Wal-Mart on the March in China

Wal-Mart Stores Inc. and other foreign retailers in China are looking westward for the next round of store expansion as the government sweetens incentives to invest in the underdeveloped central regions.

Multinationals are already well-established in Chinese coastal cities such as Shanghai, where competition is fierce. Analysts say the stage is now set for another battle over second-tier, inland cities as retailers race to build name recognition among brand-loyal consumers.

Retail consultants list some 60 cities that are ripe for development. The first retailer to reach each one gains a major edge because they can build a following among local consumers before competitors can muscle in.

Foreign retailers are eager to expand in China to get their share of a $240 billion retail market with an average growth rate of more than 10 percent in recent years. Most of their focus so far has been on the large, wealthy cities on the eastern coast.

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