FEDDERS Corp, the United States' largest room air-conditioner manufacturer, has established its first joint venture in China. Executive vice-president Robert Laurent said the group wanted to increase its sales outside the US from 10 per cent of its output to 50 per cent. The group was discussing joint ventures in India and Indonesia. China's rising living standards and the increasing demand for electrical appliances prompted Fedders to make the direct investment, almost 10 years after it began sourcing components from the mainland. 'The US is a steady market and it is not growing,' Mr Laurent said. He said China's was the fastest expanding. China had already caught up with the US market with annual demand of four million air conditioners, compared with 500,000 five years ago. It was expected to grow 20 to 30 per cent a year. Mr Laurent said China's demand for air conditioners would be boosted as the country shifted from an agricultural economy to an industrial one, and people moved away from farms into the cities. He said air-conditioner sales picked up after the refrigerator boom, as consumers became wealthier. 'The second thing people will buy after refrigerators and apartments is a TV and people will then include air conditioners,' he said. Fedders signed a contract with Ningbo General Air Factory in August to establish a joint venture initially capitalised at US$24.4 million. Both partners would contribute equity and the remaining required funds would come from a long-term loan from Chinese banks. The US group has taken a 60 per cent stake. The venture, Fedders Xinle Company, would produce 200,000 air conditioners in the first year of operation. It would reach a production peak of 500,000 in 1997. About half of the production would be sold domestically. Mr Laurent said the plant, in the Ningbo Economic and Technical Development Zone, would be able to expand in the future because extra space within the zone was available. The venture would keep its component costs low with the support of a Fedders global sourcing programme, Mr Laurent said. He expected China's air-conditioner market to consolidate and squeeze out most of the 120 manufacturers, leaving only five to 10 major companies. 'There are only a few ready to grow and we are in that category,' he said. Fedders, which has a market capitalisation of US$200 million, has 30 per cent of the US market.