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Thursday, September 19, 2002


Japan's Nissan Motor and Dongfeng, the third largest Chinese auto company, are expected to announce today the biggest foreign investment in a state-run company since Beijing joined the World Trade Organisation last year, creating a vehicle manufacturer to rival Chinese market leader Volkswagen. Nissan's 50 per cent stake represents the maximum that foreign partners are allowed under China's WTO accession agreement, and signals the intent of Dongfeng to embark upon a restructuring strategy of significant proportions. Nissan, which is 44 per cent owned by Renault, is due to appoint half the management staff at Dongfeng Motor, ceding the Japanese company a level of management control hitherto unseen among foreign partners in a Chinese vehicle joint venture. One significant little detail that has emerged from all this, in the first seven months of this year, China's car sales reached 599,445 vehicles, up 44 per cent from the same period last year. So someone, somewhere is growing.

Details of the deal, which was arranged by Goldman Sachs over several months, stipulate that the new company will emerge stripped of much of the debt carried by its state-owned parent. Later, a plan to streamline operations by shedding staff and upgrading technology is to be launched. Industry analysts said that government approval for the acquisition showed Beijing's resolve to introduce competition and force a rationalisation in the overcrowded vehicle market.Dongfeng controls 12 per cent of the Chinese vehicle market. In August, Toyota, Japan's largest carmaker, agreed a joint venture with First Automotive Works (FAW), China's biggest car company, to produce up to 400,000 cars annually by 2010. The venture was valued at $1.27bn, compared with today's $2.06bn deal.
Source: Financial Times

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