Aug. 23 (Bloomberg) -- Sony Corp. will invest $200 million in China this year to expand production of televisions and Cyber- shot digital cameras, predicting the world's most populous nation will overtake Japan as its second-largest market by 2009.

The investment for the year through March 2007 brings Tokyo- based Sony's spending in China since 1978 to $1.2 billion, Shizuo Takashino, head of China electronics, said in an interview on Aug. 18. He declined to provide last year's numbers. The U.S. is Sony's largest market by sales, followed by Japan.

``The probability is high that China will surpass Japan as the company's second-biggest electronics market by sales in two to three years,'' Takashino, 62, said from his Shanghai office.

Takashino, who helped design the Walkman portable cassette players that made Sony a global brand in 1979, plans to enlarge development operations and boost manufacturing to raise sales in the world's fastest growing major economy. He's also expanding a team in Beijing, host of the 2008 Olympic Games, to develop new products that will later be sold worldwide.

``With the Olympics coming up, there's no doubt that the Chinese market will grow,'' said Naoki Fujiwara, who oversees $720 million in assets at Shinkin Asset Management Co. in Tokyo. ``It's a positive sign that they're investing in China.''

Half of the $200 million investment will be spent on production, and the rest will be used for design and development, new shipping systems and administration, Takashino said.

Shares of Sony fell 0.2 percent to 5,250 yen at the 3 p.m. close on the Tokyo Stock Exchange. The stock has gained 8.9 percent this year, compared with a 0.3 percent advance in the benchmark Nikkei 225 Stock Average.

Biggest Production Site

The U.S. accounted for 25 percent of Sony's 5.15 trillion yen ($45 billion) in electronics sales in the last fiscal year. Europe made up 24 percent, while the rest of the world, including China, accounted for 31 percent, according to company data. Japan made up 20 percent of revenue.

No separate figures were provided for China. Of Sony's major markets, China is the fastest growing, Takashino said, declining to give a specific number.

China is Sony's biggest production site outside Japan, with eight factories including one in Shanghai that makes Cyber-shot digital cameras and camcorders, and another in the eastern city of Wuxi that makes rechargeable batteries.

Dell Inc., the world's largest personal computer maker, last week said it's recalling 4.1 million notebook PC batteries made by Sony that may burst into flames. The batteries were made in Japan and mainly assembled in China by Sony workers.

Chinese `Energy'

Sony made $4.7 billion of electronics in China last fiscal year, representing 10 percent of the company's production, Tokyo- based spokeswoman Minako Eto said.

Matsushita Electric Industrial Co., the world's largest consumer-electronics maker, aims to sell 767 billion yen ($6.6 billion) of its Panasonic goods in China for the year to March 2007. The Osaka-based company doesn't disclose production or investment amounts in China.

China, the world's fourth-biggest economy, expanded 11.3 percent in the second quarter, the most in more than a decade. Retail sales rose 13.7 percent to 601.2 billion yuan ($75.5 billion) in July, the fifth straight month that they gained more than 13 percent.

Takashino first visited China in the late 1970s, before introducing the Walkman, on a tour of a cassette factory in the town of Huizhou outside the southern city of Shenzhen. What he remembered most about that trip was the ``energy'' of the Chinese market.

`Cranes Everywhere'

``The first time I came to Shanghai, I couldn't find a good place to drink,'' he said of a visit in the early 1980s. ``Now there are many, and there are cranes everywhere.''

Sony plans to enlarge its Beijing team that develops new product technologies, Takashino said, without giving more detail. The company also has 200 engineers in Shanghai who design the exteriors of digital cameras and flat-panel TVs sold in China.

Takashino, who was also part of the teams that developed the CD Walkman and Mini-Disc players, targets having new products developed in China sold worldwide in future, which may take 10 to 20 years.

``I'm trying now to deliver the Sony DNA to our engineers in China,'' he said. ``Manufacturing is only the first step.''

To contact the reporters on this story: John Liu in Shanghai at jliu42@bloomberg.net; Kyoko Suzuki in Tokyo at at ksuzuki3@bloomberg.net

Last Updated: August 23, 2006 02:52 EDT