Tesco enters auction for Chinese group Trust-Mart

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Tesco has made a late entry into the bidding for China's Trust-Mart, joining Wal-Mart of the US and France's Carrefour in the $1bn-plus supermarket auction.

The British supermarket group is trying to catch up its bigger rivals in the world's most populated country, which it entered two years ago. Tesco has a 50 per cent stake in the 39-strong Hymall chain owned by the Chinese food supplier Ting Hsin.

Trust-Mart, which hoisted the "for sale" sign in January, is an attractive target because it owns more than 100 stores in some of China's more affluent southern and eastern cities. It was set up eight years ago by a group of Taiwanese entrepreneurs but ran into trouble after expanding too fast. Some of the stores are loss-making. UBS is handling the sale, which is still at an early phase.

Tesco is focusing its firepower overseas in an attempt to deflect attention from its stranglehold on the UK supermarket sector, which has recently fallen foul of the competition authorities.

The Office of Fair Trading said this month that it was likely to refer the £100bn sector to the competition authorities for a third investigation in five years amid fears that the Big Four chains are squeezing smaller stores out of the market.

Already this year, Tesco has unveiled plans to conquer the US, starting with a £250m cash injection in a chain of convenience stores on the country's West Coast.

It has also been linked with the $1.85bn (£1.05bn) purchase of Carrefour's stores in South Korea, where it operates under the Samsung banner, and the Indian telecoms group Bharti Tele-Ventures, which wants to expand into food retailing. A spokesman for Tesco declined to comment yesterday on the group's expansion plans.

One retail analyst said Tesco could "easily afford" Trust-Mart's $1bn-plus price tag. "A deal would make sense because the Chinese market is considered to be the best growth market, because the low-cost hypermarket model appears to work there," he said.

Carrefour is the biggest overseas retailer in China with about 70 stores, while Wal-Mart has 51. The US retailer has said it will create 150,000 jobs in China over the next five years, five times as many as it currently employs.

The Chinese government recently made it easier for international chains to invest in the country to comply with rules set when it joined the World Trade Organisation in November 2001. Although foreign retailers are now allowed to invest directly in the country, most prefer to work with local partners.