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Alliance to boost retailers' performance
By Liu Jie (China Daily)
Updated: 2004-05-10 08:41

The Wangfujing Dong'an and Xidan Friendship groups, two of Beijing's largest retail enterprises, are working to close a deal that will allow them to boost profitability.

Although they declined to comment on the possibility of a merger, insiders said the deal would be a boon for both sides, taking into account the enlargement of business scales and sales networks.

In accordance with the companies' performances last year, the annual sales volume of the touted retailing carrier would exceed 8 billion yuan (US$963 million), experts and insiders estimate.

In February, the Ministry of Commerce announced that the government would offer special support to 15-20 large commercial enterprises, in a bid to consolidate the nation's commercial sector, prevent duplication and enhance the sector's comprehensive competitiveness.

"The decision of Wangfujing Dong'an and Xidan Friendship seems to have a close relationship with the (government) policy," said Yan Ligang, spokesman for the Beijing Commerce Bureau.

The two groups have been in discussion for a long period of time, however, no agreement has been reached due to personnel, asset and business structure problems.

"We, of course, encourage such a move, which may favour the optimization of Beijing's commercial structure," said Yan.

The Wangfujing Dong'an Group is Beijing's leading retailing enterprise and was ranked among China's top 30 retailers last year.

Its key asset is the Wangfujing Department Store - the first large-scaled department store after the foundation of New China in 1949.

Wangfujing listed in Hong Kong in 1997 and acquired the Dong'an Group in September 2000.

So far, the Wangfujing Dong'an Group owns 11 chain department stores in eight key Chinese cities, including Beijing, Guangzhou and Wuhan.

The group plans to open 30 outlets around China and wants an annual sales volume of more than 12 billion yuan (US$1.45 billion) by the start of next year.

The Xidan Friendship Group was created in 1997 by a tie up between the Xidan Shopping Centre and Beijing Friendship Store. Its sales volume reached 2.5 billion yuan (US$301 million) last year.

Chen Jian, a researcher with the Beijing municipal government's policy study office, said the possible merger "seems complementary, as Wangfujing Dong'an may get new fuel to realize its ambitious target and Xidan Friendship can share network resources with its partner to expand business."

If completed, the alliance would follow the tourism affiliation by the Beijing Tourism Group, Quanjude and New Yansha, which created a bloc with assets in excess of 15 billion yuan (US$1.8 billion), according to Chen.

"Encouraged by the municipal government, acquisitions and mergers have become the trend among Beijing's commercial enterprises, which may facilitate the upgrading of the city's retail industry structure," said Chen.

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