China's retail and consumer sector will see growing merger and acquisition activity in the years ahead, according to a report released yesterday by PricewaterhouseCoopers (PwC), a worldwide accounting and consulting firm.

China's economic reforms and opening-up policy have improved the public's purchasing power in retail and consumer markets, said Sonny Doo, the firm's retail and consumer chief in China.

"Many more foreign retailers will resort to the practice of mergers and acquisitions as a way to gain efficient and effective market entry, while domestic players will buy out smaller regional retailers as a strategy to extend their presence."

The report, based on PwC's global retail and consumer study, titled "From Sao Paulo to Shanghai", aims to provide a general picture of the economic, social and cultural environment in which investors operate.

It also highlights major consumer trends and identifies challenges and opportunities for companies in the global retail and consumer goods sector.

Doo said strategic alliances and voluntary chains will be another trend among retailers especially smaller ones in the coming years.

"Small and medium-sized domestic retailers need to form voluntary chain operations to increase bargaining power, pool resources, enhance sourcing capabilities and share logistics facilities and information, thereby countering intensified competition," he said.

Citing the study, Doo said China's middle-class families, which have an annual income of 60,000 yuan to 500,000 yuan each, will make up 45 percent of the population by the year 2020, compared to 5 percent today. Those families will be avid consumers of durable goods ranging from high-end electronic appliances to upscale fashion to premium home goods.

The report also said the business boom in second- and third-tier cities and rural areas will attract a growing number of foreign retailers.

Editor: Yan