Geely, the first privately-owned China carmaker, yesterday revealed to China Daily that it has abandoned its listing plans on the mainland and will focus on the Hong Kong stock market to raise money for its fast-growing car business.

The company, based in East China's Zhejiang Province, has taken another bold step towards its back-door listing plan in Hong Kong by acquiring an indirect 20 per cent stake of its Hong Kong-listed joint venture partner.

Zhihui Co Ltd, Geely's wholly-owned subsidiary incorporated in the British Virgin Islands, earlier this week bought a 32 per cent stake of Proper Glory Holdings that has a 60.68 per cent share of Guorun Holding which runs two car joint ventures with the carmaker.

"This is an important move to cement our ties with Guorun, but it does not mean that we have entered into the stock market through buying a shell company," Geely Chairman Li Shufu said in an interview yesterday.

"There is no accurate timetable for our listing in Hong Kong and things are in the process according to regulations," said Li, one of the richest Chinese men.

He said Geely has halted its plan to buy a 30 per cent stake of Anhui Quanchai Engine Co Ltd, a State-run diesel engine maker listed in Shanghai.

It is reported that the derailment of the plan is mainly because of resistance from the authorities in East China's Anhui Province.

"It's a little bit easier for Geely to go public in Hong Kong than in the mainland because the domestic stock market leans more to State-owned enterprises to raise money for their restructuring than to privately-owned firms," said Zhang Xin, an auto analyst with the Guotai & Jun'an Securities Co.

There are six mainland's completed vehicle makers listed in Hong Kong now. The latest is Great Wall Auto, a privately-owned pickup maker in North China's Hebei Province, which launched an initial public offering in Hong Kong last month.

"We need to raise money from the stock market to facilitate our ambitious expansion in the capital and technology-intensive car industry," Li said.

Li envisions that Geely will produce 1 million cars a year by 2010.

The company aims to sell 165,000 cars this year, up from around 80,000 units last year.

"However, the most important thing for Geely is to have strong technology capabilities, not to raise money, to survive mounting competition in China's car market," Zhang told China Daily.

"Still a small player in the car market, Geely could not totally depend on itself to greatly enhance its technology capabilities even if it succeeded in going public in Hong Kong. It had better co-operate with an international big automaker," he said.

Geely now produces the Haoqing, Merrie, Ulion and Maple compact cars and the Beauty Leopard sport car, all which are low-technology and cheap.

However, Li, nicknamed "car paranoia," vows to stick to independent development.

"We will not give up independent development and be subject to foreign giants. We should step forward boldly to bring credit to the Chinese car industry when most of domestic big names are just assembling foreign brands," said Li.

Most of major Chinese carmakers, including the top three -- First Automotive Works Corp, Dongfeng Motor Corp and Shanghai Automotive Industry Corp -- are producing models from their foreign partners, such as Volkswagen, General Motors, Toyota and PSA Peugeot Citroen and Honda.

The Beauty Leopard is the first Chinese-made sport car launched at the end of last year.

Analysts say the model's symbolic significance for the Chinese auto industry goes far beyond itself, although it is no match to world's level sport cars in terms of prestige, power or luxury.

Geely plans to launch 14 new self-developed models from 2003 to 2007.

Value Century, wholly-owned by Guorun, and Shanghai Maple Automobile -- one of Geely's three manufacturing bases, set up a joint venture in Shanghai with a total investment of 525 million yuan (US$63.2 million) last October.

During the first half of last year, another Guorun affiliate, Centurion Industries, and Geely also established a joint venture based on the carmaker's other manufacturing base in Ningbo, a port city in Zhejiang.

Geely has another manufacturing base in Taizhou, Zhejiang.

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