GM set for approval on $1.1b China factory

General Motors Co, the world's biggest automaker, is poised to receive approval to build a 7 billion yuan ($1.1 billion) factory in China, according to a provincial government statement.

The plant, operated by GM's passenger-car venture with SAIC Motor Corp, will have an annual production capacity of 300,000 vehicles and will be located in the central city of Wuhan, the Hubei Environmental Protection Bureau said on its website. Shanghai GM is satisfied with its current capacity arrangements and has yet to make a decision on building a new factory in Wuhan, said Jerry Ma, a Shanghai-based spokesman.

The Hubei bureau statement comes less than two months after China moved to end a seven-year policy attracting foreign investments into the carmaking industry. The factory would increase GM's passenger-vehicle capacity, estimated at 2 million last year by research firm IHS Automotive, by about 15 percent in China, easing the strain on existing plants that are producing cars in excess of their normal output.

The move may also help increase GM's lead as the biggest foreign automaker in the world's biggest vehicle market. GM's deliveries of vehicles to Chinese dealers rose by 8.3 percent to 2.55 million vehicles in 2011 after climbing 29 percent the previous year, according to the company.

For the Shanghai GM passenger-car venture, which is expanding capacity in two existing plants in Shenyang and Yantai, the new factory will provide enough capacity for the company to meet its target of selling 1.3 million vehicles in China this year, Ma said. Shanghai GM sold 1.2 million vehicles last year, it said Jan. 9.

The National Reform and Development Commission on Dec 29 dropped vehicle manufacturing from the "encouraged" external investment list, ending benefits that analysts at Booz & Co said include the waiver of import duties on automaking equipment and tax breaks.