Well-known luxury brands are increasing their presence in the Chinese market by opening more stores. For instance, Coach plans to open 80 stores in the next five years in addition to the current 25. In July, Gucci will open a new store in Shanghai, which will be the brand's 28th outlet in China.

A Goldman Sachs report said that luxury product consumption grew 20 percent in 2008 compared with that of 2007. By 2015, China is expected to be the biggest market for luxury products as its citizens are going to spend more than $11.5 billion on them, accounting for 29 percent of the world total.

Auto Boom

Spurred by domestic stimulus measures, sales of domestically made automobiles soared over 6 million in the first half of this year, a record high in the country.

According to figures from the China Association of Automobile Manufacturers (CAAM), sales of domestically made automobiles grew 17.69 percent in the first six months year on year, defying a worldwide auto sales slump.

China has replaced the United States as the biggest car market in the world. A total of 4.8 million auto vehicles were sold in the United States in the first half, dropping 35 percent year on year, according to Autodata Corp., a U.S. auto industry research unit.

CAAM said it was "cautiously optimistic" about auto sales in the domestic market in the second half of this year, and expected a total of 11 million automobiles will be sold in the country.

Zhu Yiping, Assistant Secretary General of CAAM, said the rapid industrialization and urbanization process has opened a vast market for auto sales and that producers should tap into second-tier cities for more growth. Stimulus measures also contributed to the growth. In January, China halved the purchase tax on passenger cars to 5 percent for models with engine displacement of less than 1.6 liters.

Fiat's New Mate

After a failed marriage with Nanjing Automobile (Group) Corp. that ended in 2007, the Italian auto giant Fiat Automobiles SpA inked a pre-nup with Guangdong Automobile Industry Group Co. Ltd. in an effort to strengthen its presence in the burgeoning Chinese auto market.

According to the agreement, Fiat and Guangdong Automobile will set up a 50-50 joint venture with an investment of 400 million euros. The new factory will be located in Changsha, capital city of Hunan Province, and will start to produce its first Fiat passenger car in the second half of 2011.

The deal is awaiting final approval from the National Development and Reform Commission.

Fiat's previous attempts to manufacture in China all failed. The best-known project was its eight-year alliance with Nanjing Automobile, which was terminated in 2007 due to poor sales. The factory site was eventually sold off to German auto giant Volkswagen.

Fiat has been complaining about its misfortune in the fastest-growing auto market and picked the wrong partner. But this time Fiat may have found its Mr. Right, said Lin Muhong, an auto analyst at Industrial Securities Co. Ltd. Guangdong Automobile is a well-established brand in China and its successful alliances with Japanese Toyota and Honda have been role models for joint venture automakers.

Opel Fight

Industry analysts recently played down a Chinese automaker's proposed acquisition of the beleaguered General Motors (GM)'s Opel brand.

Beijing Automotive Industry Holding Co. Ltd. made a generous bid for Opel for as much as 660 million euros, and intended to foster Opel as an international brand, according to German media reports.

It planned to get 51 percent of Opel stake and leave the other 49 percent to GM.

Compared with Magna International Inc., Beijing Automotive's offer seemed more attractive in that GM could get more stake in Opel and more Opel employees would stay in their current positions.

But the Canadian auto parts maker Magna is reported to be the favored bidder for GM's Opel brand.

Dong Jianhua, auto analyst at Southwest Securities Co. Ltd., said reviewing Beijing Automotive's offer was just a negotiation strategy. By introducing a competitor in acquisition talks, GM might be able to get a better offer from Magna, Dong said.

Many Chinese companies have recently made bids for troubled overseas auto brands such as a Sichuan heavy machinery company's bid for GM's Hummer. But the Chinese Government has discouraged acquisition of troubled foreign assets. Its reasons are obvious. If the once deep-pocketed GM cannot make a success of these brands, critics say, how can Chinese companies?