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Cramer: It's not China, it's Yum's execution

Yum Brand's decision to spin off its China operations doesn't necessarily point to weakness in the country, CNBC's Jim Cramer said on Tuesday.

"It is a call not on China, but on their execution in China, because I continue to believe that the consumer is doing much better," he said on an interview with "Squawk on the Street."

On Tuesday, Yum Brands said it intends to separate its China business into a publicly traded company, bowing to pressure from an activist shareholder.

Yum China, the new entity, will become a franchise of Yum Brands in mainland China and will pay a percentage of its sales to the parent company for exclusive rights to three of the company's brands — KFC, Pizza Hut and Taco Bell.

"The country [China] is making a comeback, [you] just have to hope that the execution has improved," he said.

Cramer also said that the move comes at a bad time since there isn't much stabilization in the KFC or Pizza Hut brands.

— Reuters contributed to this report.