According to their agreement, the Jeely Group will keep focusing on the sedan car market, while JMStar will produce motorcycles, buses and trucks.

"Expansion through restructuring is the only way for small, privately-run automakers to survive the intense competition brought about by transnational firms flocking into the Chinese market," said Xu Gang, the newly-appointed executive director of Jeely Group.

Xu was chief accountant at the Zhejiang Provincial Local Taxation Bureau before he joined the group three months ago.

Four years ago, the Jeely Group became the first private automaker in China by taking over a bankrupt state-owned company based in southwestern Sichuan Province.

To date, the group has taken a 3.5-percent share in China's domestic market, with the sale of 52,000 Jeely cars.

It has turned out several economy car brands to comply with the needs of low-income groups, and the lowest price it has offered so far is around 30,000 yuan (US$3,600).

In the top-end of the market, the group has recently rolled out a sports car that is estimated to be priced at 150,000 yuan (IS$18,000).

Likewise, Shanghai JMStar was authorized to make cars through cooperation with a state firm in north China's Jilin Province. Earlier this year, it rolled out the "Meilu" (Beautiful Deer), a hatchback priced below 100,000 yuan (US$12,000 US).

China presently has over 100 automakers, most of which are expected to carry out strategic restructuring in order to survive the upcoming competition with their foreign rivals, insiders say.

China's auto giant, the Changchun-based First Automobile Works (FAW) Group, incorporated the Tianjin Automobile Group in June.

In the meantime, many local automakers have beefed up cooperation with their foreign counterparts to incorporate state-of-the-art technology into their products.

Sources with the State Economic and Trade Commission, the industrial watchdog, have also confirmed that the country will encourage local enterprises to enhance international cooperation and speed up restructuring so as to sharpen their competitive edge.

(Xinhua News Agency August 7, 2002)