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From Retail to Real Estate-A New Trend in China and its Upcoming Challenge for Legal Departments

September 2010
ConstructionRetail

Abstract

Recent years have seen a rapid expansion of investment in China by foreign retail giants. Contrary to the worldwide economic crisis, the Chinese market has become a hot destination for foreign capital, especially capital from retail giants. Facing fierce competition in the market, traditional supermarkets seem outdated. For some retail investors, looking for diversity or uniqueness will be a way out. Among others, a combination of the whole chain of retail, entertainment, logistics and service by the development of city commercial centers are becoming a new trend for retail giants. Is this only a trial to invest in the Chinese real estate market due to huge appreciation of assets and increasing rental for real estate, or a must-do strategy? The answer could be different. Engaging more in the real estate market, retail giants seem to be less experienced in this area compared to what they have in the retail market. Since the legislation system on real estate in China is not quite mature, there is still uncertainty or risk for some investors. Prior to discussing some challenges they are facing, let’s first of all have a general picture on Chinese legal system on real estate.

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Author

Michael Qu
Legal Counsel, Metro AG, China

The Author, Michael Qu is in-house legal counsel working at METRO Cash&Carry China, subsidiary of METRO AG.

Company

Metro AG

Metro AG is a diversified retail and wholesale/cash and carry group based in Düsseldorf, Germany. It has the largest market share in its home market, and is one of the most globalised retail and wholesale corporations. It is the 5th largest retailer in the world according to Deloitte [2] , while Reuters lists the company as the 3rd largest retailer in the world [3]. In English it often refers to itself as Metro Group. It was established in 1964 by Otto Beisheim.

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