Three major Chinese companies have announced a joint venture to create the largest grocery retail business in the southern Guangdong province.

The move will involve A.S. Watson Group (ASW) - the retail arm of CK Hutchison Holdings - supermarket operator Yonghui Superstores, and WeChat app owner Tencent Holdings.

The joint venture combines ASW’s current PARKnSHOP supermarket with Yonghui’s portfolio in the region to create a network of over 70 stores and 2.2 million loyalty member base.

The objective of the partnership is to capitalize on the strengths of both retail groups to accelerate growth and expand the business, according to ASW.

A.S. Watson Group will have 40% of the new business, while Yonghui will have 50% and Tencent 10%.

Dominic Lai, ASW's group managing director, said the joint venture aims to capitalize on the Guangdong province’s strong retail sales growth of 16% in the first eight months of 2018.

“A.S. Watson Group is delighted and extremely excited about this partnership which brings together Yonghui, one of the largest and most successful national supermarket chain and PARKnSHOP, a well-known brand in Hong Kong and Southern China," he said.

“The investment of Tencent creates additional strategic importance to this new brand, which we will name 'ARKnSHOP-Yonghui.'"

Zhang Xuanning, founder of Yonghui Superstores, highlighted that Guangdong is one of the most significant growth markets in mainland China.

Tian Jiangxue, deputy general manager of Tencent Smart Retail, added that collaboration with ASW and Yonghui will enable it to explore opportunities in the regional market.

“As a leader in tech and innovation in the Guangdong-Hong Kong-Macao Greater Bay Area, Tencent will spare no efforts in fueling the digital transformation of the joint venture, sharpening its edge in the big data and cloud-computing era," he said.

Guangdong located in southern China, has a 110 million population, accounting for 8% of the country’s population.

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