Walmart investment: Why is the retailer looking to invest big in China?

walmart to sell chinese e commerce business to
AWal-Mart store in Mexico City January 11, 2013 Reuters

Walmart (WMT) is expanding its reach even further with a reported $1.2 billion investment in China to allow it to compete with the country's local competition and online retailers in the grocery sector.

The investment will be used for Chinese distribution centers and will occur over the next two decades as it looks to increase its grocery deliveries, the company told CNN Business in a statement.

At last count, Walmart had 443 stores located in China as well as Sam's Club locations. Operations in the country have garnered $10.7 billion in sales for the company, which accounts for less than one-tenth of its international revenue, the news outlet reported.

"Walmart continues to increase investment in supply-chain logistics in order to ... provide our Chinese customers with great fresh products, and improve our service," Ryan McDaniel, Walmart's head of international logistics, said in the statement to the news outlet.

Walmart has already made a $102 million investment to build a distribution center in the south of China and has been operating in the country since 1996. The online groceries business in China is competitive as companies such as Alibaba have grown their visibility in the country over the last few years, which is further complicated by Chinese tariffs.

Beyond its $1.2 billion investment, Walmart teamed up with Chinese tech firm and Chinese delivery service Dada-JD Daojia. The company is currently testing smaller "smart supermarkets' in the region to allow its customers to use their smartphones as a scanner, which is then read at the checkout, of which the first was opened in Shenzhen last year, CNN reported.

Shares of Walmart stock were down 0.05 percent as of 11:16 a.m. ET on Wednesday.

This article was first published in IBTimes US. Permission required for reproduction.