A string of deals involving the auto industry and worth over 7 billion yuan (US$846 million) were sealed at the weekend. The 22 agreements were made at the auto parts industrial park, located in the Shanghai International Automobile Town, a heavily-invested project.

The overseas and domestic companies behind the deals are expected to develop into a powerful force to bolster Shanghai's ambitions to build an inclusive world-level auto base.

The deals represent the inflow of US$320 million worth of contractual overseas investment as well as 4.4 billion yuan (US$532 million) worth of contractual investment from domestic companies.

The projects involved are mostly connected with the manufacture of automobile spare parts or auxiliaries, which face a fast-growing demand from the soaring domestic auto industry.

"The projects signal a kind of `industrial clustering effect,' and that is just what we expect to see at our auto town project here,'' said Vice-Mayor Tang Dengjie.

Evolving from a former subsidiary facility of Shanghai Volkswagen five years ago, the industrial park has, since September 2001, been expected to play a greater role following a decision by the city government to upgrade it into a significant part of the auto town, located at the city's northwestern Jiading District. The area's operations include auto-related manufacturing, trade, research and development (R&D) plus sporting activities.

The park currently hosts over 180 overseas and domestic businesses, involving a contractual domestic investment of 16.4 billion yuan (US$1.98 billion) plus US$880 million in foreign investment.

"We are planning to have our joint venture (at the park) become our purchase centre, R&D centre and production centre in Asia, that's why we decided to double the investment capital here,'' said Anton Usow, executive manager of Shanghai Kostal-Huayang Automotive Electric Co Ltd, a subsidiary of the German-based Kostal Group.

Seeing its local business grow at 30 per cent annually since 1998, his company is to add another US$40 million-plus to its capital pool -- according to a deal signed on Saturday -- to better back up its expansion plans.

"The auto parts companies at the park should be a key bolstering factor for our group's future growth,'' said Hu Maoyuan, president of Shanghai Automotive Industry Corp (SAIC), one of China's largest automakers.

The company has worked out an ambitious development blueprint aimed at raising its annual vehicle output from the current 410,000 units to over 1 million by the end of 2007.

SAIC is ready to relocate all its auto parts manufacturing businesses in the central city areas to the eight-square-kilometre park, Hu said.

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