China is expected to produce 3.6 million vehicles this year, 1.3 million of them cars, Reuters reported, citing the official Xinhua News Agency.

Reuters said that would be a 19.2% rise in car production from last year and a 10.8% rise in overall vehicle output, according to 2002 figures provided by the State Development Planning Commission last week.

According to Reuters, Xinhua quoted Ma Liqiang, head of the economic operations bureau of the State Economic and Trade Commission, as saying mergers and restructurings of major Chinese vehicle companies would increase capacity substantially.

Ma said the growth of the industry would encourage private car ownership and individual buyers would account for approximately 60% of sales, Reuters added.

Reuters noted that the Chinese market is the fastest-growing in the world, with annual sales of passenger cars topping the one million mark for the first time last year.

The industry, led by the joint ventures of the world’s biggest car companies, such as Volkswagen and General Motors, made gross profits of about $US5.2 billion in 2002, up 61% from the year before, Reuters said.

Although most analysts see car sales growth slowing this year from 2002’s surprisingly strong 56%, they say the market will continue to grow steadily due to rising incomes of Chinese families after years of robust domestic economic growth, Reuters added.

According to Reuters, Xinhua said Ma urged companies to be wary of blind expansion, adding that regulations would be issued soon to direct investment, consumption, loan management and other aspects.

China’s vehicle industry is crowded with about 110 manufacturers, but only 12 have annual capacity of more than 50,000 vehicles. The government has called for the consolidation of tiny domestic players which do not make a single car a year, Reuters noted.