Starbucks says it is selling a 60% stake in its business in China as part of a $4bn (£3.04bn) deal with investment firm Boyu Capital.

Under the agreement, the world’s biggest coffee chain will have a 40% stake in the Chinese retail operation and retain ownership of the Starbucks brand there.

Starbucks entered China more than a quarter of a century ago and the country is now its second-largest market outside the US, but has struggled in recent years with the rise of homegrown brands like Luckin Coffee.

The business will continue to be headquartered in Shanghai and will own and operate 8,000 outlets in the Chinese market, with plans to grow to as many as 20,000 locations, the firm said on Monday.

The partnership with Boyu is a “significant milestone” and signals its plans for long-term growth in China, Starbucks said as it put a $13bn valuation on its retail operations in China.

The collaboration “combining Starbucks globally recognised brand, coffee expertise, and partner (employee)-centred culture with Boyu’s depth of understanding of Chinese consumers,” it added.

Starbucks’ future in China had been uncertain for months after former boss Laxman Narasimhan said last year that the company was exploring “strategic partnerships” to stay competitive in the world’s second largest economy.