China Resources Enterprise mulls Tesco venture in China

China Resources Enterprise (CRE) said it is considering a joint venture with the UK retailer Tesco to operate hypermarkets and supermarkets in China. CRE would control about 80% of the venture while Tesco would have 20%, it said in a filing to the Hong Kong stock exchange.

The move would combine Tesco's 131 stores in China with CRE's almost 3,000 stores, called Vanguard. After an aggressive expansion, Tesco has left some international markets.

CRE said in a statement that the move would bring together its "deep understanding of local customers, established nationwide infrastructure and proved track record as a partner with Tesco's global retail expertise, international sourcing scale and supply chain capabilities".

Tesco, the biggest supermarket in the UK, first started operating in China in 2004 where it mainly has hypermarkets and some shopping malls with Tesco stores.

Analysts said the joint venture would allow Tesco to bring down the amount of capital it must commit to its China business, while still having a presence there.

After a decade of international expansion, Tesco faces challenges in outside markets. In April Tesco said it was exiting its US chain of 199 Fresh and Easy shops, at the same time recording its first decline in annual profits in almost 20 years. It is still to be decided whether it will sell the business or close it down. That move came after Tesco said it would leave the Japanese market in 2012.

Tesco has meanwhile been re-focusing its effort on its home market, unveiling a new concept store in Watford designed to appeal to young mothers and diners.

BBC