The huge construction project began Friday with a batch of programs including building some auxiliary transport infrastructure, the Shanghai Automotive Industry Quality Testing Research Institute, the Tongji Automobile College and a novel city-level used car trading center. These efforts will cost a combined US$301 million (2.5 billion yuan).

It will take five to 10 years to shape Anting, where Shanghai Volkswagen is located, into one of China's leading automaking centers. The goal includes having the area feature auto-related manufacturing, exhibition space, trading ability and tourist services.

The 68-square-kilometre auto town eventually will feature a first-class racetrack suitable for the Formula One world championship circuit. China has little experience hosting such top auto racing tournaments because it lacks proper facilities.

Volkswagen's imprint will be all over the area, with a motif similar to the company's base in Wolfsburg, Germany.

Of the expected 50 billion yuan investment in the project, about half will come from foreign investors, said Cheng Guang, deputy director of the Shanghai Municipal Development Planning Commission.

The Anting project is necessary to boost the city's pillar auto industry, Cheng said. This is a reasonable response to China's coming entry into the World Trade Organization (WTO), which will pit the domestic auto industry against tougher global players, analysts said.

Shanghai Volkswagen now makes 250,000 Santanas and Passats annually, and Anting is now home to a growing number of automobile component plants.

"Our attention will focus not only on auto manufacturing but other related areas, like services and trading,'' Cheng noted.

By 2010, Cheng predicted, Anting's annual trade volume could hit US$36 billion (300 billion yuan).

The prediction echoes other analysts' forecasts for China's sedan purchases to triple by the end of 2010, with big cities like Beijing and Shanghai seeing surging demand for cars.

So far, more than 20 global auto firms have shown interest in being involved in Anting's proposed trading zone, said Zhang Lichun, general manager of the Shanghai Autotown International Development Co Ltd, one of a group of newly established firms working on the project.

Domestic auto manufacturers such as Changchun-based First Automotive Works will play an active role in the huge project, Cheng said.

Despite the highly anticipated plan, some analysts cautioned that it is a government-orchestrated move and not an industry-based effort. It will take time to see how tenants attract the necessary investment and bring in a market-driven management style, they said.

(China Daily 09/28/2001)