China's state-run labour union had threatened legal action against any foreign businesses that refuse to allow union representation in any of their operations in the country.
However, Wal-Mart says it believes that the move will have little impact on its operations in China. Before conceding to representation, the company said it had questioned its employees over whether or not they wanted to have representation in its stores and reported that no interest had been shown.
"Currently there are no unions in Wal-Mart China because associates have not requested that one be formed," a company statement said.
"Should associates request information on a union, Wal-Mart China would respect their wishes and honour its obligation under China's Trade Union Law."
Wal-Mart, which opened its first China outlet in 1996 and now has a total of 41 stores in 20 cities, is notorious for its lack of union representation in its operations world-wide. Indeed the only country where union representation was allowed until now has been Canada.
But industry observers say that Wal-Mart's move is more concerned with the China government exercising its political muscle than a preoccupation with worker's rights.
When China joined the World Trade Organisation in 2001, the terms of the agreement meant that the government would have to free up access for international companies to the domestic market. This means that by the end of this year, all restrictions on foreign companies must be lifted.
Experts also believe that the insistence on Wal-Mart's union representation is partly a reaction to the loss of government influence bought about WTO membership. Indeed, in reaction to the lifting of restrictions on international retailers in the China market, many believe that further government backing of domestic food retailers will be inevitable.
M+M Planet Retail analyst Robert Gregory expounds this theory,"Currently the government is saying that it might pledge financial support to 20 of its leading domestic retailers. One of the groups it has ringed for this support is the Shanghai Balian Group, which owns a number of leading food retail operations, including China's largest, Lianhua.
"Obviously the China authorities have no intention of lying down and letting foreign retailers have a free ride," he said.