The Chinese retail market will sustain double-digit growth in the next five years to become the second-largest retail market in the world by 2012, TNS Retail Forward has predicted.

The Chinese market is set to increase in value to more than US$1.4trn by 2012, the US research firm said in a new report - "China's Retail Landscape".

The Chinese market is likely to shrug off short-term pressures, ranging from inflation to increased governmental regulation, and support strong and sustained growth.

This makes the market a tempting prize for international retailers. Carrefour and Wal-Mart have both embarked on aggressive expansion drives in the region and Tesco is preparing to enter the market sometime this year. Other foreign retailers, including Taiwan's RT-Mart, partner of Auchan, and Kingfisher, have built up sizable presences in the country.

However, the market remains dominated by local players, senior economist and manager of TNS's global retailing program Frank Badillo told just-food today (26 June).

"China has a strong slate of domestic retailers that really control the retail scene," Badillo observed. "The bureaucratic process means that they are able to open stores more quickly and find locations more easily."

Another advantage that domestic retailers have, Badillo said, is the recent upsurge in Chinese nationalism, as demonstrated by the boycott of Carrefour launched in response to French protests over Tibet during the Olympic torch procession through Paris.

"There has been a surge in Chinese nationalism and pride in Chinese retailers. This is a potential risk to foreign retailers… but it remains to be seen whether this is a passing phase in reaction to the Olympics and Tibet or if it is a longer-term issue," Badillo said.

Nevertheless, Badillo continued, multinational retailers are finding ways around these problems. For example, Wal-Mart is increasingly fostering relationships with local companies - such as real estate firms - to negotiate the bureaucratic process and find potential store locations.