(AFP) Malaysia's national carmaker Proton said today it had taken-up a stake in an auto production company in China, marking its foray into the world's most populated country.

In a statement, Proton said its unit, Proton Automobiles China Ltd, has signed an agreement to acquire a 49-percent stake in Goldstar Heavy Industrial Co Ltd for RM85.5 million.

Proton said it has also inked an equity joint venture agreement with the existing shareholders of Goldstar to bring their shareholding down to 51 percent following its entry.

The acquisition will be financed with Proton Automobiles China's internally generated cash resources.

"The joint-venture will facilitate Proton's entry into the China market and expand capacity for the production of left-hand drive market as part of Proton's strategy to increase its export market," it added.

Stay competitive

The deal is subject to obtaining relevant approvals. Goldstar is engaged in the production and sales of automobiles and has businesses in Humen, Dongguan and Guangdong province.

Proton's entry into China is aimed at preparing the company to stay competitive ahead of the Asean Free Trade Area (Afta) in 2005, analysts said.

At the moment, Proton sells more than six in every 10 new cars in Malaysia but its share will shrink when high tariffs on imported cars is cut to no more than five percent from 2005 under AFTA.

Under Afta, the tariffs were meant to be reduced from 2003 but Malaysia received a two-year reprieve.