Gome chairman Huang Guangyu has teamed with United States investment bank Bear Stearns Companies Inc on a 500 U.S. dollar million fund to invest in China's retail sector.

Huang, the richest man on the Chinese mainland, will invest 250 million U.S. dollars through his Eagle Investment Group while Bear Stearns, the biggest US underwriter of mortgage bonds, will fund the other half, both companies said in a statement yesterday.

The alliance will work in conjunction with Bear Stearns Merchant Banking, Bear Stearns' private equity arm which mainly invests in mid-market retail, financial services and consumer products companies including Dairyland and Harlem Furniture.

"With its tremendous success, especially in the retail sector, Bear Stearns Merchant Banking will contribute to Eagle's success in China," said Huang, chairman of Eagle Investment Group and Gome Appliance Co.

"With our years of retail experience in China, I am looking forward to working with the Bear Stearns Merchant Banking team as they extend their successful track record into China."

Five-year plan

Gome Appliance, the country's biggest home appliance chain with more than 800 stores, is confronted by increasing competition with domestic and overseas counterparts including Suning Appliance Co and Best Buy Co. Beijing-based Gome paid 5.27 billion HK dollars(680.7 million U.S. dollars) in July to buy rival China Paradise Electronics Retail Ltd - the third-largest home appliance chain at the time in China - to boost market share and maintain its No. 1 position. Gome then mapped out a five-year plan in November, estimating sales to reach 100 billion yuan this year and 150 billion in 2010, before it expands overseas.

"The two companies's ambition was clear taking into account that the retail sector will gradually become the growth engine behind economic expansion," said Zhang Qi, an analyst at Haitong Securities Co.

China's retail sales grew 13.7 percent last year to 7.64 trillion yuan as consumer demand booms nationwide. The government has cut taxes, raised minimum wages and improved education, welfare and health care to boost spending. Disposable income among urban residents advanced 12.1 percent to 11,759 yuan per year in 2006.

Editor: Yan