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Midea Going Abroad for Production
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Midea Group, one of the nation's leading household appliance suppliers, is mapping out a new blueprint for overseas direct investment.

Following its first manufacturing investment project in Viet Nam, the group will set up another in Russia and is studying the feasibility of setting up a third overseas manufacturing facility in India.

"We signed a letter of intent for an investment project in Leningrad when the Leningrad governor paid a visit to our group recently," said Zhang Hechuan, CEO of Midea's daily electronic appliance division.

"We have not yet decided what the facility in Leningrad will specialize in nor have we decided the investment size," he said.

It is very likely the project will manufacture microwave ovens and air-conditioners.

Midea is also stepping up feasibility studies of a manufacturing project in India, he said.

The CEO said the new overseas investment plan is based on the successful operation of the Viet Nam project and it is expected to help the firm further tap market potential globally.

Involving an investment of US$25 million and covering an area of about seven hectares, Midea's Viet Nam project broke ground in late March this year and has recently started a trial operation. The facility specializes in the production of induction cookers and electric cookers.

Zhang said that Midea aims to further crack the market in the European Union with the Leningrad project, and the market in Southeast Asia with the Viet Nam and India projects.

The overseas investment projects are also expected to help the firm shun international trade barriers including anti-dumping moves against products from China.

The appreciation of the renminbi makes the investment more cost-effective, he added.

At a recent seminar on Midea's overseas strategic development, He Xiangjian, chairman of the board of Midea Group, said the time has come for Midea's overseas direct investments for faster expansion in the overseas market.

The chairman said intensifying trade barriers against Chinese exports makes it very necessary for the firm to invest directly abroad.

Meanwhile, the improved industrial chain for household appliances in other developing countries will make the operation of a new household appliance facility easier.

Chairman He said that Midea will set up two to three overseas production bases and five to seven overseas R&D centres while improving the sales and after-sales service network abroad by 2010.

Midea aims to see total sales of 100 billion yuan (US$12.33 billion) by 2010.

Midea's overseas sales revenue is expected to reach US$2.5 billion this year, up 25 percent year-on-year.

Prior to Midea's move, several other Chinese household appliance suppliers, including Haier in East China's Shandong Province, had poured investments into manufacturing facilities abroad.

(China Daily December 15, 2006)

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