NRI Papers
No.76   May 1, 2004
  China's Distribution Service Market Entering Phase of Full-Scale Opening  
Tatsuki ONDA
       Entering its third year as a member of the World Trade Organization (WTO), China's distribution service industry has embarked upon the most crucial stage of market opening. While timing and specific opening measures differ depending on individual business categories, markets in most business categories are scheduled to be opened on a phased basis three to five years after China joined the WTO. China's gigantic market is certain to begin opening mainly in the coastal areas, which have a population of nearly 500 million.
       Ahead of other service industries, plans call for the removal of almost all regulations in the distribution industry by the end of 2004. Regulations concerning the deployment of chain franchise systems and commercial trade (exports and imports) as well as limitations on foreign capital investment, areas, and volume (number of companies and outlets) will be abolished, thereby establishing a fair and competitive environment.
       Success in participating in the Chinese market requires a full understanding of specific situations, and thorough preparations must be made. In particular, it is vitally important to explicitly exhibit the "basic stance of contributing to the development of China's economy." Detailed participation strategies should also be developed and implemented with the greatest possible care. Issues such as "cooperating with the Central People's Government and local participating governments," "the format of participation and the selection of partners," and "understanding and following accepted commercial practices of individual business categories" are especially important.
I Current Status and Attractiveness of China's Distribution Service Market
  1 Market Opening Entering the Core Stage
  2 Coastal Areas Where Conditions for the Development of Distribution Service Businesses Have Been Established
  3 Political Support and the Reorganization of Domestic Industries toward the Expansion of the Distribution Service Industry
II Important Points regarding Participation in China's Distribution Service Market
  1 Basic Stance of Contributing to the Development of the Chinese Economy
  2 Discrepancies in Views between the Central People's Government and Local Governments
  3 Format of Participation and Partner Selection
  4 Profit Structure Particular to the Chinese Distribution Industry: Low Gross Profit Ratio and Jin chang fei (Participation Fees)


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