Tesco has sold its 20% holding in Chinese business Gain Land as it increases focus on its core operations.

The sale, to a subsidiary of its joint venture partner China Resources Holdings, will generate net proceeds of £275m for Tesco and marks the grocer’s exit from China.

Tesco said the cash “will be used for general corporate purposes” and that the disposal would enable it to “further simplify and focus the business on its core operations”.

Shore Capital analyst Clive Black said: “The exit from China, where Tesco took a major step back in 2014 with the creation of Gain Land after the abandonment of once grand plans around real estate and retailing, represents another step in the geographic retrenchment of the group and so now more of a focus upon capital discipline and free cash generation rather than growth.

“The exit may not be the last such move in Asia, as we continue to await the outcome of the potential disposal process in Malaysia and Thailand, which would carry a much more substantial payout.

“With Thailand in particular sold, Tesco would be losing perhaps its most apparent growth piston, and so we continue to believe that this trophy asset should be sold for a corresponding price to what now appears to be one of three local parties.”

Bernstein analyst Bruno Monteyne said: “With this transaction and the possible sale of Thailand and Malaysia, Tesco’s biggest short-term concern could be how to efficiently return cash to shareholders. It’s a good problem to have.”

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