Shanghai Automotive Industry Corp., China's biggest carmaker, said it had no timetable to sign an investment agreement with MG Rover Group Ltd., a day after Britain's only remaining volume carmaker said the US$1.86 billion deal may be concluded by January.

"We don't have any timetable at the moment,'' Shanghai Auto spokesman Xue Hao said. "The information provided by Rover might be their own opinion.'' Rover was "confident" the agreement would be signed by January, spokesman Dan Ward said in London on Sunday.

The agreement, which would give Shanghai Auto 70 percent of Rover, may signal the start of a wave of overseas acquisitions, as cashed-up Chinese companies go abroad to improve their technological capability and acquire high-profile brand names.

"State-owned companies may have shrunk as a percentage of the Chinese economy, but the strong ones have a lot of money,'' said Victor Gao, chief executive of Beijing-based China State-owned Enterprise Investment Co. He predicts Chinese companies may invest as much as US$40 billion overseas in the next five years.

China is encouraging companies to expand abroad to improve their competitiveness and secure resources as the government opens the economy to foreign investors. The government is also making it easier for capital to flow out of the country as part of efforts to cool the economy, which expanded 9.1 per-cent in the third quarter, the fastest rate of the 20 biggest economies.

The Rover-Shanghai Auto deal, which needs approval from the Chinese Government, will help the Chinese carmaker establish its own car brand. Shanghai Auto, which makes passenger cars with General Motors Corp. and Volkswagen AG in China, aims to sell 50,000 cars under its own brand in 2007, or 5 percent of its one mil-lion unit target. The company sold 612,216 cars last year.

Shanghai Auto agreed last month to buy 49 percent of Ssangyong Motor Co., South Korea's fourth-largest carmaker, for about US$500 million, giving it capacity to expand into producing sport-utility vehicles. It was China's first takeover of an overseas automaker.

"If Shanghai Auto wants to become a competitive international player they have to own their own brand name,'' said Yu Hui, an analyst with GTJA Allianz Funds in Shanghai. "Acquiring ownership of Rover's brand is more economical than building a new one.''

Shanghai Auto makes Buick Regal, Excelle and Sail cars, and GL8 minivans with General Motors in Shanghai. The two companies also have a venture in central China that makes Chevrolet Spark mini cars. Shanghai Auto and Volkswagen make Santana, Passat, Polo and Gol cars. Shanghai Auto doesn't have intellectual property rights to any of the models.

TCL Corp., PetroChina Co. and China Petroleum & Chemical Corp. are among other Chinese companies that have already made acquisitions overseas.

"You'll see many Chinese companies, including automakers, acquire technology and branded products,'' said Wang Zaixiang, a director at Beijing-based China Automotive Technology Research Center, which tracks China's auto market. "They have learned the only way to quickly accelerate their growth is to acquire major stakes in companies abroad.''

China had US$514.5 billion in foreign-exchange reserves at the end of September, the world's second-largest after Japan. The reserves were a sign of how much cash was at the disposal of Chinese companies, said Wang, who predicts that mergers and acquisitions overseas may surge as much as 10-fold by 2010.

Phoenix Venture Holdings Ltd., MG Rover's closely held owner, signed an agreement with Shanghai Auto in June to develop cars, with the Chinese carmaker to fund development of new models and help expand Rover's brands worldwide, Phoenix said then.

The venture comes as China's vehicle sales have slowed to 18 per-cent growth in the first 10 months, down from a 76 percent expansion last year, the world's fastest rate.

"The deal is risky as there is no room left in Shanghai's production for Rover's passenger car models,'' said Zhang Xin, an analyst with Guotai Junan Securities Co. in Beijing. "Shanghai Auto has to take care of the interests of its other partners.''

(Shenzhen Daily November 25, 2004)