Having historically defended its anti-union stance to the hilt, Wal-Mart has said that it will allow its employees in China to join a trade union following pressure from the Chinese authorities. The change in company policy threatens to reduce the company's flexibility, though the large potential market in China means Wal-Mart will be keen to keep the authorities on its side.

Wal-Mart, the world's largest retailer, currently operates 43 stores in China, from a global total of well over 5,000 outlets. The company plans to expand rapidly in China, opening another ten stores next year across key urban areas. However, China's state-controlled All-China Federation of Trade Unions (ACFTU) has threatened to sue Wal-Mart and other non-Chinese companies if they do not set up union branches in their Chinese operations.

Wal-Mart, well known for its anti-union stance, has now said that it will respect the wishes of any employees wanting to form a union. In response, an ACFTU official told the Xinhua news agency: "Wal-Mart China has shown a positive change of its long-standing non-union attitude [...] and the ACFTU is planning to help foreign-funded companies, including Wal-Mart, in the country to establish trade unions as soon as possible."

A more unionised Wal-Mart operation threatens to impede the company's flexibility concerning employee benefits and resolving grievances. Growing competition in China, through other multinationals such as Carrefour and consolidated domestic firms such as Shanghai's Bailian Group, has emphasised the need for Wal-Mart to remain as competitive and flexible as possible to react to fast moving market changes. However, given its existing worldwide spread, it seems unlikely that Wal-Mart would fail to understand the need to adapt its regional operations to meet local conditions - what works in the US or Europe is after all unlikely to be applicable in the same way in China.

China's retail market is estimated to be worth US$240bn and official estimates suggest that it is set to grow 8-10% a year to reach approximately $2.4 trillion by 2020. It is the second largest market in Asia, after Japan, and is therefore of great importance to Wal-Mart. If the company is to fully reap the benefits of such a growing market, it must work in harmony with the Chinese government to ensure the smooth realisation of its own expansion plans.

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