U.K.-based supermarket chain Tesco Plc (LSE: TSCO) has entered a Memorandum of Understanding with Chinese retailer China Resource Enterprise (CRE).

In an announcement Friday, the company said it was exclusive talks with CRE to combine operations in China to form the largest multi-format retailer in the East Asian country.

If it goes ahead, the arrangement would bring together CRE subsidiary CR Vanguard's 2,986 stores across China and Hong Kong with Tesco China's 131 stores and shopping malls.

"The partnership would bring together CRE’s deep understanding of local customers, established nationwide infrastructure and proven track record as a partner with Tesco’s global retail expertise, international sourcing scale and supply chain capabilities," the release said.

"The proposed joint venture would create a business with sales of some £10bn (US$15.5 billion), in which CRE and Tesco's effective interests are expected to be 80% and 20% respectively.

"The intended partnership follows a series of highly successful joint ventures between CRE and other multi-national corporations and is consistent with Tesco’s stated strategy of focusing on profitable routes to growth in fast-growing but less mature markets, with a disciplined approach to the allocation of capital."

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