GM has bet more than most US companies on Chinese politicians and the socialist system. It has invested in a $1.5 billion state-of-the-art plant to make a car that only top officials -- plus a few entrepreneurs, luxury hotels and foreign firms -- will be able to afford.

The Buick sedan about to roll off the assembly lines in December is mid-sized by US standards, but will be big for China. And pricey, too.Some rival carmakers are puzzled by GM's decision to pin its hopes on a high-end market so dependent on state buyers. Already, the Buick has been dubbed the "cadre's car".

But Schlais is adamant. "Very definitely, that project will make money," he said.

Spinning their wheels

Tothe world's big automakers, China once appeared to be the last great untapped market.

GM, Ford Motor, Chrysler Corp, Daimler-Benz AG and others all gunned their engines and raced towards China with ambitious plans to build vehicles. They pledged billions of dollars and spread out their best technology.

Nobody offered the Chinese a sweeter deal than GM. Not only did it pledge a top-of-the-line model, complete with engine and automatic transmission manufacturing, it also promised to invest in parts making - and threw in a design and testing facility as well.

The result: GM was awarded the most hotly-contested auto project in China, to build passenger cars in Shanghai in a joint venture with state-run Shanghai Automotive Industrial Corp.

"In three-and-a-half years we went from $12 million in investments to more than $2 billion," said Schlais. Over the same period, most carmakers that sped into China before GM have been spinning their wheels.

No-Frills VW

Over-regulation, shifting governmentpolicy, drawn out negotiations and an economic slowdown are part of a long list of problems that have thwarted the ambitions of most foreign carmakers in China.

Passenger car factories in China are, on an average, producing about 50 per cent of capacity. Worse, the government has just launched a housing privatisation programme that is encouraging ordinary Chinese to buy homes, not cars.

Peugeot-Citroen SA pulled out of a car plant in southern Guangdong province. Daimler-Benz has gone silent on a deal it was negotiating to build mini-vans. And a Chrysler joint venture, Beijing Jeep Corp, the first US automaking project in China, is finding it tough to sell its expensive -- and fuel-guzzling -- Cherokee jeeps to an emerging middle-class consumer market.

Almost alone among foreign automakers, Volkswagen is doing well, but only in its Shanghai factory where it makes a no-frills Santana, the standard taxi cab in many Chinese cities. One in every two cars sold in China is a Santana.The size of China'spassenger car market last year was around 474,000 units.

Banks Keep Faith

Yet GM appears undaunted by the failures of its competitors as it prepares to roll out a luxury 3.0 litre car from a factory with an annual capacity of 100,000 vehicles.

Schlais said the Shanghai plant was based on "a lot of world class principles for competition". Others in the industry are less certain.

Volkswagen's Audi plant has just switched to 2.4 litre engines from 3.0 litre engines. "The market was saturated," said Kevin McCann, Audi's sales manager in China, who estimated annual sales of 3.0 litre cars in China at 5,000.

As part of a long-term austerity programme, senior Chinese officials have been told to buy smaller cars: 3.0 litre vehicles are off-limits. What is more, the civil service is being cut in half, reducing the size of GM's potential market. And top managers of loss-making state enterprises are under intense pressure to cut costs as bank credit shrivels. Schlais pointed out that a consortium of 11foreign banks had put their faith in the Shanghai project.

And the Shanghai city government was solidly behind the factory, having nominated it the "number one project in Shanghai this year". "I feel very strongly we've done the right thing from ourinvestors' standpoint and the right thing from China's standpoint," said Schlais.

"The projects we are putting in place are projects that have returns and that we would be proud to have virtually anywhere in the world," he said.

Playing by the rules

According to Schlais, the Buick is aimed at institutional buyers, including foreign enterprises, state-owned enterprises and hotels with luxury car fleets. It would compete against imports, not domestically made cars.

Down the road, Schlais said he saw opportunities as China opened the tightly-shut service end of the auto market, including sales, after-sales and financing. For now, GM is playing by socialist rules, and trusting the system will deliver.

"We are foreign companies and guests of China --and they have a set of rules," said Schlais. "We must play by those rules if we want to be part of this country. We did not come here to change China."