HONGKONG retail and manufacturing group A.S. Watson and Co is close to finalising negotiations to set up a joint-venture soft drinks factory in Shanghai. The announcement fits with Watson's twin long-term objectives of penetrating the China market and escaping or overcoming Hongkong's high manufacturing costs. Watson's group managing director Ian Wade unveiled the company's plans yesterday after signing a deal with Shanghai Yimin Number One Food Factory to establish a separate joint venture food and drinks company in the city. The joint venture, Shanghai A.S. Watson Yimin Food Co, will have start-up capital of US$29 million and is poised to become China's largest integrated food manufacturing concern. Mr Wade said talks with the Shanghai Light Industry Bureau were close to completion, preparing the way for a US$20 million joint-venture carbonated drinks factory to open in Shanghai in the autumn. Watson's has a soft drinks venture in Guangzhou and is considering establishing similar operations around China. Mr Wade also said Watson's hoped to start a bottled water venture in Beijing in September. Watson's supermarket subsidiary Park'N Shop opened its sixth supermarket in Shenzhen this month. Park'N Shop plans to open its first store in Shanghai in August and hopes to open its first Beijing outlet within six months. Watson's Personal Store has one outlet in Beijing, two in Shanghai and one in Shantou. A.S. Watson Yimin Food Co is due to start making sweets, fruit juice, canned and frozen food at its 300,000-square-foot factory in the autumn.