The new production facility, one of seven worldwide, cost about US$28 million and was financed totally by Schattdecor.

"Running a wholly owned venture overseas conforms to our foreign investment philosophy, which aims to create a peaceful environment inside the company," said Walter Schatt, president of Schattdecor AG.

The plant, which is located in the city's Kangqiao Industrial Zone, is expected to produce 2,500 tons of materials next year for decorating surfaces in kitchens, furniture and flooring.

The factory will use imported raw materials and German technology, to create products specifically for the Chinese market. Predictions put annual sales as high as US$40 million.

"With a plant in Shanghai, local clients can get materials in time rather than wait for six to eight months for products from Europe," Schatt said.

Bernd Reub, a spokesman for Schattdecor AG, said some decorative materials will be sold to neighbouring Southeast Asian countries, Australia and New Zealand.

Schatt said the opening of the plant demonstrates Schattdecor initial success in China.

"Shanghai is a place where we can gain understanding from our Chinese partners and the conditions we need to run such a factory," Schatt said.

According to Zhu Yi, general manager of Schattdecor Shanghai Co Ltd, the plant could reach its annual maximum output of 4,000 tons by 2004.

"It will be decided by the market demand whether the Shanghai company will add three more production lines," said Reub.

With four production lines installed, it would be able to annually produce 10,000 tons of decorative materials.

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