"Our announcement today that we intend to collaborate with the All China Federation of Trade Unions... reflects our mutual aim to establish grassroots unions within each Wal-Mart store throughout China," said a company statement.

"Wal-Mart China desires to further strengthen its ties to China and our associates."

Employees of Wal-Mart have set up five unions over the past two weeks, following two years of intense pressure from the All China Confederation of Trade Unions to allow unions at the organization's stores.

Wal-Mart has 60 stores in China and employs more than 31,000 workers.

The company has always maintained its employees have been free to set up unions if they wished and that it followed Chinese laws.

Despite its insistence and Wednesday's statement, the confederation, which is run by the ruling Communist Party, indicated its continued distrust in Wal-Mart.

The confederation issued a statement on the state-run Xinhua news agency warning Wal-Mart not to take "revenge" against those employees who had set up the unions over the past two weeks.

"The federation... will take measures to protect these workers if they are revenged by Wal-Mart," Xinhua quoted Gou Wencai, a senior official with the union body, as saying.

Guo was also quoted on television as saying it intended to eventually set up union branches in all foreign companies in China to better protect the rights of workers in the private sector.

"We have a work target: the establishment of unions in foreign-invested enterprises has to reach 60 percent by year-end. This is a difficult task but we must try our best," Guo told China Central Television.

However joining the confederation's unions offers workers no guarantee against exploitation, with the organization often criticized by international labor rights groups for doing very little to protect workers' rights.

China's trade union law outlaws workers from forming independent unions or organizing collective bargaining activities outside the federation.

Many international rights critics say China's economic growth has been built on the back of exploited workers, especially those in the construction and service industries.

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