In a statement to the Hong Kong stock exchange, Wumart said Zhang quit as chairman on November 12 and is assisting the authorities with an investigation.

The Hong Kong-based newspaper Standard reported earlier that Zhang was under investigation over how he obtained the capital to establish Wumart in 1994.

"This is a personal matter and will not affect our company's normal operations and future development," said Wu Jianzhong, the firm's new chairman.

In addition to the election of Wu, an executive director of Wumart, to his new post, Wang Jianping, a non-executive director, was elected vice-chairman of the company's board.

Zhang will remain as an executive director of Wumart.

Media reports of the ongoing investigation and Wumart's cancellation of its share sale last Thursday had raised concerns over the company's stability and its ability to expand.

It originally planned to sell up to 101.3 million new H shares at HK$6.6 (85 US cents) each, raising HK$668.7 million (US$89 million) to finance its expansion.

"We will stick to our regional development strategy," Fu Yu, the company's senior public relations manager, told China Daily.

He said that the company is now focusing on Beijing and Tianjin municipalities in the north, northwestern China's Ningxia Hui Autonomous Region and Jiangsu in eastern China, where it has established itself through organic growth or mergers and acquisitions.

But it will also look at other expansion opportunities.

"We are pursuing a rapid but stable growth," Fu said. The company expects to maintain an annual growth rate of 50 per cent.

During the first nine months of this year, the retailer, which operates nearly 600 Wumart supermarkets, hypermarkets and convenience stores, reported a turnover of 1.46 billion yuan (US$184.8 million) with a net profit of 55 million yuan (US$7.06 million), up 54.1 per cent and 53.2 per cent respectively year-on-year. The company's shares were last traded at HK$6.88 (88.4 US cents) on November 13.

(China Daily 11/21/2006 page9)

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