Dec. 6 (Bloomberg) -- General Motors Corp., the world's largest automaker, plans to invest as much as $5 billion in China over the next five years to expand its share of the world's fastest-growing major car market.

The Detroit-based company will spend about $1 billion a year on car and engine development, production facilities, technical and after-sales support and infrastructure, said Kevin Wale, president of GM's China unit, in an interview in Shanghai yesterday.

GM will sell more than 1 million Cadillacs, Buicks, and other models in China in 2008, a more than 150-fold increase in sales over a decade. Toyota Motor Corp. and Volkswagen AG both plan to add production capacity in the country to raise their own sales.

``Even with this $1 billion a year, it'll still be tough to remain No. 1 in China,'' said Ashvin Chotai, a London-based analyst for Global Insight Inc. ``With China becoming the most important strategic market in the world, it's crucial to have their investment to stay in the race.''

China's annual economic growth has averaged 9.6 percent over the past five years, making cars affordable to more people. The country's total demand will rise to 9.5 million and 10 million vehicles next year, Wale said.

That compares with sales of between 8 million and 8.5 million vehicles for 2007, according to the China Association of Automobile Manufacturers. The passenger car market will grow 70 percent to 9.2 million vehicles by 2012, according to Chotai.

Toyota, Volkswagen

``No one has seen growth like this anywhere in the world,'' said Wale. ``We target to grow a little faster than the market.''

GM, the largest overseas vehicle maker in China, expects to sell 1 million units this year. That compares with Volkswagen's target of 900,000 units this year. The German carmaker, which has lost market share to GM, will expand production by 2010.

Toyota, the world's biggest carmaker by market value, expects to sell more than 450,000 vehicles this year. The Toyota City, Japan-based company began building a second plant in Guangzhou in June to make Camry sedans and Yaris compacts.

GM relies on Asia and Latin America for profit in contrast to its home market, where it is closing factories and cutting jobs. Globally, GM plans to build about 9.3 million vehicles in 2007.

In the first nine months of this year, GM posted net income of $481 million in Asia-Pacific and $754 million in Latin America. In Europe, the company had a loss of $2.6 billion and in North America, it posted a loss of $34.7 billion, mostly because it wrote down the value of future tax benefits.

North America

GM is cutting first-quarter North American production 11 percent after its U.S. sales dropped by the same rate in November. Growth in China, Brazil and Russia kept the company's sales higher than Toyota's in the first nine months of the year. U.S. sales may fall to 30 percent of the company's total within 10 years, Vice Chairman Bob Lutz said in October.

``GM's main hope is put in Asia Pacific, within which China is the most important part,'' said Global Insight's Chotai.

GM is investing $250 million to build a research laboratory, the company's China office and Asia-Pacific headquarters in Shanghai.

``There's no doubt there will be new facilities,'' said Wale.

GM rose 1.5 percent to $28.10 yesterday in New York Stock Exchange composite trading. The shares have fallen 8.5 percent this year.

To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net

Last Updated: December 6, 2007 03:46 EST