Tesco, one of the biggest retailers in the UK and Ireland, is set to merge its 131 stores in China with the country’s second-biggest hypermarket chain, ending nearly a decade of independent operations in the country as sales decline. Tesco is set to be a minority shareholder in the merger announced this morning.

The giant retailer plans to form a partnership with China Resources Enterprise that will also run convenience stores, supermarkets and other outlets in Hong Kong, China and Macau, it has been reported. Tesco will have a 20 per cent stake in the tie-up with China Resources holding the remaining 80 per cent.

In a statement issued this morning, Tesco said: "The partnership would bring together CRE’s 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.  The proposed joint venture would create a business with sales of some £10bn, in which CRE and Tesco’s effective interests are expected to be 80 per cent and 20 per cent respectively.

"It would involve CRE combining its CR Vanguard business, which currently operates 2,986 stores across China and Hong Kong, with Tesco China’s 131 stores and shopping mall business," the statement added.

The merger allows Tesco to maintain a presence in the world’s second-largest economy where it’s been closing stores amid greater competition from regional rivals such as Sun Art Retail Group, backed by France’s Groupe Auchan.

According to Euromonitor International, China Resources is one of China’s largest hypermarket operators with an 11 per cent share of the market  last year. That compares with a 14 per cent share held by rival Sun Art. Tesco ranked eighth with a 2.4 per cent share.

Image shutterstock