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Five questions answered on Tesco’s talks with China Resources

A win-win move, or do Tesco still just not understand China?

Tesco.
The deal would mean Tesco retained a low-capital stake in the Chinese market. Photograph: Getty Images.

UK supermarket giant Tesco is said to be in talks with China Resources Enterprise (CRE) about merging both company’s markets and hypermarkets.

How many stores are the companies thinking of merging?

The grocery retailers are talking about merging Tesco’s 131 stores in China with CRE's almost 3,000 stores, which are called Vanguard. Both companies confirmed they were talks in stockmarket statements, but warned there was no guarantee the deal would go through.

How will control be divided up? 

State run CRE would control 80 per cent of the new chain and Tesco would have the remaining 20 per cent. The companies say that if the deal goes through it would mean Vanguard would be the leading multi-format retailer in China.

What will the deal mean for Tesco?

It would mean that Tesco could still have a presence in China without having to invest a significant amount of capital. One analyst, speaking to Reuters new agency, said: "This may look win-win, but in reality, Tesco is saying 'I can't figure out China',".

What has CRE said about the merger?

The company said that the venture would bring together its "deep understanding of local customers, established nationwide infrastructure and proven track record as a partner with Tesco's global retail expertise, international sourcing scale and supply chain capabilities".

What about Tesco’s other overseas operations?

In recent times Tesco, which is the biggest supermarket chain in the UK, has faced increasing difficulties in its overseas operations.

In April the company said it was abandoning its US chain of 199 Fresh & Easy shops. It also announced its first decline in annual profits in almost 20 years. In 2012, it announced it would leave the Japanese market.