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Proposals Might Add to Cost, Complexity of Building Big Stores
Topic Global Management
Key Words China, World Trade Organization, joint venture
News Story

New rules being drafted in China that regulate large-scale shopping outlets could raise costs and increase delays for foreign retailers like Wal Mart and Carrefour SA. The new rules would require cities to file detailed blueprints of their commercial plans. Retailers applying to build outlets larger than 10,000 square meters would also be required to address a public hearing. Experts predict that these hearings could result in higher costs for the retailers, if for example, the local government begins to require refinements to the plans such as pedestrian tunnels to improve traffic flow.

Foreign retailers are privately expressing concerns about the proposed new rules. Some believe that because the rules apply only to stores larger than 10,000 meters, the new rules will unfairly discriminate against foreign companies, who specialize in these larger stores. James Zimmerman, vice chairman of the American Chamber of Commerce in China, said that if the new rules unfairly restrict foreign trade with China, the country may be setting up a nontariff barrier, which would be in direct violation of World Trade Organization rules.

Local business people welcome the new regulations which they believe will curb waste and help to preserve the flavor of China’s local neighborhoods.

Questions
1.

What are China’s new rules designed to accomplish?

2.

What is a nontariff barrier? Why does James Zimmerman believe that China might be in violation of World Trade Organization rules if its new rules create a nontariff barrier?

3.

Last year, China ended rules requiring foreign retailers to form joint ventures with local partners, which sparked a surge in expansion by foreign retailers. Define joint venture and how this would apply to a new American company wanting to expand into China.

Source “Proposals Might Add to Cost, Complexity of Building Big Stores,” Wall Street Journal, July 17, 2006, page A6.
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