For a company that has long embraced the virtues of global sourcing, Wal-Mart’s decision to cut its global procurement headcount by over 250 has come of something of a surprise.

And with China the region hit most severely by the cuts – reports suggest that more than 100 staff could go in the company’s Shanghai, Putian and Dongguan divisions – the move seems to suggest that the US retail giant is intending to shift its focus away from the far east and could soon be switching its attention to India.

The company’s PR head Jonathan Dong has insisted that the cuts have nothing to do with the China’s new Labour Contract Law, which comes into affect on January 1 2008, but the decision has already brought a chorus of derision from Chinese law experts who claim that the headcount reductions go against existing legislation which states that companies can only implement job cuts once all other avenues have been explored.

Others have claimed that Wal-Mart is cutting jobs to both cut costs and give them an excuse to go to countries where labour prices have not soared to the extent they have in China, something Dong, who pointed out that his company’s direct procurement in the country currently runs at $9bn a year, has strenuously denied.

Wal-Mart insists this week’s decisions have been taken to make the company more competitive in a market that is becoming increasingly crowded with Western competitors. Whether it signals a fundamental shift in procurement policy remains to be seen.