This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

How Did Wal-Mart Crack Open China?

By Peter Cohan

Wal-Mart Stores (WMT) entered China in 1996 and has billions of sales there. But how did it crack China? One big answer is a 65%-Wal-Mart-owned joint venture with a company run by the son of a former Chinese vice president who was tossed in 2009 out by Beijing after investigations into a multi-billion foreign exchange trading scandal.

Wal-Mart has operated in China for 16 years. According to its web site, Wal-Mart "opened its first Supercenter and Sam's Club in Shenzhen in 1996." By March 2012, it ran Supercenters, Sam's Clubs, and Neighborhood Markets in China. Its footprint then included "370 units in 140 cities in 21 provinces and four municipalities." And Bloomberg reported that as of October 2011, Wal-Mart's China sales totaled $7.5 billion.

That was when Wal-Mart got into some hot water with regulators. The Chongqing government fined Wal-Mart $423,000 â¿¿ accusing it of selling "63,547 kilograms of falsely labeled pork over the past two years." And Bloomberg reported that Wal-Mart claimed that it was "cooperating with the investigation,  sorry for inconveniencing customers,  set up a hotline to address customers' questions."

But that would be a small fine compared to what Wal-Mart would face if evidence emerged that it made payments to Chinese officials in order to gain access to its market. After all, Wal-Mart has allegedly demonstrated its willingness to make such payments to grow rapidly in Mexico.

That was when the New York Times reported on an estimated $24 million in bribes that Wal-Mart allegedly paid to Mexican officials through a "perfect" scheme.  Thursday, Wal-Mart announced along with its earnings that its audit committee was investigating possible violations of the "Foreign Corrupt Practices Act and other alleged crimes or misconduct in connection with foreign subsidiaries, including Wal-Mart de México."

Could these Wal-Mart foreign subsidiaries include those in China? There are certainly reports of large companies forming joint ventures with the families of powerful Chinese officials. In fact, there seem to be so many of these, that it would appear impossible for a company the size of Wal-Mart to gain access to the market without following this practice.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.20 -1.00%
FB $117.80 0.32%
GOOG $697.00 0.67%
YHOO $35.85 -0.44%
TSLA $227.60 -2.00%


Chart of I:DJI
DOW 17,660.99 -89.92 -0.51%
S&P 500 2,048.93 -14.44 -0.70%
NASDAQ 4,726.4480 -36.7760 -0.77%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs