China greenlights Wal-Mart's buy into Yihaodian

China's Ministry of Commerce (MOC) has approved U.S. retailer Wal-Mart's move to increase its stake and become the controlling shareholder of a local e-commerce company, but with certain restrictions.

Xinhua reported Tuesday that Walmart has increased its 17.7 percent stake in the holding company of online supermarket Yihaodian to 51.3 percent. However, restrictive conditions will be imposed as MOC's anti-monopoly bureau said the acquisition may exclude or restrict competition in China's value-added telecommunications services market.

The restrictions include limiting Yihaodian to using its e-commerce platform strictly to sales, and Yihaodian's parent company may not host third-party transactions on its platform.

Additionally, Wal-Mart cannot use variable interest entity (VIE) arrangements to conduct value-added telecommunication services now operated by Yihaodian. VIEs are a common practice in China with which overseas companies can control, but not legally own, domestic businesses in certain sectors to bypass restrictions on foreign investment.

"Yihaodian fully respects and welcomes the MOC's decision. We have maintained high-speed growth since launching in 2008 and will create greater value for consumers as our partnership with Wal-Mart deepens," the company said.

The approval came months after Wal-Mart announced its plan in February to increase ownership stake in Yihaodian due to the review of the deal being extended twice over fears it may hamper market competition.