MARK O'NEILL in Shanghai

China is keen to prevent foreign domination of its retail sector even after it liberalises the market this month, according to the head of the foreign firm that runs the mainland's biggest home improvement retailer.

Gerry Murphy is chief executive of Kingfisher, owner of B&Q, which has 20 stores and 5,000 workers in the mainland, with sales in the year to January of £131 million ($1.92 billion), up from £88 million and £33 million in the two previous years.

On December 11, under its commitments to the World Trade Organisation, Beijing will allow foreign retailers to operate without a local partner, to open as many stores as they want anywhere in the country, and to buy from suppliers that had been previously only been allowed to export.

"China will allow substantial western participation but not dominance," Mr Murphy said on the sidelines of a B&Q presentation to 20 visiting investors.

"The government will use planning and environmental laws to keep a lid on foreigners and develop local companies. This is a proud, independent country, which had an unhappy experience of colonialism by Britain and France in the 19th century and Japan in the 20th century."

Until now, Kingfisher has owned 65 per cent of B&Q stores, with the remainder held by local partners. On December 18, it will open its 21st store, in Wuxi, in which it will own 100 per cent.

Mr Murphy said that his firm was buying its 35 per cent share of the four B&Qs in Shanghai from partner Shanghai Gas. "We are well-established here and do not need the connections. But this is a highly politicised country. We will keep some joint-venture partners that are well connected [in other areas of the country]."

The company plans to more than triple the number of stores in the mainland to 75 within five years and forecasts double-digit growth for many years to come.

David Wei, the president of B&Q China, said the December 11 liberalisation could prove to be mixed blessing. "It will lead to a more level playing field, lower tariffs for imported products, provide a better legal framework and make land sales more transparent."

The downside will be more involvement by local governments, more intense competition for land, staff and managers and more companies entering the market.

"Commercial planning rules are likely to be imposed that may restrict where we can open stores within a city and restrict the size of those stores. Sale of commercial land through public auctions will push up prices and increase competition for sites. Resettlement compensation for existing land occupiers will increase and relocating existing occupiers will become more difficult," Mr Wei said.

He said his company would be flexible in its use of land - one store in Shenzhen is beneath six residential tower blocks and one in Chongqing is below a school.

On November 26, Kingfisher announced it had acquired five leasehold hypermarket stores from PriceSmart, a privately owned mainland firm, for £6.95 million. The five vacant stores will be converted to the B&Q format next year.

The company plans to open seven to nine new stores in the country during 2005-06.