Seoul-based Lotte signed an agreement yesterday with Zhejing Intime Department Store Co, an arm of China Yintai Holdings Co, to set up a local venture, the South Korean firm said in a regulatory filing.

Both companies will take equal stakes in the Beijing-based venture, the statement said, without disclosing the investment amount.

The duo will initially invest about US$10 million to open a store in Beijing's Wangfujing area, Reuters reported early yesterday ahead of the company statement, citing an unnamed source.

Lotte, led by Chief Executive Lee In Won, has been diversifying its businesses in countries such as China and Russia as competition intensifies in its US$120 billion retail market at home.

Economists expect South Korea's retail market to expand nearly 2.5 percent annually through 2008 while China's US$970 billion market will grow at least 10 percent a year.

The Beijing store will be Lotte's second overseas outlet as the company is on track to set up a department store in Moscow in the first half of next year, according to the statement. Lotte also said it is considering entering the Vietnam market.

Lotte raised 3.4 trillion won (US$3.6 billion) in an initial public offering this year. The company said in January it plans to add six new department stores by 2010 and 28 discount stores by 2007.

Lotte controls 44 percent of South Korea's 16.5 trillion won department store market and 12 percent of the country's 21.5 trillion won discount sector, according to Bloomberg data.

(For more biz stories, please visit Industry Updates)