The company will combine General Motors Acceptance Corp. (GMAC), a financial institution that is a subsidiary of General Motors, and a Chinese financial institution in the non-banking sector.

"In light of the large market of 13 million consumers in China, we will manufacture more economy cars that most Chinese can afford. In addition, to facilitate sales, we plan to set up a joint-venture auto finance company to introduce state-of-the-art car financing service into the country," Smith said.

Smith said that GM's application has yet to be approved to the People's Bank of China, adding that details about the company will not be available until after approval. But the company is expected to combine the international experience of GMAC with the local know-how of a Chinese financial institution to give Chinese consumers their first access to foreign financiers in more than 50 years.

Founded in 1919, GMAC provides services that covers retail and automotive financing, mortgage banking, residential mortgage funding and insurance. It offers financing to auto dealers, whether GM-affiliated or not.

Today, only some 12 percent of private car sales are financed in China, compared to around 80 percent in the West. But with China's World Trade Organization (WTO) entry now basically a formality, things are expected to change.

The China-US bilateral access agreement included a specific provision allowing foreigners to provide auto financing on China's entering WTO. GMAC is now endeavoring to be in a position to be operational in line with China's expected accession and possible competition from other world auto giants like Ford, Daimler Chrysler, Daewoo and Honda, after China's accession to WTO, Smith said he is confident about the future of General Motors in China, noting that GM already has had a good start - the largest car manufacturer sold 30,000 cars in China last year and expects to double that number this year.

Economy cars including the Sail and Buick have enjoyed good sales in China, but less that expected -- blamed in part on the lack of a related credit infrastructure for consumers in China. What credit China does offer has been hampered by the lack of a credit rating system, making for a long and complicated process of examining financial backgrounds of prospective borrowers.

Both GM and its Chinese counterparts should focus more on producing economy cars that people can buy, along with high-quality standards, said Rudolph A. Schlais, Group vice president of GM and president and chief executive officer of Asia Pacific General Motors Corporation, who accompanied Smith to Shanghai.

Smith and Schlais left Sunday with the rest of the GM delegation to APEC for Japan to attend the Tokyo Car Exhibition, the largest one this year in Asia.

(china.org.cn by Guo Xiaohong, staff reporter October 22, 2001)