British retailer Tesco will pay $558 million to own 20 per cent of a joint venture with China Resources Enterprises (CRE).

The JV, flagged two months ago, will combine Tesco’s 134 Chinese stores with CRE’s 2986 stores.

It will also merge Tesco’s retail practices, international sourcing and digital capabilities with CRE’s local knowledge and brand to create a business with sales of some £10 billion.

Tesco CEO Philip Clarke said the JV will help the company move more quickly to profitability in China.

Tesco is facing slower growth in China because of tough competition with local retailers.

The retailer has been exiting unprofitable markets: in 2012, it paid £40 million to leave its Japanese JV to Aeon and is selling its loss-making US business “Fresh & Easy” to investment group Yucaipa, so as to exit the US.