Why Foreign Retailers Stumble in China

Tesco supermarket in Shanghai Photograph by Imaginechina/AP Images

Tesco’s recent decision to transfer its retail operations in China to a joint venture controlled by China Resources, a local state-owned enterprise, is just the latest example of a prominent Western retailer that has stumbled in China. Tesco entered China in 2005. With 131 stores in the country, however, it ranks only No. 8 by size in China’s hypermarket retail segment and commands a tiny 2 percent share of the market. Letting China Resources take over these operations appears to be the right move for Tesco’s shareholders.

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