Wal-Mart, Citic Form Joint Venture
10/11/2002, The Wall Street Journal

Wal-Mart Stores, the world's largest retailer, said it has signed an agreement with China International Trust & Investment Corp., known as Citic, to open stores on China's booming eastern coast. Wal-Mart said a new joint venture with Citic, called East China Wal-Mart Stores, would open supermarkets in and around Shanghai, China's largest and richest city. Citic's main business is financial services. Wal-Mart also said it had opened a procurement center in Shanghai to buy merchandise from eastern and northern China for export. The company says it bought more than $10 billion in goods in China last year. The joint-venture supermarket deal marks the U.S. company's first foray into eastern China, although Wal-Mart already has 22 stores elsewhere in China.


  1. What do you see in the article regarding WalMart's efforts to manage its economic or strategic exposure to foreign-exchange risk?
  2. What do you know about CITIC?  Find out the extent of its governmental connections?  How might this be an effort by WalMart to manage its political risk?
  3. Why is WalMart using a joint-venture to move into Eastern China?  What strategy did it use to establish itself in other parts of China?
  4. Is its China strategy an attempt to diversify earnings?  What else could it be?
  5. How would you come up with a required rate of return for this investment?
  6. Is this good for WalMart's stock?  Did the stock price go up at the announcement?  Explain the market movement.