SIEMENS, a major foreign investor in China, is extending its activities in the communications market with a joint venture to manufacture telephones. The venture, Siemens Shanghai Communication Terminals, is starting small but aims to capture 10-20 per cent of the domestic telephone market in three to four years. Its initial investment is about 60 million yuan (about HK$55.8 million), with Siemens taking 60 per cent and Shanghai Video & Audio Electronics the rest. General manager Michael Muller said the venture was targeting production of two million telephones a year, representing 450 million yuan in turnover, in its first phase. Initially, it would make four models, from the standard telephone to a digital answering machine. 'After we reach the target of two million, we will increase our production capacity step by step to reach 10-20 per cent of the domestic market,' Mr Muller said. China is expected to produce 20 million telephones this year, rising to 40 million by 2000. By then, the venture aims to have an annual output of at least six million telephones, or turnover of about 1.4 billion yuan. Mr Muller said a decision whether to make cordless and key-system telephones would be made in two years, depending on market conditions. The venture is Siemens' sixth in the communications sector. It also has 24 joint ventures in the energy, industrial, information, transport, health care, lighting and household appliances sectors. Fifteen are in or near Shanghai. Talks are underway to set up 20 more joint ventures by the turn of the century, which will generate annual business volume of at least US$10 billion, on total investments of $1 billion. In the last fiscal year, the group's sales in China reached nearly $1 billion. The German giant signed three agreements worth $350 million on Monday, out of $1 billion worth of deals clinched by a visiting German business delegation led by Chancellor Helmut Kohl. Siemens' deals included a $250 million contract to build and supply two 350-megawatt turbines for a power plant in Rizhao, Shandong province, an initial agreement for another power plant, and an order to provide technology for a telecommunications line from Beijing to Harbin, Heilongjiang province. Siemens has singled out the power sector as a key growth area for its expansion in China. The government plans to add 15,000 mW of electricity a year from 1966 to 2000.