By  on February 26, 2008

Despite the rising exchange rate and concerns about product safety, the vice chairman of Wal-Mart Stores Inc., Michael Duke, said Monday in Beijing that the retail giant's level of procurement from China likely will remain steady this year at about $9 billion.

Improvements in productivity will help counter inflation of directly sourced products from China, said Duke, who oversees Wal-Mart's international operations. While some product categories from China may decline, others will increase, he said, without providing specifics.

Chinese suppliers have been able to remain competitive in the face of inflation, which is running at one of the highest levels in the last decade, and a rise in China's currency, the yuan, by becoming more efficient and enhancing quality, Duke said, noting that the Asian giant will continue to account for "a major portion of direct purchases by Wal-Mart for a long time."

Chinese exporters have been hurt by the yuan's rise against the U.S. dollar. Since July 2005 when Beijing ended a direct link between the currencies, the yuan has risen by 16 percent against the dollar. Local inflation in China also has been a challenge for exporters who have seen prices soar.

Wal-Mart has been looking to its international operations for growth as it scales back expansion in the U.S. Wal-Mart posted record and earnings sales, up 8.3 and 4 percent, respectively, for the fourth quarter ended Jan. 31, over the fiscal 2007 fourth quarter. Domestic same-store sales advanced only 1.6 percent in the quarter.

Duke said sales in China are growing faster than the 18 percent rate of Wal-Mart's other non-U.S. operations. The Bentonville, Ark.-based behemoth operates 202 units in China, including 101 stores under the Trustmart nameplate, a Wal-Mart spokeswoman said.

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