GM, Fuji Drop Plans for Chinese Car Venture

General Motors Corp. and Japan’s Fuji Heavy Industries have decided to withdraw from a planned car-making joint venture with a Chinese firm in northern China, officials at both companies said today.

A Fuji spokesman said the plan to make 300,000 small cars a year at a factory in China’s Hubei province was scrapped in the early stages of a feasibility study.

Fuji decided to drop the project due to a lack of components and concern about political instability following China’s crushing of pro-democracy demonstrations in June, the spokesman said.

Fuji had invested no money in the project, he added.

“The deal did not appear to be viable,” said General Motors spokesman Ron Theis in Detroit. “Last year we were in preliminary discussions at the request of the Chinese government,” he said, but the formal discussions ended earlier this year.

Western nations have cut military cooperation and halted government credits to China since the bloody army crackdown in June. Trade sanctions, however, have not been applied.

In a statement, Chinese Premier Li Peng has reassured his countrymen that the economy, after showing its worst performance in 3 1/2 years, is not going into a tailspin.

China’s industrial output rose a sickly 0.9% in September over a year ago. That was down sharply from the 17.7% rise in all of 1988 from the previous year.

“China’s economy will not contract, despite what some Western economists say,” the People’s Daily quoted Li as saying.