Chemical giant China National Blue Star Corp will heavily invest in Shenyang, capital of Northeast China's Liaoning Province where it merged with a local chemical company recently.

The State-owned Blue Star plans to put a total investment of 7.5 billion yuan (US$905.8 million) in Shenyang within the next four years, said Li Aiqing, the company's spokeswoman.

Earlier this month, Beijing-based Blue Star took over Shenyang Chemical Group, including its 46.66 percent stake in the Shenzhen-listed Shenyang Chemical Co Ltd, according to a free State asset transfer deal.

Shenyang Chemical Co Ltd is Blue Star's fourth domestically listed subsidiary after Blue Star Cleaning, Blue Star New Materials and Southwest Chemical Machinery.

Blue Star will build new facilities based on Shenyang Chemical Group to produce a slew of chemicals, such as acrylic acid, fumed silicon dioxide and polyvinyl chloride (PVC).

Current main products of the Shenyang firm, previously owned by the Shenyang municipal government, include past PVC, fumed silica, chlorinated paraffin, caustic soda, lubricants and tires.

The merger is the latest move by Blue Star to reinforce its position in China's chemical market.

Last year, the company acquired nine petroleum, chemical, rubber and tire producers in China.

Li said the central government has approved Blue Star's consolidation with another chemical conglomerate, China Haohua Chemical Industrial Corp.

The two companies will be combined into one entity to be named China National Chemical Industry (Group) Corp.

"Blue Star's general manager Ren Jianxin has been appointed as president of the bigger group," Li told China Daily.

However, in another development, Li said Blue Star has held up merger negotiations with South Korea's Ssangyong Motors because "the two sides disagreed on sale price."

At the end of last year, Blue Star became the sole bidder in buying a 55.4 percent stake in the ailing Ssangyong Motors, beating out big names such as General Motors, Renault and Shanghai Automotive Industry Corp - one of China's three biggest automakers.

But sources close to the negotiations said the main reason for Blue Star abandoning the acquisition deal is that the company failed to obtain approval from Chinese authorities as it is not a well-established automaker.

The setback has not stopped Blue Star from trying to make inroads in China's booming vehicle market.

In February, the company signed a letter of intent with British automaker Manganese Bronze Holdings to set up a joint venture in Lanzhou, capital of Northwest China's Gansu Province.

Blue Star said the two parties plan to invest US$350 million in the envisioned venture to build 50,000 taxies for the British company annually.

The Chinese firm's Zhongche, the largest vehicle repairing chain, has built more than 200 stations in China.

Blue Star, which was founded by a group of government officials in the chemical industry in 1984, reported sales of 10.2 billion yuan (US$1.2 billion) last year, jumping 67 percent from a year earlier.

Its assets now total 20 billion yuan (US$2.4 billion), up from 10,000 yuan (US$1,210) in 1984.

Sales of vehicles made in China surged by 34 percent year on year to 4.39 million units last year, including almost 2 million passenger cars.

(China Daily April 22, 2004)