Argos turns to China to boost sales

With shoppers cutting back in the UK, Argos has turned to China as part of its drive to revive its flagging fortunes.

The catalogue business is setting up a £45 million joint venture with Chinese manufacturing giant Haier in a bid to tap into the country's buoyant economy and current spending boom.

Previous openings overseas have proved unsuccessful, including pilot stores in the Netherlands opened in 1998, while five stores in India were closed in 2009.

However, Argos will return to overseas expansion next year when it opens a trial store and internet delivery service in Shanghai, and ultimately aims to expand throughout the country.

It will follow in the footsteps of other UK retailers who have already got a foothold in the powerhouse Asian economy, such as Tesco, Burberry, Mothercare and Marks & Spencer.

In the UK, Argos's customers are being badly hit by the squeeze in living standards because they tend to have lower disposable income and, with many renting, they have not benefited from the record low interest rates.

But in China, Argos hopes to tap into the booming middle classes who are spending freely as they reap the rewards of the country's rapid industrialisation.

The Chinese economy is expected to carry on growing faster than the West - it recently overtook Japan as the world's second biggest economy and is set to supplant the US as the number one economy in coming decades.

The new venture will draw on Argos's expertise in online retailing and Haier's distribution network in the country.

Haier, which makes TVs, fridges, freezers and washing machines, is one of the world's largest white goods manufacturers. It will own 51% of the joint venture.