Tesco to step up Chinese expansion

London Tesco plans to make China a key part of an accelerated international expansion plan to fuel sales growth as its share of the domestic grocery market plateaus, according to a Bloomberg report.

Tesco will spend 2.5 billion pounds ($3.9 billion) over five years opening Chinese shopping malls and hypermarkets, the report said. The retailer will also increase store openings outside of China by 66% this year, with Fresh & Easy chain opening one new store a week.

The grocer is seeking to sustain growth by expanding internationally and adding services, such as banking. Tesco Bank will begin offering mortgages and fixed-interest savings bonds this year and bank accounts in 2011.

Tesco also plans to increase the number of “Lifespace” shopping malls in China to nine from three this year. The malls offer multi- storey outlets of Tesco food and non-food stores, along with further levels of cinemas, restaurants and stores.

About half of the funding for the malls will come partly from joint ventures and other third parties, who will contribute about 2.5 billion pounds, the report said. The grocer will use funds from the sale and leaseback of some of its U.K. supermarkets, operating cash flow and its “budget” to fund its half of the investment, Bloomberg added.