's Lex blog

A peculiarly Chinese response to the "Occupy Wall Street" movement: occupy Wal-mart. At a time of popular anger towards icons of capitalism, authorities in the south-western city of Chongqing have chosen to go after the U.S. retail giant for the crime of mislabelling ordinary pork as "organic".

Two forces are at work here. First is the groundswell of nationalistic feeling supporting Chongqing party chief Bo Xilai, son of Mao Zedong's finance minister.

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Mr. Bo is pushing for promotion next year to the nine-man Standing Committee of the Politburo -- China's highest decision-making body. Second is food inflation, most evident in the price of pork, which was up 44 per cent in September from a year earlier, accounting for a fifth of the 6.1 per cent rise in the overall consumer price index. Given that backdrop, what better way to bolster one's image as a consumer watchdog than to bash a U.S.-owned enterprise for fraudulently driving up the price of a vital household staple?

Wal-mart has little choice but to suck it up. Outside the US is where the growth is: in the six months to July 31, net sales in Wal-mart stores outside the U.S. grew 32 times faster than those inside it. Such diversification has helped its shares outperform the market during this summer's downturn.

While it does not break down sales or profits by geography, China is the obvious focus. The Arkansas-based company has grown to about 350 stores and well over 100,000 "associates" since opening in Shenzhen 15 years ago. Square footage on the mainland has almost quintupled since 2006, more than double the next-fastest rate of expansion (in Argentina).

The company is saying very little about this latest incident -- involving 35 detentions, the temporary closure of 13 stores, and the departure of two top executives -- except to emphasise its commitment to the country. Yet for it, and for many other foreign-invested enterprises in China, the regulatory climate has rarely seemed this noxious.

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