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Wal-Mart Expansion Good For US and China

Wal-Mart has been blamed for everything from the loss of high-wage manufacturing jobs in the U.S. to the growing trade deficit with China.

But some say the largest retailer in the world is also a model of efficiency and could have a liberalizing effect on business in communist-run China.

"We don't need the traffic…" says one protestor at an anti-Wal-Mart rally.

In Spokane Washington, angry protesters say a proposed Wal-Mart will bring traffic into their neighborhoods and drive high paying jobs away.

"Go back where you came from, give some good jobs and give up the forces of darkness," says another protestor.

Whether it's an evil corporate giant or a model of supply-chain efficiency, one thing is certain -- Wal-Mart has been hugely successful.

Jim Randle is an economics editor at Voice of America and says, "Their sales, according to their Website, was $312.4 billion last year. Just for perspective that's roughly the same as the Gross Domestic Product of a decent-sized country."

And with enough cash to run a small country, it's an economic force that can transform entire communities.

Peter Morici is an economics professor at the University of Maryland. "Wal-Mart is a force that's much bigger than inexpensive products on a store shelf; it's a way of getting things done and it's having an impact in our culture very much the way Henry Ford's production line had on our culture," he says.

Like the Ford Motor Company and others, Wal-Mart is expanding worldwide, making inroads into the fastest growing economy in the world. Wal-Mart will open 20 more stores in China over the next few months and could hire as many as 150,000 new employees over the next five years.

Wal-Mart Asia CEO Joe Hatfield believes China's growth potential is enormous. "China's the one place in the world that, given time, you could replicate Wal-Mart in the U.S."

Analysts say if Wal-Mart can seize just three percent of the Chinese market, it would bring in as much as $20 billion a year.

Jim McGregor, the author of "One Billion Customers" told the American network ABC that Wal-Mart's eastward expansion will bridge cultural gaps and make Chinese businesses more open to the idea of Western efficiency.

"Chinese distribution has been very, very inefficient because it was a bunch of laggard state companies,” says McGregor. “Wal-Mart will build a distribution system that breaks through that. Chinese retailers will have to clean up their act to compete.”

If Wal-Mart succeeds in China, it's not likely to have much impact on the U.S. trade deficit with China, which was more than $200 billion last year. But Peter Morici says it could hasten trade reforms in a country still firmly under the control of a select few.

"When you start to build out large retail organizations like Wal-Mart across the country, you're taking control of commerce out of the hands of the elite and creating the potential. Out of those Wal-Mart employees in China will emerge a middle class of managers who will not be beholden to the Communist party," professor Morici adds.

Morici blames the U.S. trade deficit less on Wal-Mart's imports from China and more on the undervalued yuan, which he says is kept artificially low by a highly protectionist Chinese government.