Volkswagen's vehicle sales in China should rise 17% in 2004 as it races to meet demand in its second-largest market, executives with one of its local partners said on Tuesday.

However, that growth lags estimates for rival General Motors, which has a smaller market share but expects a near-40% jump this year, Reuters said, noting that analysts estimate the overall China market is likely to rise between 20 and 40%, after doubling to two million units in 2003.

The news agency said Volkswagen now controls about a third of the Chinese market, the world's fastest-growing, but rival GM is closing in after commanding about an 8.7% share in 2003.

"At the moment we're still unable to satisfy demand. There's so much pent-up demand," Wang Bing, a spokesman with FAW, Volkswagen's partner in northern China, told Reuters during a tour of the company's 20 square-kilometre complex in the north eastern city of Changchun.

But he reportedly added: "Competition is getting worse, which is affecting margins."

Wang told Reuters Volkswagen AG should see sales from its venture with FAW grow by up to 21% this year.

Coupled with an earlier forecast from its other venture, in China's commercial hub of Shanghai, the German company should see sales in China jump to 810,000 to 820,000 vehicles this year, the report added.

Meanwhile, GM should post a near-40% jump in 2004 sales from its Shanghai venture to 280,000, the firm's partner has said, according to Reuters.

The report said Volkswagen's venture with FAW, FAW-Volkswagen, projects sales rising to between 350,000 and 360,000 vehicles this year while its other venture, Shanghai Volkswagen, has said sales in 2004 should rise 16% to 460,000 vehicles.

"For GM, it has expanded production this year and launched new models, so its sales growth should look more remarkable," Yale Zhang, an executive with auto consultancy CSM Asia Corp in Shanghai, told Reuters.

"FAW-Volkswagen's sales growth may slow this year because its production can't keep up with demand. It needs another year for its new plant to begin production," Zhang added.

Reuters noted that FAW and Volkswagen are now building a factory that would double capacity to 660,000 by about 2007.