China will lead retail market growth in the Asia-Pacific region, a recent MasterCard survey of retail trends indicates.

The survey said retail markets in the Asia-Pacific region will show a positive trend in the latter half of 2003, but that the Chinese retail market will have the region's highest growth rate - 6.8 per cent year-on-year.

Figures from the National Bureau of Statistics show China's retail sales during the first half of the year totalled 2.1556 trillion yuan (US$260.3 billion), a year-on-year increase of 8 per cent.

Some industry experts said that the huge market ensures the rapid growth of the retail sector.

However, a report from the China Commerce Association for General Merchandise said some problems exist in the retail sector which will hinder its development and make it less competitive than retail sectors in foreign countries.

The small number of large-scale businesses, especially retail chains, is a major problem in the sector, according to the report.

Though chain stores have been developing rapidly over the past few years and are gradually becoming a major retail channel, there are still many problems and such chains account for only a small proportion of total national retail sales.

In the United States, on the other hand, the sales volume of retail chains accounts for over 80 per cent of total retail sales in the country.

To develop large-scale retail outlets and retail chains through mergers and acquisitions is a practicable way for the country to break out of its traditional retail modes, said the report.

According to China's 10th Five-year (2001-05) Plan, chain store retailing should grow at an annual rate of 35 per cent, with sales volume reaching 700 billion yuan (US$84.5 billion) by 2005.

Poor management, logistics and information systems, which result in higher operating costs, also hinder development, according to the report.

With the opening up of the retail sector to foreign investors, domestic firms must build up their own brand names and improve their competitiveness, if they are to survive in the global market, the report pointed out.

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