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GM's China chief dismisses glut, slowdown fears
Reuters, 06.04.04, 6:20 AM ET

SHANGHAI, June 4 (Reuters) - The world's top car maker General Motors Corp (nyse: GM - news - people) waved off concerns of a China slowdown and looming car glut, saying on Friday the market would still grow faster than in much of the developed world.

Multinationals including GM, Ford Motor Co (nyse: F - news - people) and Volkswagen AG <VOWG.DE> are set to spend around $10 billion on factories to crank out some five million cars annually over the next few years -- raising fears about overcapacity and a price war.

Analysts also want to see how government curbs on over-investment will affect the industry.

Beijing is trying to put the brakes on an economy which shot up 9.8 percent in the year through the first quarter by limiting credit growth and investment in selected sectors.

"People are getting carried away," GM's China chief, Phil Murtaugh, told reporters.

"(They say) the government's trying to slow down steel, concrete and real estate, and they are overheating and that's slowing down car sales from 80 percent to 10 percent."

But that was still faster than in mature markets like the United States or Britain, he added.

GM has invested hundreds of millions of dollars in China since the late 1990s, and last year said it would raise capacity by 50 percent to 766,000 units, adding production lines in Shanghai and another at a venture in the southwest.

The auto giant sold about 70 percent more cars in China in the first quarter than a year ago, topping 122,000 units. Its sales in the United States over the same period grew just five percent.

China is also an increasingly important source of profits for GM. Profits from its Chinese joint ventures nearly quadrupled to $162 million in the first quarter.

If its sales growth and margins continue at those rates, China would produce about a quarter of the group's $4 billion in profits forecast by analysts for this year.

GM expects China to become its second-largest market this year, after the United States, up from number four last year.

"We're selling everything we can produce," Murtaugh told a gathering of business executives in Shanghai. "The top 15 manufacturers in China are all running at capacity utilisation rates in excess of 85 percent."

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