Tesco exits China

Nick Miles
Head of Insight - Asia Pacific
@RetailAnalysis

Date : 25 February 2020

Tesco has announced it will exit its joint venture with China Resources Holdings in China, which it established in 2014.

Sale will generate £275m for additional business investment

As the retailer continues to reorganise its international businesses, Tesco has agreed to sell its 20% stake in Gain Land to a subsidiary of its joint venture partner, China Resources Holdings. Gain Land is the Chinese joint venture with China Resources Holdings that was established in 2014 between the two companies.  The disposal will result in net cash proceeds to Tesco of c.£275m which will be used for general corporate purposes. The retailer has said that the disposal allows Tesco to further simplify and focus the business on its core operations and will be completed by 28 February, as it is not subject to regulatory approval.

16 years trying to crack the Chinese market

The sale will bring to an end Tesco's retail presence in the Chinese market. Tesco first entered the market in 2004 via a JV with local retail chain Hymall and in 2006 increased its stake in the business. At its peak it had offices and around 130 stores focused on three key regions of Beijing, Shanghai and Guangzhou. However, the retailer struggled in the face of strong local competition to secure the best locations for its stores, while having a network spread down the entire east coast presented further challenges in terms of both supply chain and understanding strong regional differences in shopper preferences.

What does this mean for Tesco's presence in Asia?

The sale highlights another retrenchment of the retailer from Asia, having sold businesses in Japan, South Korea and now China over the past few years. Tesco has also been clear that it is further reviewing its operations in Thailand and Malaysia, which have reportedly generated much interest from other major retailers and investors in the region. If it does decide to sell off this part of the business, Tesco which once saw Asia as a significant growth engine for the business, will only have a small foothold in India, where it still maintains a JV with Trent, Tata's retail business.