Foreign-owned sourcing operators have urged China to cut bureaucratic red tape in an effort to improve their procurement business operations in the country. Under mainland rules, foreign-invested procurement operators enjoy export rights and a rebate on the 17 per cent value-added tax (VAT) after exporting their products. 'VAT refund is still a big problem,' said Mikael Franzen, chief representative of Ikea Trading (Hong Kong), a unit of Sweden-based Ikea Group. Mr Franzen said there was too much red tape involved in the refunding process. He spoke on the sidelines of the China (Shenzhen) Consumer Goods Procurement Fair in Shenzhen, which began on Friday and ends tomorrow. On Friday, Shenzhen Mayor Yu Youjun said Shenzhen had become a major procurement centre, attracting large international companies to form sourcing bases in the city. Ikea established a wholly-owned procurement centre in Shanghai last year but Mr Franzen said the scale was quite small. It also has two procurement representative offices - one in Shekou, Guangdong, and the other in Qingdao, Shandong. Mr Franzen said the group was considering expanding its procurement business in China but this would depend on how the VAT refund system functioned. He said Ikea had a 30-year business relationship with China. Last year, Ikea purchased more from China than from any other country, accounting for 15 per cent of its total volume of purchases. Jerry Chan, deputy managing director of Tesco's Hong Kong office, said lack of efficiency remained a big problem with the mainland government. Mr Chan said Tesco, Britain's biggest hypermarket operator by volume, was studying the feasibility of establishing a procurement centre in China. At present, the group's procurement centre is based in Hong Kong. The advantage of establishing a direct sourcing centre was that the retailer could enjoy preferential tax treatment and could better manage product distribution, Mr Chan said. Mr Chan said Tesco was also studying the possibility of establishing hypermarket stores in China. Ikea said it was expanding its retail operations in China. It has one store in Beijing and another in Shanghai. It also built its own factory in Beijing to supply products for the stores.