Negotiations about the project have basically been completed between the Guangzhou Automobile Group and its Japanese partner, the Honda Company, according to Zhao Weiguo, director of the Economic Development Administration of the Guangzhou Economic and Technological Development Zone.

"And we are now waiting for approval from the central government to sign a contract to start construction of the project," Zhao said yesterday.

But Zhao refused to reveal Honda's stake in the ground-breaking project, saying it is a commercial secret.

Located in the Guangzhou Export Processing Zone, the project is another example of car manufacturing between Guangzhou and a Japanese car producer.

The car plant will cover an area of more than 900,000 square metres. The factory, which is expected to begin production in 2004, will reach a capacity of producing 50,000 cars annually in the first stage, before hitting the goal of 120,000 cars a year.

Zhao said he is confident the project will soon get the clearance from the central government because all the cars from the new company will be sold outside the Chinese mainland.

"The project has little impact on the domestic vehicle market," Zhao said.

If successful, it will become the first automobile project to allow foreign investors to hold more than 50 per cent of investment.

According to relevant Chinese policies and regulations on automobile industrial development, foreign investors can only currently hold up to 50 per cent.

The Guangzhou Honda Automobile Co Ltd is a 50-50 per cent joint venture between Honda of Japan and the Guangzhou Automobile Industrial Group.

In China, foreign investors are able to set up wholly funded companies or become primary shareholders of firms that produce car parts.

Tan Kecheng, deputy director of the Guangzhou Economic and Technological Development Zone, said the new Honda project further strengthens Guangzhou's status as a hub of vehicle production and sales.

Tan said to further promote auto production in the southern Chinese region, the Guangzhou Automobile Industry (Trade) Promotion and South China International Automobile Exhibition Trade Fair will be held next week, providing an opportunity for overseas car makers to expand their sales in the country.

Earlier this year, Guangzhou Mayor Lin Shusen said his government had planned to reach an annual production of more than 500,000 vehicles in 2005 and more than 800,000 in 10 years.

Guangzhou's car production will account for one-fifth of the city's total industrial output value by 2005, compared with only 6.1 per cent last year.

And Guangzhou's automobile industrial output value is expected to exceed 100 billion yuan (US$12 billion) by 2005.

To achieve the goal, Lin said Guangzhou needed foreign financial support and co-operation to further boost its industrial development in the sector.

The city now has more than 50 foreign companies and joint ventures that are producing cars, parts and related products.

The annual production of sedans in Guangzhou will reach 94,000 this year, compared with 64,000 in 2001 with an output value of 20 billion yuan (US$2.4 billion).

(China Daily October 17, 2002)