Wal-Mart Stores (WMT) is betting big on China because growing its U.S. business has proved to be a vexing challenge.

The world's largest retailer announced Monday it is buying a controlling stake in the Chinese online shopping company Yihaodian to further solidify its position in the world's most populous country. Two weeks ago, Wal-Mart appointed Greg Foran to run its China operations as it overhauls the business after a series of scandals, including "a pork mislabeling issue last year that forced it to temporarily shut a dozen stores in central China," according to Reuters.  

Shares of Wal-Mart have surged about 20% in the past six months as investors have figured that the retailer will benefit from an economic rebound in the U.S. The company, which reports quarterly results Tuesday, may find that its potential for growth is greater outside the U.S. China's economy is expected to grow at 8.4% this year, which is slower than earlier forecasts but roughly four times what economists expect from the U.S. This trend has been evident in Wal-Mart's recent quarterly results.

Wal-Mart U.S. sales in the nine months ended October 2011 rose 1.2% to $191.4 billion, while international sales rose 16.1% to $90.4 billion, fueled in part by China's growing middle class.  Wal-Mart's U.S. same-store sales rose 1.3% in the third quarter, beating the company's forecasts and analysts' expectations. These results represented an improvement -- when Bill Simon was named the head of Wal-Mart's U.S. operations in 2010, the retailer had seen four straight declines in same-store sales. 

For its fourth quarter, ended Jan. 28, 2012, Wal-Mart expects U.S. comparable-store sales will have increased from flat to 2%. That's why China remains so critical.

Jonathan Berr owns no shares in the companies listed here.